-Report by Harsh Singh Rajput
In the case of GPSK CAPITAL PRIVATE LIMITED (FORMERLY KNOWN AS MANTRI FINANCE LIMITED) vs THE SECURITIES AND EXCHANGE BOARD OF INDIA, the said company appealed to get an exemption from the registration fees because of Shrikant Mantri, from who they have acquired the membership card of CSE(Calcutta Stock Exchange) and that appeal, got rejected by The Securities and Exchange Board of India.
On 30th Nov 1992, Shrikant Mantri became a member of CSE(Calcutta Stock Exchange) and got registered as a stockbroker with it. And later in 1997, he decided to transfer his membership card CSE to Mantri Finance Ltd. (hereinafter being referred to as ‘company’). This company was a member of NSE. And on the 17th of October, 1995 it also obtained the membership of NSE as a stock broker. After the membership card is given to the company. It got itself registered as a stockbroker on 1st April 1998.
Now, the company raised the issue that Shrikant Mantra had already paid the fees for registration. So, it should be exempted from the payment of registration fees for the period for which Shrikant Mantra had already paid. It further stated that the company is also entitled to compensation as all the conditions prescribed under para 4 of Schedule 3rd to the Regulation were also fulfilled.
But the board rejected this appeal of the company by order dated 7th May 2007. The board justify this action by saying that Shrikant in his three years of the period of membership acted only as a director of the company and as he was not the permanent director, therefore the company will not be entitled to such exemption as the condition under para 4 of schedule 3rd were also not followed properly.
Then the company filed an appeal against the order of the Board dated 07 May 2007 and highlighted the two issues.
Those two issues were read as:
(i) Whether the stock broker requires multiple registrations to operate on more than one stock exchange(s) or a single registration will suﬃce for all the stock exchanges.
(ii)Whether the appellant-Company is entitled to fee continuity benefits provided under para 4 of Schedule III.
For issue no 1., The learned tribunal held that single registration will be suﬃcient, even after having multiple memberships by the stockbroker. So, with ordering the board, the learned tribunal said to the board to calculate the registration fee payable again based on registration w.e.f 17th Oct 1995.
For issue no 2., the learned tribunal held that the appellant will not be exempted from the payment fee for which Shrikant Mantri had already paid, as the company fails to satisfy the conditions of clause (4) of Schedule 3rd to the registration.
And both sides were aggrieved by this decision by the tribunal, they preferred the appeal being Civil Appeal No(s). 2402 and CIVIL APPEAL NO(S). 5636 against the impugned judgment by tribunal dated 09th Aug 2007.
The learned counsel on behalf of the company submitted that Shrikant Mantra applies for conversion of his membership to a corporate identity and membership of the old entity under para 4 of schedule 3rd.
The learned counsel also stated that the board made an apparent error even after all the conditions are being fulfilled as indicated in para 4.
He also added that the interpretation of para 4 should also be done with the intention with which it was added. And stated that para 4 also mandates that from the converted corporate entity, no fresh fee will be collected.
Learned counsel on behalf of the respondent submitted that if an individual or partnership is being converted to a corporate entity then, a director( not being a temporary director ) and the corporate entity are entitled to claim exemption from paying the registration fees.
And in this case, he also added that Shrikant Mantra transferred his membership card CSE to the company and did not convert himself into a corporate identity.
They also supported the board’s decision not to give the appellant exemption.
The honourable Supreme Court after taking into consideration para 4 of schedule 3rd of the regulation, 1992, and both sides’ facts stated that Shrikant Mantra is not the whole time director, transferred his membership. And also there is nothing that shows the designation of Shrikant Mantra as a full-time director rather he’s been designated as ‘Director’.
And the appellant company failed to satisfy the condition that prevailed in para 4 of schedule 3rd of the regulation.
So, the honourable court dismissed the appeal of the appellant and held that the company will not be exempted from the registration fees.
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