OPG SECURITIES PRIVATE LTD.versusS.E.B.I. & ANR.

                  [2015] 14 S.C.R. 171


            OPG SECURITIES PRIVATE LTD.                     A
                            v.
                     S.E.B.I. & ANR.
             (Civil Appeal No. 3548 of 2010)
                                                            B
                  DECEMBER 04, 2015
   [VIKRAMAJlT SEN AND SHIVA KIRTI SINGH, JJ.]
      ·Securities and Exchange Board of India (Stock-brokers
and Sub-brokers) Regulations, 1992: Dispute arose on c
account of amended Regulations effective from 1. 10.2006
introducing Schedule II/A into the Regulations - For stock
brokers, the measure of fee under Schedule Ill was "turnover
of the previous year• on yearly basis and the same was
replaced by concept of monthly fee on the basis of monthly D
turnover - Demand of registration fee from appellant stock
broker not only on. the basis of turnover of the previous year
but also for the entire turnover earned after the turnover of
                                               ..
the previous year and till the implementation of the Schedule
I/IA - Held: Demand liable to be quashed in view of specific E
provisions of the Regulations, particularly clause IV to
Schedule Ill and whole of Schedule II/A which were introduced
 together by the third amendment to the Regulation w.e.f.
 1.10.2006 - After 30.9.2006, Schedule II/A admittedly
became applicable to the appellant and, therefore, no F
provisions in Schedule Ill could be applied in the instant
case - Registration fee for any future period since 1. 10.2006
to be calculated on the basis of monthly turnover and payable
each month asper provisions in Schedule I/IA.
                                                            G
     Allowing the appeal, the Court
    HELD: After Schedule lllA became applicable, the
Registration fee for any future period since 1.10.2006
could not be levied or demanded on the basis of H
                          171
172          SUPREME COURT REPORTS                [2015] 14 S.C.R.


A Schedule Ill. It had to be calculated on the basis of
  monthly turnover and payable each month as per
  provisions in Schedule lllA. [Para 12] [178-A·B]

            B.S.E. Brokers' Forum v. Securities and Exchange
B           Board of India (2001) 3 SCC 482 - relied on.
                         Case Law Reference

       c2001) 3 sec 482            relied on            Para 8

C          CIVIL APPELLATE JURISDICTION: Civil Appeal No.
      3548 of 2010.

           From the Judgment and Order dated 11.02.2010 of the
       Securities Appellate Tribunal in Appeal No. 28 of 2009.

D             Shyam Divan, Sr. Adv., Yashraj Singh Deora, Ms. Shreya
        Agrawal, G. Kalla, Ms. Priya Darshnee Singh, M/s. Mitter &
      . Mitter Co. for the Appellant.

            Chander Uday Singh, Sr. Adv., Dhaval Mehrotra,
E      Bhargava V. Desai, Ms. Saumya Mehrotra, Rishi Gautam,
       Pratap Venugopal, Ms. Surekha Raman, Anuj Sarma,
       Ms. Niharika, Ms. T. Mukherjee, M/s. K. J. Jonh & Co. for the
       Respondents.

            The Judgment of the Court was delivered by
 F
       SHIVA KIRTI SINGH, J. 1. This is a statutory appeal
  preferred under Section 15Z of the Securities and Exchange
  Board of India Act, 1992 (for brevity 'the Act') against the
  judgment and order dated 11th February, 2010 passed by the
G Securities Appellate Tribunal, Mumbai (for brevity 'the SAT)
  in Appeal No. 28 of 2009. The dispute between the parties
  has arisen on account of amended Regulations effective from.
  1.10.2006 introducing Schedule lllA into the Regulations. For
  stock brokers the measure of fee under Schedule Ill was
H
   OPG SECURITIES PRIVATE LTD. v. S.E.B.I. &ANR.                 173
        .    [SHIVA KIRTI SINGH, J.]

"turnover of the previous year" on yearly basis and the same A
has been replaced by concept of monthly fee on the basis of
monthly turnover. The dispute is whether the latter would come
into effect immediately from the date Schedule lllA becomes
applicable to a stock-broker or the earlier measure of fee on
yearly basis would continue for a limited period till fee in B
accordance with Schedule Ill and the principle of turnover of
the whole year is realized not only as per the previous year's
turnover but for the entire up to date turnover till Schedule lllA
comes into effect in respect of a stock-broker.
                                                                  c
       2. According to the impugned judgment and order of the .
SAT, SEBI was justified in demanding registration fee from
the appellant, a stock-broker, not only on the basis of turnover
of the previous year but also for the entire turnover earned after
the turnover of the previous year and till the implementation of D
the Schedule lllA, so that no part of the turnover of the stock-
broker escapes from the net of registration fee. According to
appellant's case, argued by learned senior counsel Mr. Shyam
Divan, such view of the SAT is impermissible in view of specific
provisions of the Regulations, particularly clause (IV) to E
Schedule Ill and whole of Schedule lllA which were introduced
together by the third amendment to the Regulations with effect
from 1.10.2006. Per submissions, the view is also contrary to
the distinction between a turnover tax I tax on income in which
case the annual turnover is targeted as the subject matter of F
levy on one hand, and a levy imposed in the present case as
registration fee on the other, in which the annual turnover of a
stock-broker is only a measure of the levy and not its subject
matter.
                                                                   G
       3. On the contrary, the stand of the respondent is that the
demand made by SEBI is justified by clause 1(a) & (b) of·
Schedule Ill and such demand is saved by CIC\USe 4 of Schedule
lllA .
                                                                   H
174          SUPREME COURT REPORTS                     (2015] 14 S.C.R.


A            4.. Since the question to be answered is dependent
      solely upon interpretation of provisions of Securities and
      Exchange Board of India (Stock-brokers and sub-brokers)
      Regulations, 1992 (for short the Regulations) as amended from
      time to time including Schedule Ill and lllA, it is not necessary
B     to go into the facts. It is sufficient to notice that the appellant is
      a stock-broker trading, inter alia, as a member of the Bombay
      Stock Exchange Limited since 29.1.2004. It is not in dispute
      that the appellant and stock-brokers in general are regulated
      under the provisions of the Act and for conducting their trade
C     or business they are required to be registered with SEBI under
      the Regulations. Such registration is mandatory in terms of
      Section 12 of the Act whereas Regulation 10 requires that for
      obtaining certificate of registration from SEBI, every applicant
      shall pay such fees and in such manner as specified in
D     Schedule Ill or lllA, as the case may be. The part relating to
      Schedule lllA was inserted by the SEBI (Stock Brokers and
      sub-Brokers) Act (third amendment) Regulations 2006 with
      effect from 1.10.2006. Regulation 10 also empowers SEBI to
E     suspend the Registration Certificate of a stock-broker if he
      fails to pay the fees and on such suspension the stock-broker
      shall cease to sell or deal in securities as a stock-broker.
        5. The appellant paid the registration fee in accordance
  with Regulation 10 read with Schedule Ill without any dispute
F for the financial years 2003-04, 2004-05 and 2005-06 based
  on the previous year turnover. After Schedule lllA was inserted
  w.e.f. 1.10.2006, the appellant exercised the option under
  clause 2 of Schedule lllA and started paying fee as per
G Schedule lllAw.e.f. 1.10.2006 on the basis of monthly turnover
  as the measure of registration fee payable on monthly basis.
            6. In case there had been no option offered by way of
      introduction of Schedule lllA, the appellant would have been
      required to pay for the whole of the year 2005-06 on the basis
H                                 •
    OPG SECURITIES PRIVATE LTD. v. S.E.8.1. &ANR.                   175
              [SHIVA KIRTI SINGH, J.]

of turnover of previous year but on account of exercise of option   A
and switching over to regime under rule lllA with effect from
1.10.2006, the appellant paid pro rata only for the period upto
30.9.2006 on the basis of turnover of the previous year
(1 A.2005 to 30.9.2005). SEBI, on the other hand, claimed
that appellant had paid only half of his liability whereas he was   B
liable to pay further Rs.18,13,995/- even for the period from
October 2006 to March 2007 regardless of the fact that from
October 2006, as per Schedule lllA he was liable to pay and
had paid the registration fee on monthly basis on monthly
turnover. Not only this, SEBI claimed further amount of             C
Rs.21,60,600/- for the year 2007-08 on the ground that no
amount of turnover reached by the appellant till he opted to
come under Schedule lllA should escape from levy of
registration fee. Such demands by the SEBI were regardless
of the fact that the appellant, without any dispute came to be      D
governed by Schedule lllA from 1.10.2006 and he paid
Registration Fee in accordance with Schedule lllA for the
remaining part of 2006c07, i.e, from 1.10.2006 and for the year
2007-08.
                                                                    E
      7. As noticed earlier, due to above dispute the appellant
preferred appeal No. 28 of 2009 under Section 15T of the Act.
The SAT decided against the appellant and dismissed his
appeal by the impugned order.
                                                                    F
          8. On hearing learned senior counsel for the appellant
·Mr. Divan and learned senior counsel for the SEBI, Mr. C.U.
 Singh, we find that the c;lemands raised by SEBt is illegal being
 contrary to the Regulations particularly clause IV of Schedule.
 Ill. It is also based on a misconception that the entire annual G
 turnover regardless of the formula accepted under Schedule
mwhich took into account only the annual turnover of previous
 year as a measure of levy, must be the subject matter of levy
 even after Schedule lllA became applicable. This
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176       SUPREME COURT REPORTS                   [2015) 14S.C.R.


A misconception is due to a wrong mind set that the annual
  turnover is the subject matter of levy and not merely a measure
  of levy. Such misconception is directly in teeth of what has
  been clearly held in Paragraph 45 of this Court's Judgment in
  the case of B.S.E. Brokers' Forum v. Securities and
B Exchange Board of India, (2001) 3 SCC 482 decided by a
  three Judges Bench. Relevant part of para 45 of that judgment
  reads as follows:-
           "45. It cannot be disputed that the "annual turnover" of a
C-         broker is not the subject-matter of the levy but is only a
           measure of the levy. In other words, the fee is not being
           levied on the turnover as such but the fee is being levied
           on· the brokers making their annual turnover as a
           measure of the levy which is a fee for regulatin·g the
D          activities of the securities market and for registration of
           the brokers and other intermediaries in the said market.
 •         Therefore, it is futile to contend that such levy would be
           either a tax or a fee on the turnover."
E        9. The main contention of Mr. C.U. Singh to support the
  impugned judgment of the SAT is based upon clause 1(a) &
  (b) of Schedule Ill. According to him that clause is the charging
  provision which requires taking note of annual turnover during
  any financial year for levy of registration fee for each financial
F year. In reply Mr. Divan has contended that the charging
  provision is in fact Regulation 10 which requires every applicant
  for a certificate of registration to pay fees. Only the quantum
  and manner of payment of such fees has been left to be
  determined as per Schedule Ill or Schedule lllA.
G
         10. Further reply is that in clause 1(a), the annual turnover
  of the financial year has not been made the basis for computing
  registration fee for that financial year and in fact under the·
  applicable provisions in clause 2(b) such fee is required to be
H computed with reference to the annual turnover relating to the
     OPG SECURITIES PRIVATE LTD. v. S.E.B.I. &ANR.                 177
               [SHIVA KIRTI SINGH, J.)

 preceding financial year. It was fmther pointed out on behalf A
 of the appellant that while introducing Schedule lllA, the SEBI
 also introduced a contemporaneous change in Schedule Ill by
 inserting clause IV, which is as follows :
        "IV. Non-applicability to stock brokers governed           B
        by Schedule Ill- The provisions of this Schedule shall
        not apply to stockbrokers to whom Schedule lllA applies,
        from the time when it becomes so applicable."
       11. We find ourselves in agreement with submissions
 advanced on behalf of the appellant that after 301h September, C
 2006 i.e. after Schedule lllA admittedly became applicable to
 the appellant, no provisions in Schedule Ill could be applied to
 his case. We also find no merit in the contention advanced on
 behalf of SEBI that clause 4 of Schedule lllA protects the 0
 demand raised by SEBI. Clause 4 of Schedule lllA along with
 clause 3 occurs in Part B which relates to charge of fees. It
 reads as follows :
        "4 - Nothing in clause 3 shall affect the liability of any
        stock broker to pay fees under Schedule Ill, which E
        accrued before this Schedule became applicable to him
        and such fees shall be paid as per the relevant
        provisions of Schedule Ill as if they had not ceased to
        be applicable to him."
                                                                    F
         The aforesaid clause is clarificatory in nature. It clarifies
  that the liability to pay fees as per Schedule Ill which has already
  accrued and got fastened to a stock-broker before the
  Schedule lllA became applicable, would remain payable as
  per the provisions of Schedule Ill even after they cease to be G
· effective for subsequent period.
       12. This clause in our view does not affect the
 enforceability of Schedule lllA from the date it became
 applicable to the appellant on account of option permitted by H
178          SUPREME COURT REPORTS               (2015] 14 S.C.R.


A the relevant provisions. After Schedule lllAbecame applicable,
    the Registration fee for any future period since 1.10.2006 could
    not be levied or demanded on the basis of Schedule Ill. It had
    to be calculated on the basis of monthly turnover and payable
    each month as per provisions in Schedule lllA.
B
           12. In view of clear legal provisions noticed above, we
    find the impugned order of the SAT under appeal to be contrary
    to law. The same is accordingly set aside. The Appeal is
    allowed. As a result the demand made upon the appellant by
c SEBI which was under challenge before the SAT shall stand
    quashed. Whatever amount the appellant had paid towards
    such demand shall be refunded to it along with interest at the
    rate of 10% per annum from the date of deposit till refund. The
    refund should be effected without any delay and in any case
D · within two months. There shall be no order as to costs.
      Devika Gujral                                   Appeal allowe,t.