SANTOSH HEGDE - (1.) WRIT petitions questioning the validity of Regulation 10 of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, read with Schedule III thereof as also letters dated 7th of November, 1992 and 7th of January, 1993 issued by the Securities and Exchange Board of India (SEBI) were filed in various High Courts in the country. On a transfer petition for consolidating these cases being filed before this Court by respondent No. 1, this Court by its order dated 10th of December, 1999 directed that one such WRIT Petition (C) No. 126/1993 pending before the Bombay High Court be transferred to this Court. By the said order, this Court also stayed other proceedings pending in the other High Courts but gave liberties to the concerned parties to file intervention application in the above transferred case.
(2.) ON 31st of January, 1992, the President of India in exercise of the powers conferred upon him by Article 123(1) of the Constitution of India was pleased to promulgate the Securities and Exchange Board of India Ordinance, 1992. This Ordinance was subsequently replaced by the Securities and Exchange Board of India Act, 1992, ('the Act'). The Act was given retrospective operation w.e.f. 30th of January, 1992. Section 3 of the Act provided for the establishment of Securities and Exchange Board of India (SEBI) while Section 4 provided for SEBI's Management Board (the Board). On 10th of April, 1992 on behalf of the Board, a letter was addressed to the President and Executive Directors of all the recognised Stock Exchanges whereby the members, stock brokers of all the recognised Stock Exchanges in India were called upon to submit their applications to the Board for the purpose of registration in accordance with Section 12(1) of the Act. The said letter which enclosed a pro forma of the application for registration of stock brokers required fees to be paid by applicants for registration on the following basis : JUDGEMENT_479_SUPREME1_2001Html1.htm Category A : Stock Brokers who are or will be members of Bombay, Delhi and Calcutta Stock Exchanges. Category B : Stock Brokers who are or will be members of Bangalore, Cochin, Madras and Ahmedabad Stock Exchanges. Category C : Stock Brokers who are or will be members of other Stock Exchanges. This demand of the Board led to a nation-wide agitation of stock brokers which resulted in the closing down of Stock Exchanges throughout India for several days. The issue which gave rise to this agitation was the high registration fee sought to be levied by the Board for the purpose of registration. Succumbing to the pressure of this agitation the Board on 19th of April, 1992 issued a revised fee structure for registration of brokers giving two options as below : JUDGEMENT_479_SUPREME1_2001Html2.htm OPTION B : One time registration fee may be payable by the members under this Option as follows : Fee @ of 1% of the annual turnover of each broker for 5 years from 1990-91. This fee will be uniform for all exchanges. The registration fee will include fee for registration as underwriters also. During the 5 years period there will be no annual fee. Each exchange may choose either Option A or Option B and collect fees accordingly from all its members and sent their application forms to SEBI within the date stipulated already. The one time registration fee for sub-brokers will be uniform at Rs. 5,000.00. In addition, the sub-brokers will require to pay an annual fee of Rs. 1,000.00 for renewal of registration."
(3.) AS could be seen from the above, there was substantial change in the new proposal made by the Board. It proposed to reduce the initial fee for registration by 50% with more instalment facility. In effect the earlier demands of registration fee of Rs. 2.5 lakhs, Rs. 1.5 lakhs and Rs. 50,000.00 respectively on different categories of members were brought down to Rs. 1.45 lakhs, Rs. 87,000/- and Rs. 29,000.00 respectively. Even to this reduced offer of the Board, the members of the Stock Exchanges and the stock brokers had their opposition which is evident from the letter dated 25th of April, 1992 addressed to the Finance Minister of India by the Presidents of all the 22 Stock Exchanges which are recognised and regulated by the Union of India under the Securities Contracts (Regulation) Act, 1956 (the SCR Act). By the said letter the Stock Exchanges sought exemption from the requirement of registration by their members. Their further demand was that there should be, if at all necessary, a simplified form for registration and only nominal fee for registration of Rs. 1,000.00 payable at one time only should be collected from each of their members. The Union of India by a notification dated 20th of August, 1992 issued in exercise of powers conferred by Section 29 of the Act notified the Securities and Exchange Board of India (Stock brokers and Sub-brokers) Rules, 1992 (the Rules). Rule 3 of the said Rules provides that no stock broker shall buy, sell and deal in securities unless he holds a certificate granted by the Board. The Rule also provided that for the grant of such certificate, the applicant concerned will have to pay an amount of fees for registration in the manner provided in the Regulation to be framed by the Board.;