Reg 5 of Stockbroker Regulations Mandates 15% Interest on O/S Dues of Annual Turnover Fees; SEBI Lacks Discretion to Deviate | SAT

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  • Last Updated on 28 December, 2024

Stockbroker Regulations

Case Details: ICAP IL India (P.) Ltd. v. Securities & Exchange Board of India - [2024] 169 taxmann.com 567 (SAT-Mumbai)

Judiciary and Counsel Details

  • P.S. Dinesh Kumar, Presiding Officer, Ms Meera Swarup & Dr Dheeraj Bhatnagar, Technical Member
  • Abishek VenkatramanPranav SampatArka Saha, Advs. for the Appellant.
  • Pradeep Sancheti, Sr. Adv., Mihir ModyYash SutariaTushar Bansode, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant was a trading member in Wholesale Debt Market (WDM) segment. SEBI in its order, asked the appellant to pay an amount of Rs. 33.51 crore towards outstanding dues of annual turnover fee and further an amount of Rs. 3.78 crore towards an interest.

The appellant preferred to plead with the SEBI for a lowering basis for annual turnover based fee, which was not acceded to by the SEBI. However, the appeal against that order of SEBI was allowed by the SAT.

Supreme Court Held

The Supreme Court set aside the order passed by the SAT and directed the appellant to pay outstanding fee at 0.001% of annual turnover. Further, other ancillary issues, inter-alia, chargeability of interest on outstanding fee, were remanded back to the SAT.

In pursuance of the aforesaid order, SAT directed that the SEBI was at its liberty to impose simple interest on outstanding dues at rate of 15% per annum. Thereafter, the appellant filed an instant appeal alleging that in holding so, SAT had given discretion to the SEBI on whether to charge any interest or not or to charge interest at a lower rate.

It was noted that Regulation 5 of Schedule-III of Stockbroker’s regulations, 2002, mandatorily provides for charging interest at a rate of 15% on delayed payment. In view of this, SEBI had no discretion in the matter.

The SAT held that the interest liability computed by the SEBI was to be confirmed subject to granting credit to the appellant for interest at the rate of 15% per annum (simple) on the amount lying in the appellant’s credit, if any.

List of Cases Reviewed

  • B.S.E. Brokers Forum Bombay & Ors. v. SEBI & Ors. [(2001) 3 SCC 482] (Para 7.1) followed.
  • Order dated 18.05.2022 (Ex A) passed by SEBI (Para 7.4.1) modified.

List of Cases Referred to

  • B.S.E. Brokers Forum Bombay & Ors. v. SEBI & Ors. (2001) 3 SCC 482 (para 2)
  • CIT v. Anjum M. H. Ghaswala & Ors AIR 2001 SC 3868 (para 5.1.3)
  • Alok Shankar Pandey v. Union of India (2007) 3 SCC 545 (para 5.1.3)
  • Dushyant Dalal v. SEBI (2017) 9 SCC 660 (para 5.1.3).

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