At, SEBI Securities Exchange Board of India Securities Appellate Tribunal
By, CORAM: JUSTICE KUMAR RAJARATNAM
By, PRESIDING OFFICER
By, DR. B. SAMAL
Appellant – Represented by : Mr. Sanjay Mehta, Advocate. Respondent – Represented by : Mr. Subhash Jha, Advocate
Per: Justice Kumar Rajaratnam, Presiding Officer
1. The appeal is taken up with consent of both parties. The appellant is a registered broker of National Stock Exchange (NSE) and Ahmedabad Stock Exchange (ASE). The said membership of ASE and NSE was acquired by the appellant in the year 1994-1995. The appellant submitted that pursuant to the circular of the respondent dated 28.3.2002 the appellant was required to pay to SEBI turnover fee as required under Regulation 10 Schedule III of SEBI (Stock Broker and Sub-broker) Regulation 1992 read with SEBI circular dated 28.3.2002. The appellant along with a letter dated 27.3.2003 sent the DD for Rs. 3,80,000/- to the respondent towards payment of such fees for NSE Operations and subsequently on 29.7.2003 sent another cheque dated 31.3.2003 for Rs. 3,76,231/- towards payment of such fees for NSE Operations. The appellant made payment of 7,56,231/- towards turnover fees for NSE operations. The appellant also executed Indemnity Bond dated 27.3.2003 which was submitted to the respondent as required pursuant to the circular dated 28.3.2002.
2. The appellant submits that it received letter dated 27.5.2003 from the ASE stating that the ASE had received letter dated 26.5.2003 whereby provisional statement of receipt of fess/interest in respect of the appellant was enclosed by the respondent board with a direction to the Stock Exchange to forward the same to the appellant and intimating the appellant to bring to the notice of the Exchange if any wrong credit is found or any amount paid has not been credited in the said provisional statement of fees and interest receipts. On receipt of the said letter, the appellant found that there was discrepancy to the tune of Rs. 7,56,231/- whereby the amount which was paid by the appellant to the respondent towards NSE operations was wrongly credited to the account of the appellant towards ASE operations. As far as ASE was concerned, the said amount was credited in excess. This discrepancy was brought to the notice of ASE by the appellant vide its letter dated 31.5.2003. The appellant received a letter from NSE dated 4.6.2003 along with a statement of fees and interest received, which was forwarded by the respondent to NSE. On perusal it was found that amount of Rs. 7,56,231/- which was paid by the appellant towards NSE operations was not credited therein. (Italics by Court) The appellant responded to the NSE by letter dated 6.6.2003 and pointed out the aforesaid discrepancy to NSE with a request to rectify the same. The appellant submits that on the basis of the aforesaid two letters it came to the knowledge of the appellant that some mistake has crept in on account of which amount which was paid by the appellant towards fees for NSE operations was wrongly credited in the account of the appellant towards fees of ASE operations. Pursuant to a letter written by the appellant to ASE, ASE submitted a statement of receipt of fees/interest to the respondent in respect of brokers of ASE in which discrepancies were found which were required to be rectified.
3. The appellant made an application dated 25.8.2003 to NSE for membership in futures and operations segment in the prescribed form with the enclosures as required, along with a Demand Draft of Rs. 2 lakhs. In response to the said application, the appellant received letter dated 10.10.2003 from NSE intimating that the appellant has been admitted as the trading member in future and operations segment on professional basis subject to fulfillment of the conditions. By letter dated 15.10.2003 the appellant informed NSE that it accepted the conditions of the provisional offer letter and agreed to comply with the terms and conditions by the dates stated therein. It also requested NSE to forward the application to the respondent for registration. The appellant submits that subsequently by letter dated 16.12.2003, NSE informed the appellant that the respondent had returned the application on the ground that there was outstanding fees payable by the respondent to the tune of Rs. 7,52,420/- towards principal and Rs. 5,50,025/- towards interest. The appellant by letter dated 6.1.2004 made a representation to the respondent stating all the facts in detail for clarification in respect of so called outstanding fees with a request for permission to commence F&O operations at the earliest. It is submitted that the appellant has not received any response from the respondent in spite of numerous reminders as well as personal representation by the appellant.
4. In these circumstances, the appellant prayed before the Tribunal to direct the respondent to transfer the amount of Rs. 7,50,231.08 refundable by ASE to NSE towards turnover fees of the appellant in respect of NSE operations, pending hearing and final disposal of this appeal. It was also prayed that the Tribunal direct the respondent to permit the appellant to operate in future and options segment and also make necessary allotments for the increase in capital without change in control on such terms and conditions, as may be deemed fit and proper.
5. It is common ground that a sum of Rs. 7,52,4210/- has been wrongly credited with SEBI towards ASE and which ought to have been towards the fees for NSE. The ASE admits by its statement dated 16.4.2004 at Annexure Z that the said sum had been credited erroneously with SEBI on account of ASE. It clearly means that this amount was meant for NSE and not for ASE.
6. Mr. Jha was fair enough to submit that these entries can be reversed with retrospective effect i.e. from the date on which it was credited with SEBI and whatever amount is still due to SEBI on NSE account will have to be settled.
7. We direct the contra-entries to be made to give a correct account of the amount with NSE within a period of two weeks from the date of the receipt of this order. Learned counsel for the appellant agreed to this suggestion and also submitted that he would avail of SEBI (Interest Liability Regularization) Scheme, 2004 as and when the scheme comes into force. It is fairly submitted by the counsel for the appellant that amount by way of interest owing to NSE would be Rs. 5,50,000/-; and if the interest in the regularization scheme is applied and if the appellant has to have the benefit, the amount will be Rs. 1,25,000/-. It is entirely for the appellant to take advantage of the scheme if in force and if in accordance with law.
8. In that view of the matter, we have no hesitation in setting aside the impugned orders demanding payment from the appellant towards NSE account. However, it is upon to the respondent to pass fresh order in accordance with law with regard to the demand for interest. It would be open for the appellant to seek compounding of the interest under the scheme if in accordance with law.
9. With regard to the application for derivative segment and increase in equity share capital without changing control, it
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is for the appellant to approach the NSE and make the proper application in accordance with law and the NSE shall forward it to SEBI and SEBI shall dispose of these applications in accordance with law as expeditiously as possible within four weeks from the date of receipt of the application from NSE on behalf of the appellant taking into account our direction. Appeal is disposed of accordingly. No order as to costs. 10. The Court places on record the fair and equitable submission made by Mr. Jha, the learned senior counsel for the respondent. It also places on record the valuable assistance rendered by Mr. Venu Gopal for arriving at an amicable and equitable resolution of the dispute. But for their cooperation this matter could not have been resolved expeditiously.