LexVSE STOCK SERVICES LTD. versus S.E.B.I. &ANR.
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[2015] 12 S.C.R. 909 VSE STOCK SERVICES LTD. A v. S.E.B.I. &ANR. (Civil Appeal No.4664 of 2006) 8 NOVEMBER 04, 2015 [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulation.s, 1992- Reg 10(1) read with schedule Ill - Fee continuity benefit- Entitlement- Parent c company incorporated a subsidiary company (company limited by guarantee) and got membership of Bombay stock exchange but failed to get membership of National Stock Exchange - To overcome this, the parent company incorporated another subsidiary company-appellant D company, (company limited by stocks) - Said company obtained membership of NSE but SEBI refused to grant recognition since only one subsidiary could claim registration as a broker - Subsequently, to operate on NSE, earlier subsidiary company amalgamated with the appellant E company - Payment of provisional fee liability by appellant. - However, demand of final fee by SEBI - Challenge to, on the ground that appellant entitled to fee continuity benefit in t0rms of circular of SEBI - Rejection of claim by tribunal - F On appeal, held: Compulsion of the appellant was a business compulsion to do business as a broker with NSE - Such a situation cannot be treated as a compulsion of law for amalgamation - Only because the appellant and the parent company subsequently decided and opted to do business G as a broker with NSE, they chose the path ofamalgamation - They could have as weir chosen the path of winding up of the earlier subsidiary company- Thus, order passed by the tribunal upheld. B.S.E: Brokers' Forum v. Securities & Exchange Board H 909 910 SUPREMECOURTREPORTS [2015] 12 S.C.R. A of India (2001) 3 SCC 482; Ratnabali Capital Markets Ltd. v. B c D Securities & Exchange Board of India 2007 (11) SCR 629: (2008) 1 sec 439 - referred to. Case Law Reference (2001) 3 sec 482 2007 (11) SCR 629 referred to. referred to. Para 6 Para 8 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4664 of 2006. From the Judgment and Order dated 18.05.2006 of the •. Securities Appellate Tribunal, Mumbai in Appeal No. 342 of 2004. Amar Dave, E.C. Agrawala, Advs., for the Appellant. C.U. Singh, Sr.Adv., Dhawal Mehrotra, Bhargava V. Desai, Ms. Saumya Mehrotra, Rishi Gautam, Advs., for the Respondent. E The Judgment of the Court was delivered by SHIVA KIRTI SINGH, J. 1. Challenge in this appeal is to order dated 18.5.2006 rendered by the Securities Appellate Tribunal, Mumbai (for short 'SAT') whereby Appeal No.342/ F 2004 preferred by the appellant was dismissed by holding that the appellant is not entitled to the fee continuity benefit claimed under the provisions of Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 [for short, 'the Regulations']. G 2. Since there is no dispute on the material facts which have been correctly recorded in the .order under appeal, no useful purpose will be served by recollecting the facts in detail once again. It would suffice to note that in terms of policy decision by respondent no.1, the Securities & Exchange Board H of India (for brevity, 'the SEBI') reflected in its circulars dated VSE STOCK SERVICES LTD. v. S.E.B.I. &ANR 911 [SHIVAKIRTI SINGH, J.] 26.11.1999 and 16.12.1999, the Vadodara Stock Exchange A Ltd. incorporated a subsidiary company named as VSE Securities Ltd. on 24.12.1999. It got membership of Bombay Stock Exchange (BSE) as well as registration under the SEBI resulting in commencement of operation on BSE from 29.5.2000 but failed to get membership of National Stock B Exchange (NSE) for the specific reason that it was a company limited by guarantee and not by stock or shares. To overcome this handicap, the Vadodara Stock Exchange Ltd. corresponded with the SEBI as well as NSE but without success because apparently it had ignored the clarifications C contained in circular dated 16.12.1999 indicating that a Stock Exchange could acquire the membership right of a major Stock Exchange through a subsidiary company but it should be a company limited by stocks. The bye-laws of NSE also permitted membership only to such a company and not to one D limited by guarantee. Hence Vadodara Stock Exchange Ltd. incorporated another subsidiary company, the appellant herein, on 16.1.2002. Being limited by stocks, the appellant obtained membership of NSE on 16.4.2002. But SEBI refused to grant recog
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