Association For Welfare Of Delhi ... vs Union Of India And Ors.
2010 Latest Caselaw 2933 Del

      IN THE HIGH COURT OF DELHI AT NEW DELHI


                             W.P.(C) 17349/2004

                                       Reserved on: April 26, 2010
                                       Decision on: June 3, 2010

      ASSOCIATION FOR WELFARE OF DELHI STOCK
      BROKER AND ORS.                          ..... Petitioners
                   Through: Mr. C. Mukund, Advocate

                    versus


      UNION OF INDIA AND ORS                       ..... Respondents
                    Through: Mr. Sanjay Jain, Senior Advocate with
                    Mr. Neeraj Malhotra, Ms. Ruchi Jain and
                    Mr. Nishant Kumar, Advocates for SEBI along
                    with Ms. Sharika, Legal Officer SEBI


       CORAM: JUSTICE S. MURALIDHAR


      1.     Whether Reporters of local papers may be
             allowed to see the judgment?                       No
      2.     To be referred to the Reporter or not?             Yes

      3.     Whether the judgment should be reported
             in Digest?                                         Yes


                    JUDGMENT

1. The Petitioner No.1 is the Association for Welfare of Delhi Stock Brokers

(„Association‟) which is a society registered under the Societies Registration

Act, 1860. The list of the members of the Petitioner No. 1 Association is at

Annexure P-1. These individual stock brokers have also joined as Petitioners

in the present petition pursuant to an order dated 3rd November 2004. The

Association is aggrieved by a circular dated 10th October 2003 issued by the

Respondent No. 2, Securities and Exchange Board of India (SEBI) as well as

Clauses 2 and 3 of Part 2 of the SEBI (Interest Liability Regularization)

Scheme, 2004 („SILRS‟), in so far as it restrains SEBI from considering the

turnover data with breakup of the members of the Petitioner No.1 Association

which has been furnished to the SEBI by the Delhi Stock Exchange

Association Limited (DSEAL) (Respondent No.3 herein) till the expiry of the

regularization period on 15th November 2004. The second prayer is that the

Petitioners should be allowed the benefit of the reduced rate of fees

prescribed by Clause (bb) of Schedule III of the said SILRS while

participating therein to avail the benefit of the 80% waiver of interest

liability.

2. A third prayer is for a writ of mandamus directing the SEBI to forthwith

consider and accept the turnover data with breakup of the members of the

Petitioner No.1 Association and submitted to the SEBI through the DSEAL

in the prescribed format before the commencement of the regularization

period for the purposes of calculations of the outstanding registration fees

and interest thereon strictly in terms of the SEBI (Stock Brokers and Sub

Brokers) Regulations, 1992 and the concessions allowed under the SILRS.

3. The fourth prayer is that the SEBI should be directed to correct/revise the

"Fee Liability Statements" issued under the SILRS in relation to the members

of the Petitioner No.1 Association and give them credit of the payments

already made by them on account of SEBI registration fees in the said „Fee

Liability Statements‟. The last prayer is that those who could not meet the

deadline for submission of the turnover data should be permitted to submit it

before the expiry of the regularization period.

4. The background to the present petition is that the SEBI was constituted

under the Securities and Exchange Board of India Act, 1992 („SEBI Act‟),

inter alia, to protect the interests of investors in the securities market and

promote, develop and look after the securities markets and all matters

connected therewith and incidental thereto. It is stated that the DSEAL is

duly registered under the Securities Contract (Regulation) Act, 1956 („SCR

Act‟). It is stated that the DSEAL is the conduit for the purposes of

administration of the SEBI registration fee regime on the stock brokers. In

other words, DSEAL is responsible for co-ordinating the task of collection of

the turnover data from the stock brokers on behalf of the SEBI and

forwarding the said turnover data to SEBI based on which SEBI determines

the registration fee liability of the stock brokers. DSEAL is also stated to be

responsible for verifying the turnover data submitted by the stock brokers and

making reconciliations.

5. By a notification dated 28th August 1992 in exercise of its power under

Section 28 of the SEBI Act, the SEBI promulgated the Securities and

Exchange Board of India (Stock Brokers and Sub Brokers) Rules, 1992 („the

SEBI Rules‟). Rule 3 provided that no stock broker shall buy, sell and deal

in securities unless he holds a certificate granted by the SEBI. The Rule also

provided that for grant of such certificate the concerned broker shall have to

pay an amount as registration fee in the manner as may be prescribed by

SEBI.

6. In 1992, the Central Government enacted the SEBI (Stock Brokers and

Sub Brokers) Regulations 1992 („Regulations‟) inter alia providing for levy

of registration fee. It provides that stock brokers shall pay registration fees in

the manner set out in paras 1 to 4 of Schedule III to the Regulations. Briefly

summarized, the stock brokers are required to pay fee based on the Annual

Turnover at the rates prescribed therein only for the first five years for the

date of initial registration. Thereafter they are expected to pay a flat fee of

Rs.5,000/- only for every block of five years. According to the Petitioners,

therefore, the annual turnover of the brokers is relevant only for the purposes

of computation of this SEBI registration fees liability and is, therefore,

relevant only for the first five years from the date of registration with SEBI

and not thereafter. Following the various representations against the

circulars, the amended regulations, SEBI constituted a Committee under the

Chairmanship of Shri R.S. Bhatt, the then Chairman of Unit Trust of India.

7. The registration fee requirement was challenged by several stock brokers

through writ petitions in different High Courts. One of those writ petitions

was transferred to the Supreme Court. It was disposed of by the judgment in

B.S.E. Brokers' Forum, Bombay v. Securities Exchange Board of India

2001 (3) SCC 482. While upholding the levy based on the annual turnover of

the brokers, the Supreme Court observed that there should be changes

brought about in the definition of annual turnover and also in the quantum of

the levy pertaining to the certain specific transactions treated as part of the

turnover. Following the above judgment and pursuant to the

recommendations of the Bhatt Committee, Clause (bb) was incorporated in

the para 1 to Schedule III of the Regulations. The inserted Clause „bb‟ reads

as under:

"(bb) Notwithstanding anything contained in clause (b) it is clarified that the fee shall be recoverable as computed as under:

(i) in respect of jobbing transactions that is to say all transactions which are squared off during the same day which have not been undertaken by the Broker on behalf of clients, the fees shall be computed at the rate of one two hundredth of one per cent in respect of the sale side of such transactions;

(ii) in respect of transactions in Government securities, the bonds issued by any public Sector Undertaking and the units traded in a similar manner, the fee payable shall be computed at the rate of one thousandth of one percent of the turnover;

(iii) in case of carry forward, renewal or badla transactions the fees shall computed at the rate of one hundredth of one per cent of the turnover and the reverse off setting transactions shall not be counted as part of the turnover;

(iv) if brokers are carrying out transactions in securities without reporting them to the stock exchange, those transactions shall be taken into account for the purpose of turnover and the fees shall be computed at the rate of one hundredth of one per cent of the turnover;

(v) the trade put through on other stock exchanges shall be included in the turnover of that exchange if market for that security does not exist on the exchange of which he is a member and the fees shall be computed at the rate of one hundredth of one per cent of the turnover;

(vi) activity such as underwriting and collection of deposits shall not be taken into account for the purpose of calculating the turnover."

8. Prior to the amendment dated 20th February 2002, the SEBI (Stock Brokers

and Sub Brokers) Regulation 1992 was amended on 16 th December 1998,

inserting Para 5 in the Schedule III thereto, whereby provision for charging

of interest was made on a delay in the payment of SEBI registration fees by

the stock brokers. This was done so as to provide a coercive mechanism for

the enforcement of the SEBI fees regime.

9. Pursuant to the amendment brought about in the said Regulations on 20 th

February 2002 in the form of insertion of Clause (bb), the SEBI came out

with a circular bearing Ref.No.SMD/POLICY/Cir-07/2002 dated 28th March

2002 which apart from giving various clarifications relating to the fees to be

paid by the stock brokers, also for the first time indicated the details of

various components of the turnover as per the amended regulations that was

required to be furnished by the respective stock brokers duly supported by

Auditor‟s Certificate and even the format of such Auditor‟s Certificate was

prescribed in the circular dated 28th March 2002. It is pertinent to note that

the turnover data in the said circular, duly certified by their auditors, was to

be furnished by the stock brokers not directly to the SEBI, but to the DSEAL

which was obliged to recompile the same in the prescribed format and

forward it to the SEBI.

10. According to the Petitioner, a reading of the above circular dated 28th

March 2002 showed that it was solely for the purpose of streamlining the

process of the administration of the SEBI fee regime that DSEAL was

introduced as a conduit. DSEAL was to act purely as an agent of the SEBI.

DSEAL was required to verify the turnover figure submitted by its members

with its own records and in case of any discrepancy the DSEAL was required

to settle the same with the member concerned.

11. A further circular dated 30th September 2002 was brought out by the

SEBI. In this circular SEBI further clarified about the fees to be paid by the

stock brokers. The format for the auditor certificate was also altered.

12. By a circular dated 10th October 2003, SEBI fixed a deadline of 31st

October 2003 for the submission of the turnover data with breakup. It was

indicated that as regards such stock brokers who failed to meet the deadline,

DSEAL would forward to the SEBI the gross turnover data of such stock

brokers. This would mean that their fee liability would be calculated at the

highest rates even though concessional rates had been prescribed in Clause

(bb) of the said Regulations.

13. The Petitioners challenged the power of the SEBI to levy fees at a highest

rate on components which are eligible for concessional rates under Clause

(bb). Also challenged is SEBI‟s power to levy interest on the delayed

payment of fees under Para 5 of the Schedule III.

14. It is contended that the stock brokers, including some of the members of

the Petitioner No.1 Association had been submitting the turnover details and

have been paying fees as per transactions since 1992. The turnover data

furnished by the members of the Petitioner No.1 Association were duly

supported by auditor‟s certificates. A circular dated 28th March 2002 stated

that the turnover data with the auditor‟s certificate could not be furnished to

by the stock brokers to SEBI „without remitting fees as indicated in the

turnover statement supported by the auditor certificate‟.

15. The Petitioner state that from 2002-2003 onwards there was no

significant trading on the Delhi Stock Exchange. Members of the DSEAL,

who were also members of the Petitioner No.1 Association, did not even log

on their computers for trading on the exchange. The administrative

infrastructure of DSEAL deteriorated and it was not able to manage its own

records, settle the differences, if any, with the members and thereafter send

the turnover data to SEBI on „as is‟ basis. Consequently, DSEAL was unable

to meet its obligation of sending SEBI the turnover data. In the

circumstances, DSEAL was left with no option to seek the help of an outside

agency. Consequent upon a decision of the Board of Directors, DSEAL by a

letter dated 29th March 2004 hired the services of M/s. K.C. Khanna &

Company to compile the members‟ turnover data and their fee liability in

accordance with various circulars of the SEBI including the circular dated

28th March 2002. It was emphasized that the exercises had to be completed

before the end of May 2004 itself. It is stated that M/s. K.C. Khanna &

Company while compiling the turnover data acted contrary to the instructions

contained in the letter dated 29th March 2004 and completely ignored the

requirements of the SEBI circular dated 28th March 2002. Consequently, the

turnover data was forwarded to SEBI by the DSEAL on 9 th July 2004 without

complying the essential requirements of the circular dated 28th March 2002.

Even SEBI pointed out apparent mistakes in the turnover data as sent by the

DSEAL. It is stated that issue was discussed in a meeting of the Board of

Directors of DSEAL held on 14th July 2004. It was decided to make a

representation to the SEBI.

16. Pursuant to the above decision some of the members of the DSEAL met a

senior official of SEBI. It is stated that they were assured that the revised

data would be accepted by SEBI. In the circumstances, DSEAL withdrew

the data compiled by M/s. K.C. Khanna & Company decided to resubmit it to

the SEBI.

17. It is stated that owing to the failure of M/s. K.C. Khanna & Company to

comply with the requirements of SEBI in compiling the turnover data

DSEAL hired the services of M/s. Doogar & Associates, a chartered

accountants‟ firm, to recompile the turnover data with the breakup of the

stock brokers in compliance with the requirements stated out in the circular

dated 28th March 2002. DSEAL claims that SEBI was informed of all

developments that were taking place. It is stated around 150 stock brokers of

DSEAL, including many members of the Petitioner No.1 Association re-

submitted their turnover data with the breakup in the prescribed format which

was duly certified by their auditors. This was examined by M/s. Doogar &

Associates who thereafter forwarded the turnover data with the breakup of

the stock brokers including members of the Petitioner No.1 Association to the

Respondent No.2 SEBI between 16th to 30th September 2004.

18. Meanwhile, on 15th July 2004, SEBI notified the SILRS 2004 whereby

SEBI granted a one-time payment opportunity to stock brokers who had not

till then paid their registration fee till then. They were permitted to pay the

entire principal amount of the registration fee together with 20% of the

outstanding interest. Thereby the broker was absolved the liability to pay

80% of the outstanding interest. It was clarified that in case of non-payment

of the registration fee, the broker might face suspension or cancellation of

certificate of registration, or prosecution in terms of Section 24 of the SEBI

Act.

19. In order to avoid adverse consequences, many of the members of the

Petitioner No.1 Association decided to avail of the SILRS 2004 and make

payment of the outstanding registration fee together with 20% interest. On

3rd September 2004 SEBI forwarded, through DSEAL, the „Provisional Fee

Liability Statement‟ to all the stock brokers. It is stated that the members of

the Petitioner No.1 Association were surprised to find that the liability for

fees as shown in the said statement was based upon their „gross turnover

data‟ and not on their turnover data with breakup duly certified, by their

auditors and furnished to SEBI. In other words, the benefit of the

concessional rates of fee on different components on the turnover as

prescribed in Clause (bb) of Part 1 of the Schedule to the Regulations was not

accorded to the members of the Association. Further, those who had

converted from individual to corporate memberships understood that they

would be accorded „fee continuity benefit‟. They found that they were being

charged fees on their entire turnover at the highest rates without being given

any opportunity to submit the auditor certified turnover data with the

breakup. Further it was found that the provisional fee liability statement did

not account for some of the payments made by the individual brokers on

account of registration fees from time to time. Thereafter, the members of

the Petitioner No.1 Association approached the DSEAL, they were informed

of the lapses of M/s. K.C. Khanna & Company. DSEAL assured the members

of the Petitioner No.1 Association that the corrections would be made in the

data and that the liability to principal fee and interest would be reflected in

the „Final Fee Liability Statement‟ which was to be issued by SEBI.

20. It is stated that the Petitioners thereafter submitted all the information as

sought by the DSEAL. It is stated that on 10 th October 2004, members of the

Petitioner No.1 Association received the „Final Fee Liability Statement‟

where again they were surprised to note that there was no change from the

provisional statement. The benefit of concessional rates of fee in terms of

Clause (bb) of Para 1 to the Schedule to the Regulations continued to be

denied to the members of the Petitioner No.1 Association. Since the final

statement was received only a few days before 15th October 2004 and the

deadline for the regularization was 15th November 2004, the present petition

was filed on 2nd November 2004.

21. While directing issuance of notice on 3rd November 2004 this Court

required the SEBI to inform it whether any data was being accepted after the

cutoff date and if so, on what conditions. On the subsequent date on 10 th

November 2004 after noting the submissions of the learned Senior counsel

for the Petitioner that the SEBI was not accepting the payment made by the

Petitioner as per their calculations, this Court directed as under:

"It is open to members of the petitioners to tender payments as per their calculations, but the same will not create any rights or equities in favour of members of the petitioner. It is

equally open to respondent No.2 SEBI to accept or not to accept the said payments since the matter is sub judice."

22. At the outset the learned counsel for the Respondents relied upon the

judgment of the Gujarat High Court in Virendra Bansal v. Securities and

Exchange Board of India (2006) 2 Compl 93 (Guj). In this case, some parts

of the SILRS 2004 were challenged. The Gujarat High Court upheld the

Scheme as correct and legal in consonance with the Act, 1992. Likewise, the

calculation of registration fees, adopted by SEBI in absence of break up

turnover and in absence of Auditor‟s report before the cut off date, was

upheld as true, correct, legal and in consonance with the SEBI Act and

Regulations, 1992. The Court did not extend the benefit of the Scheme after

the cut off date, especially because, extensions had been given by SEBI,

whereby a large number of stock-brokers of Ahmedabad Stock Exchange had

already availed the benefit of the Scheme. The Court refused to extend the

cut-off date in this case. However, the facts of the present case are different

because, in this case the individual stock brokers have not defaulted in

providing the necessary data, but it is DSEAL which has failed to effectively

submit the data in the prescribed format.

23. The Respondent also referred to certain interim orders passed on 2nd

December 2005 by the Division Bench of the Gujarat High Court in LPA

No.1553 of 2005 in the case of Ajay Sarabhai v. Union of India. In this case,

the SEBI assessed the registration fee on the basis of the data earlier given by

the petitioners to the stock exchange without breakup of the turnover data and

SEBI did not give remission of 80% interest on delayed payment of

registration fee as per the provision of SEBI Scheme, 2004, as the stock

brokers of the Ahmedabad Stock Exchange did not submit turnover data with

breakup of the transactions along with the auditors certificate before the cut

off date. The petitioners contended that they were not individually informed

of such circulars or reminders from SEBI, however, the Learned Single Judge

had noted that a large number of stock brokers of Ahmedabad Stock

Exchange had already availed the benefit of the Scheme. The Division Bench

in this case passed an interim order that if the appellants furnished auditors

certificates for data with the breakup in the respect of transaction attracting

lower rate of registration fee and paid deficit registration fee, along with

interest within one month, then the Respondent shall not take any adverse

action against the petitioners. This case can similarly be distinguished as it

refers to the default in case of individual stock brokers and not of the

Ahmedabad Stock Exchange.

24. The above submission is countered by Mr.C.Mukumd, learned counsel

for the Petitioner by pointing out that as far as the present case is concerned

the Petitioners are not shying away from meeting their liability in terms of

Clause (bb) of the Regulations. It is pointed out that the failure to furnish

turnover data was not deliberate. It is urged that the SEBI has no option but

to implement the Clause (bb) and charge interest only to the extent

permissible.

25. In the counter affidavit filed by the SEBI the stand taken is that there

were three deadlines i.e. 15th July 2002, 10th April 2003 and 31st August 2003

set for the stock exchange to submit the turnover data. The circular dated

10th October 2003 gave a final deadline of 31st October 2003. Since

sufficient time had been given, the SEBI could not be faulted for proceeding

to calculate the fee liability on the basis of the gross turnover data. Reference

is made to the Regulation 10 read with Schedule III 2 (b) which provides for

manner in which fee is to be paid. The said Regulations read as under

"Regulation 10 Payment of fees and the consequences of failure of pay fees-

(1) Every applicant eligible for grant of a certificate shall pay such fees and in such manner as specified in Schedule III.

Provided that the Board may on sufficient cause being shown permit the stock-broker to pay such fees at any time before the expiry of six months from the date on which such fees become due.

(2) Where a stock-broker fails to pay the fees as provided in regulation 10, the Board may suspend the registration certificate, whereupon the stock-broker shall cease to buy, sell or deal in securities as a stock-broker.

Schedule III

2. Fees referred to in clauses (a) and (b) of paragraph 1 above shall be paid

(a) xxx

(b) in respect of the financial year beginning on the 1st day of April, 1993 and the following financial years on or before the first day of October of the financial year to which such payment relates, and such fees shall be computed with reference to the annual turnover relating to the preceding financial year."

26. It is further stated that under the SILRS which came into effect 15th July

2004, no revision of data was permissible whereas the present case was one

of data revision. Since the regularization had already come to an end on 30th

November 2004, no relief could be granted to the Petitioners. Mr. Sanjay

Jain, learned Senior counsel appearing for the SEBI submits that M/s. Doogar

and Associates while re-submitting revised data stated that they did not

vouch for the correctness and authenticity of the figures, therefore, said data

could not be taken on record. Even otherwise the data furnished was not in

accordance with the regulations.

27. The above submissions have been considered. The starting point for the

present dispute is the judgment of the Supreme Court in B.S.E. Brokers'

Forum, Bombay v. Securities Exchange Board of India which negatived the

challenge raised by the brokers to the power of the SEBI to collect from each

of them a registration fee under Section 12 (2) of the SEBI Act. While

negativing that challenge, the Supreme Court took note of the

recommendation of the Expert Committee appointed by the SEBI that there

should be a change brought about in the definition of „annual turnover‟. In

para 47 of the judgment it was observed as under:

"47. Therefore, it would be futile to contend that the impugned fee merely because it is levied on the basis of the turnover of the brokers would either amount to a turnover tax or a tax on income. While we accept the levy based on annual turnover of the brokers as valid, we have to notice that the Expert Committee appointed by the Board has in its report held that there should be certain changes brought about in the definition of 'annual turnover' as also in the quantum of the levy pertaining to certain specific transactions which are

treated as part of the turnover. It has recommended that for "jobbing transactions" the scale of fees may be reduced to One Two hundredth of 1 per cent, and in regard to carry forward, renewal or badla transactions, the off-setting entries made by the Exchange, may not be counted as part of the turnover, and further on Government securities, PSU bonds and units, the turnover will have to be calculated separately and a fee of one thousandth of one per cent may be charged on such turnover than the present scale of one hundredth of one per cent. It has also recommended that the activities such as underwriting and collection of deposits should not be taken into account for the purpose of calculating the turnover of the brokers. These recommendations of the Committee were, as a matter of fact, accepted by the Government of India also but as on date, the necessary changes have not been brought about by the Board in its Regulations. Consequently, to the extent of the recommendations made by the Expert Committee, we are of the opinion that the Board is bound to bring about corresponding changes so as to remove the anomalies pointed out by the Committee. This was pointed out to learned counsel for the respondents when it was submitted that the Board has accepted these recommendations and the proposed changes were not brought about because of the pendency of this petition and the necessary changes to incorporate the recommendations of the Bhatt Committee would be done after disposal of these petitions. We recorded this submission on behalf of the Board and direct that the said changes recommended by the Bhatt Committee will be incorporated in the Regulations. Subject to the above, we are of the view that the challenge made to the levy based on the measure of turnover has to be rejected."

28. Clause (bb) which was inserted in the Regulations consequent upon the

judgment indicates the methodology for determining the levy and mode of

payment of the registration fee by the stock brokers to the SEBI. This was a

first-time exercise for both the SEBI and various stock exchanges. The

manner of calculation of turnover data was an obviously cumbersome one.

SEBI itself quickly realized that the verification of the turnover figures

submitted by the various brokers to the stock exchanges and in turn by the

stock exchanges to the SEBI was not going to be a simple exercise. This

explains why there were several circulars and clarifications issued by the

SEBI from time to time including the one concerning „fee continuity benefit‟

to such of those stock brokers who had converted their individual

membership into a corporate membership.

29. The bone of contention is the circular dated 10th October 2003 whereby

SEBI gave a final deadline of 31st October 2003 for submission of the

turnover data on the basis of which the fee liability was to be calculated. It

was stipulated that if the brokers did not submit the breakup turnover data by

the deadline that they would not be eligible for concessional rates and a fee at

a flat rate of 0.01% would be levied on the gross turnover.

30. Clause (bb) is a non-obstante clause which was inserted precisely to

factor in the suggestion made by the Expert Committee and which was taken

note of by the Supreme Court. It was therefore not open to the SEBI to revert

to computing the fee liability as a percentage of the gross turnover in terms of

Clause (b). The consequences of the failure to submit the breakup of the

turnover data in terms of Clause (bb) are spelt out in Regulation 10 read with

Schedule-III (2) (b) of the SEBI regulations. The failure to pay registration

fees invites the consequence of suspension of the registration certificate.

Moreover in Schedule III (2) (b), the fee was required to be paid on or before

the first day of October of the financial year with respect to which such

payments were to be made and, such fees shall be computed with reference to

the annual turnover relating to the preceding financial year. In the

circumstances, it was not open to the SEBI to compute the fee liability in

terms of the gross turnover under Clause (b) of the Regulations. Therefore,

the penalty clause inserted in the circular dated 10 th October 2003 by which

SEBI could resort to computation of the fee liability as a percentage of the

gross turnover in terms of the Clause (b) was contrary to the very purpose

and object to clause (bb). In the absence of a specific provision that permits

the SEBI to resort to Clause (b) in the event of the failure to submit

information relevant to Clause (bb), the aforementioned clause in the circular

dated 10th October 2003 was unsustainable in law.

31. We next come to the SILRS 2004 Part I, Clauses 2 and 3. While the

necessity for the introduction of the SILRS has been explained by the SEBI,

and indeed it was beneficial to the brokers, the refusal to accept the revised

data after the date of announcement of the scheme but before the final

deadline for regularization i.e. 15th November 2004 does not appear to this

Court to be rational or reasonable.

32. As far as the particular clause which is objected to by the Petitioners it is

Clause 3 of Part II of SILRS 2004 which reads as under:

"3. In accordance with the above policy, the Board has been receiving turnover data from the Exchanges and taking them on record. No further data revisions would, therefore, be permitted - even if a stock broker wishes to submit an auditor certificate at this late stage, or, if the Exchange desires to revise its own data. This measure is absolutely necessary to ensure that the process of data revision does not remain open ended for even. As sufficient advance notices and reminders have been sent to the Exchanges/stock brokers and the Board is taking on record the latest turnover data duly certified by the Exchange, no representations/complaints would be entertained by the Board."

33. As far as the present case is concerned, no fault can really be found with

the individual brokers if, DSEAL‟s first set of auditors, M/s. K.C. Khanna &

Co. failed to furnish the date in the correct format. The revised data, as

prepared by M/s. Doogar & Associates was submitted before the

regularization period came to an end i.e. 15th November 2004. It is not in

dispute that there was a delay in the submission of the correct turnover data.

However, considering the facts and circumstances of the present case, where

admittedly the initially data furnished did not meet the requirements of the

SEBI Regulations, a lenient view ought to have been taken by the SEBI. In

para 20 of the counter affidavit, SEBI has acknowledged that there were

instances, where on account of Court orders or otherwise, the delay in

submission of data has been condoned. The concern voiced by SEBI that the

stock exchange cannot "go on revising the data indefinitely" cannot be

appreciated in the present case. It cannot be said that DSEAL was seeking to

revise the data indefinitely.

34. The other reason given by the SEBI for not accepting the revised data

compiled by the Doogar & Associates is that they did not vouch for its

authenticity. SEBI could have sought clarifications if necessary from Doogar

& Associates on any particular set of data which was of doubtful authenticity.

There was no justification in rejecting the entire data only because of lack of

authentication by Doogar & Associates. In a first-time exercise, where a large

number of brokers are required to submit information first to the stock

exchange which in turn has to submit it to the SEBI, there are bound to be

some lapses in the collection and collation of data. The primary

responsibility to submit the data lay with the DSEAL. The consequences of

the failure by DSEAL to meet the time deadline, should not have to be

suffered by the individual brokers who were themselves not responsible for

such failure. Keeping in view these circumstances, this court finds merit in

submission of the learned counsel for the Petitioners that SEBI has not acted

reasonably in rejecting the data submitted with the certification of M/s.

Doogar & Associates and in denying them the benefit of para 2.0 of Part I of

the SILRS 2004.

35. Accordingly, a direction is issued to the SEBI to compute the fee liability

of the individual stock brokers of the Petitioner No.1 Association by

accepting the turnover data as certified by M/s. Doogar & Associate and

giving them the benefit of para 2.0 of Part I of the SILRS 2004. SEBI will in

the above terms correct/revise the "Fee Liability Statements" issued under the

SILRS in relation to the members of the Petitioner No.1 Association and give

them credit of the payments already made by them on account of SEBI

registration fees in the said „Fee Liability Statements‟. If there is any amount

owing to the members of the petitioner No.1 Association as a result of the

above revision of the Fee Liability Statement, the said amount can be

adjusted against the future dues of such stock brokers. It is made clear that

this would be a onetime measure, which is not to be treated as a precedent. It

is further clarified that in case of any failure hereafter on the part of the

members of the Petitioner No. 1 Association to submit the turnover data in

terms of Clause (bb) within the time prescribed, it will be open to SEBI to

suspend the registration of such stock broker as provided in the Regulations.

36. The writ petition is accordingly disposed of with the above directions

with no orders as to costs.

S. MURALIDHAR, J JUNE 3, 2010 ps