Summary
A SEBI circular of 28 March 2002 required a stock broker holding separate registration certificates for several stock exchanges to pay the Schedule III fee for each. An association of NSE trading members challenged it. Relying on the words 'a certificate' in Section 12(1) of the SEBI Act, 1992, the Delhi High Court's Division Bench held that one registration suffices whatever the number of exchanges. The Supreme Court allowed SEBI's appeals. 'A certificate' says nothing about number, and the singular includes the plural. Under the 1992 Stock Brokers Rules and Regulations, applications go through each exchange in Form A and Form D certificates are tied to membership, so each registration is co-terminous with its exchange. The fee, including the five-year block counted from the 'date of initial registration', is therefore payable per certificate.
Issues
- Whether, under Section 12(1) of the SEBI Act, 1992 and the 1992 Stock Brokers Rules and Regulations, a stock broker must obtain a separate certificate of registration for each stock exchange of which it is a member.
- Whether the ad valorem fee and the five-year block under Schedule III recur for each such registration.
Provisions considered
- Section 12(1), Securities and Exchange Board of India Act, 1992'A certificate of registration' does not denote a single certificate; it must be read with the Rules and Regulations under which registration is obtained. (¶¶ 24, 42, 47)
- Rules 2(e), 3 and 4, SEBI (Stock Brokers and Sub-Brokers) Rules, 1992A stock broker is a member of a stock exchange and must abide by the bye-laws of each exchange of which it is a member to obtain a certificate. (¶¶ 27, 28)
- Regulations 3, 6, 10 and Schedule III, SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992Applications in Form A are routed through the exchange, certificates in Form D are granted in reference to it, and fees, including the block fee from the date of initial registration, are payable for each certificate. (¶¶ 29, 30, 31, 33, 34, 48)
Held
- The Division Bench erred in relying on the expression 'a certificate'; the singular includes the plural, and the scheme of the Rules and Regulations having statutory force shows that each SEBI registration is co-terminous with the stock exchange of which the broker is a member. (¶¶ 42, 47)
- A stock broker must obtain a certificate of registration for each stock exchange where it operates and pay the Schedule III fee for each certificate as computed under the 2002 circular, which conforms to the Regulations. (¶ 47)
- The 'date of initial registration' in Schedule III refers to the certificate obtained in relation to a particular exchange, so the block fee for the sixth year onward is reckoned per certificate; the validity of the fee structure itself was settled in B.S.E. Brokers' Forum. (¶¶ 48, 49)
Result
Appeals allowed; the Division Bench's judgments set aside, upholding paragraph (vi) of Part A of the SEBI circular dated 28.03.2002; no costs.