The Supreme Court while hearing the case of GPSK Capital Private Limited (Formerly Known as Mantri Finance Limited) v The Securities and Exchange Board Of India has upheld SEBI’s decision not to grant exemption to a corporate entity from payment of fees under Clause 4 of Schedule III of SEBI (Stock-Brokers and Sub-Brokers) Regulations 1992, since it was the Director and not the Whole Time Director who transferred stock exchange registration to the corporate entity and paid the registration fees. No exemption can be claimed on the ground that the Director had already paid the fees. Further, it was reiterated that a separate Registration Certificate must be obtained from SEBI for each stock exchange where the stock broker operates.
The case started with Mr. Srikant Mantri who was a member of the Calcutta Stock Exchange (“CSE”) and registered as a stockbroker in 1992. He was the Director of Mantri Finance Ltd. The appellant company Mantri Finance Ltd. was earlier registered with NSE.
The Appellant Company sought the benefit of Clause 4 of Schedule III of the Regulations 1992 and claimed exemption from payment of fees on the ground that its Director, Mr. Mantri, had already paid the fees and the claim was rejected by SEBI while holding that Mr. Mantri was only a Director and not a whole time Director in the Company during the three years period after the transfer of his membership. Therefore, the conditions prescribed under Clause 4 of Schedule III were not satisfied and no exemption could be given.
The SEBI order was challenged before the Appellate Tribunal held that a single registration with SEBI is sufficient even if the stock broker has multiple memberships and functions from several stock exchanges. Therefore, the stockbroker will have to pay the fee for initial registration with SEBI. The Appellant Company preferred an appeal before the Supreme Court against the Appellate Tribunal’s order.
The top Court reiterated that a separate Registration Certificate must be obtained from SEBI for each stock exchange where the stock broker operates. Also, there will be no exemption of fees under Clause 4 of Schedule III if registration is transferred by Director rather than Whole Time Director.