JUDGMENT
C. Bhattacharya, Member
1. This order will dispose of 19 Appeals Nos. 168, 203, 211, 212, 213, 214, 215, 219, 220, 221, 222, 223, 225, 234, 243, 265, 300, 325 and 391 of 2004 in which identical questions of law and fact arise. Challenge in these appeals is to the action of the Securities and Exchange Board of India (for short the Board) by which demand for payment of registration fee has been made by issuing a fee liability statement in which no concession has been allowed to the appellants as provided in paragraph 4 of Schedule III to the Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulations, 1992 (for short the Regulations). Since arguments were addressed in Appeal No. 211 of 2004, the facts are being taken from this case.
2. One Shri Ramanlal D. Shah was a stock broker registered with Bombay Stock Exchange(BSE) since 1967. He was also registered as a stock broker with the Securities and Exchange Board of India from 26/11/1992. On 27/11/1995 the sole proprietary firm of Ramanlal D. Shah was converted into a partnership firm where Ramanlal D. Shah was holding share of 70% and his son Kamlesh R. Shah was holding a share of 30%. On 17/4/96 this partnership firm got fresh registration from the Board. The partnership firm continued to trade in the name of M/s. Ramanlal D. Shah. Shri Ramanlal D. Shah expired on 5/9/96 and the partnership, therefore, came to an end. His son, Kamlesh R. Shah, who was earlier holding 30% share in the partnership firm applied to get a certificate of registration from the Board in the name of Kamlesh R. Shah who continued to trade as M/s. Ramanlal D. Shah vide certificate issued by the Board on 20/12/1996 which is Exhibit ‘A’ at page 23 of the appeal paper book. The partnership firm of M/s. Ramanlal D. Shah had paid fees to the Board as per Regulations for all the years it functioned.
3. Schedule III of regulation 10 of the Regulations requires the fees to be paid by a stock broker as follows:
Quote
I. Fees to be paid by the Stock Broker.
1. Every stock broker shall subject to paragraphs 2 and 3 of this Schedule pay registration fees in the manner set out below:
(a)where the annual turnover does not exceed rupees one crore during any financial year, a sum of rupees five thousand for each financial year;
(b)where the annual turnover of the stock-broker exceeds rupees one crore during any financial year, a sum of rupees five thousand plus one hundredth of one per cent of the turnover in excess of rupees one crore for each financial year;
[(bb)…
(c) after the expiry of five financial years from the date of initial registration as a stock-broker, he shall pay a sum of rupees five thousand for [every] block of five financial years commencing from the sixth financial year after the date of grant of initial registration to keep his registration in force. Unquote
4. In the course of various steps which were being taken by the policy makers to encourage more and more corporatisation of the brokers, paragraph 4 was inserted in the said schedule with effect from 21/1/1998 whereby exemption is available for payment of registration fees if the corporate entity has been formed by converting an individual or partnership membership card for the period for which the erstwhile individual or partnership member has already paid the fees subject to certain conditions as mentioned in that paragraph. A number of representations were received by the Board from various quarters and the issues raised by such representations were dealt with by the Board and a host of clarifications were issued vide the Board’s circular dated 28/3/2002. The contention of the appellant is that in such cases where death has intervened, the membership of the stock exchange has got transmitted to the heir or successor and if there is no other change then they are to be deemed as same business and same broker firm which is continuing and in such a situation they will be entitled to pay a sum of Rs. 5,000/- for every block of 5 financial years after the expiry of the first five financial years for which they have paid their fees in terms of paragraph 1 (a) or (b). The liability shown as fees payable in the impugned fee liability statement from the Board does not give them the benefit in terms of paragraph 1(c) and being aggrieved, they have filed these appeals.
5. The learned Counsel for the appellant pleaded that the bye laws of BSE do not permit a partnership firm to be a member of the exchange although a member can join a partnership firm and remain a partner. That is why in the Board’s registration also the registration is in the name of the trading member of BSE although they may trade in the name of the firm (in this case the registration certificate dated 17/4/1996 from the Board at Exhibit ‘C’ at page 25, is in the name of Ramanlal D. Shah whose trade name is indicated as M/s. Ramanlal D. Shah). The stock exchange byelaws also permit that when such death of a member occurs his heir or successor can apply for membership and pending admission, they may continue with the existing business and continue to trade in the name of old partnership card. As such, although Shri Kamlesh Shah is now the new proprietor he continues to trade in the name of M/s. Ramanlal D. Shah and is also registered by the Board. The appellant should, therefore, be treated as the same member and same firm continuing and should, therefore, be exempted on the same lines as by paragraph 4 the exemption is granted to corporatised entities. We do not agree with this contention. The correct position is that when a stock broker who is a member of an exchange dies, his heir or successor who wants to be admitted as a member of the exchange has to apply and the exchange has full discretion to decide whether to admit him or not as a member. He may be allowed, for the sake of convenience and for the sake of not to inconvenience the investors who were operating in the market through that broker, to continue with the same business and trade in the interregnum until the exchange decides to admit him as a member. Such continuation in the interregnum does not automatically make him entitled to become a member of the exchange nor can it be claimed by him as a matter of automatic right. Similarly, for obtaining the certificate of registration from the Board, the heir or successor of the deceased member i.e. the stock broker, has to apply afresh and obtain a fresh certificate of registration. Here also the grant of certificate of registration is neither automatic nor can it be claimed as a matter of right. As such, we cannot agree with the contention of the learned counsel for the appellant that in cases of transmission where the membership right is transmitted to the heir upon death, it will be treated as the same membership continuing and that they will be entitled to exemption on the same lines of paragraph 4 of Schedule III of the Regulations.
6. The learned Counsel also took us through Rule 2 of the Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Rules, 1992 where a “Stock broker” has been defined as follows:
2 (e)”stock broker” means a member of a stock exchange;
7. He pleaded that this definition should be read to include the heirs and successors of the existing stock broker as well which contention we are unable to accept. If the definition of stock broker was to include the heirs and successors of a current member of a stock exchange, the framers of the regulation would have specified so. The other argument of the learned Counsel for the appellant was that if in such cases of transmission the benefit of exemption from payment of registration fee for the period for which the deceased member of the stock exchange or the stock broker has already paid the fees is not granted, it will be discriminatory inasmuch as only such brokers who are bigger in size and have been able to corporatise their individual or partnership firms will reap the benefit of such exemption whereas the small brokers will be left out and will not receive any such benefit even. We do not agree that by not extending this benefit there is any discrimination. The exemption granted by paragraph 4 is to a class of stock brokers who form corporate entities by converting their individual or partnership membership of the exchange. The legislators in their wisdom have decided to encourage the process of such conversion and decided to allow them this exemption. This by itself does not constitute any discrimination to the others. The last argument of the learned Counsel for the appellant was that if at all they are made to pay the fees as demanded by the Board it should be only after March 28, 2002 on which date the Board issued the clarificatory circular and not for the retrospective period. We do not agree with this contention as it is a well settled position that every clarification refers to the original instruction or direction or regulation and will be effective from that date. As such, the clarification provided by the Board vide its circular dated March 28, 2002 is effective from the date the original regulation was introduced with effect from 21/1/1998.
8. In the above view, the appeals fail. The appellants are not entitled to get the same benefit of fee continuity as is available to the corporate entities which have been converted from individual or partnership memberships. The impugned action of the Board is upheld.
9. The appeals are disposed of accordingly. No order as to costs.