INDIA BUSINESS WORLD - AUGUST (16^th - 31^st) 2007
The Month that was ...

SUPREME COURT STAYS SECURITIES APPELLATE TRIBUNAL ORDER DIRECTING BROKING FIRM TO PAY FEES

THE Supreme Court has stayed a Securities Appellate Tribunal order directing a brokerage firm to pay registration fee to the Sebi on the plea that when the initial registration number continues to be operative, a new block period cannot be applied merely because the registration number has changed. The market regulator had demanded fees from the brokerage firm for the new registration number along with the liability to the old number. The appellant firm had proposed to transfer its NSE membership to one of its group companies but later decided to put it on hold and informed the Sebi. As such, it is not liable to pay any such amount, said the appeal.

Apollo Sindhoori Capital investment, the appellant, had proposed to transfer its membership in the NSE to one of its group companies, Om Sindhoori Capital Investment. Accordingly, Om Sindhoori Capital Investment was registered as a stockbroker with the Sebi with a registration number on February 18, 1999. The registration number was to take effect from March 9, 1999 upon completion of certain formalities.

Before such registration number could take effect, the appellant and Om Sindhoori Capital investment decided not to transfer the membership and the Sebi was intimated. The registration certificate in the name of Om Sindhoori was also surrendered to the NSE. The appellant in the meanwhile, continued to carry on its business as a stockbroker under the initial registration certificate.

However, the appellant received the final liability statement of Sebi demanding payment of Rs 2.01 crore (Rs 1,85,9100 towards turnover fee + Rs 16,63,000 towards interest for the new registration number along with the payment liability for the old registration number of approximately Rs 19,00,000).

Sebi's demand was upheld by the Tribunal in its order passed on July 10. It asked the appellant to pay the amount due to the Sebi. Against it, the appellant moved the apex court.

Senior counsel Arvind Datar and advocate Mahesh Agrawal appearing for the appellant said that as per the Delhi High Court order, a person cannot have multiple registrations and consequently the initial registration continues to be operative and a new block period cannot be applied to be operative merely because the registration number has changed.

Under provisions of Sebi (Stockbrokers and Sub-brokers) Regulations, 1992, a stockbroker is liable to pay turnover fees at a percentage on his turnover only for a period of five years from the date of the initial registration as a stockbroker, argued Agrawal. In this case, all the requirements for maintenance of status quo was adhered to and therefore, the allotment of new registration number does not arise.