Kratos Energy And Infrastructure ... vs Sebi
- CitationAppeal No. 526 of 2019
Ratio decidendi
The rule this decision rests on
Where a stock broker fails to submit turnover details to the stock exchange as required by the SEBI circular of 28 March 2002, the exchange may compute the outstanding brokerage fee from its own records and communicate it to SEBI, and the broker is bound by that determination where it has been communicated to and not protested by the broker. A broker who has accepted, without protest, a communicated determination of its outstanding brokerage fee liability cannot later dispute that liability on the ground that the bifurcation was never intimated to it, and a demand reiterated in later communications, accepted without objection, remains binding on the broker. An erroneous communication of a lesser sum, issued inadvertently through the use of an incorrect registration number and duly corrected and notified to the broker, does not displace the correct liability, and the broker cannot rely on the superseded figure. Where the liability was determined and communicated long before, and remained unpaid, a demand made at the time the broker's surrender application is processed is not rendered unreasonably delayed, and the outstanding amount must be paid as a condition of processing the surrender.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Order Reserved On: 09.09.2022 Date of Decision : 04.01.2023
Misc. Application No. 562 of 2021 And Appeal No. 526 of 2019
Kratos Energy and Infrastructure Limited (formerly Dil Vikas Finance Limited) 317, Maker Chamber V, 221, Nariman Point, Mumbai-400 021 ...Appellant
Versus
1.
Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai- 400 051
2. National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051 ...Respondents
Mr. Zal Andhyarujina, Senior Advocate with Mr. Kunal Kataria, Mr. Shrey Sancheti, Mr. Ankur Loona, Ms. Aparna Wagle and Ms. Sonakshi Sahay, Advocates i/b Alliance Law for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Manish Chhangani and Mr. Ravishekhar Pandey, Advocates i/b The Law Point for Respondent No.1.
Mr. Gaurav Joshi, Senior Advocate with Mr. Rashid Boatwalla, Mr. Juan D'souza, Advocates i/b MKA & Co. for Respondent No. 2.
2
CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member
Per: Justice Tarun Agarwala, Presiding Officer
1. The appellant has filed the present appeal challenging the
communication dated August 08, 2019 and August 30, 2019
issued by Securities and Exchange Board of India ("SEBI" for
convenience) intimating the payment of outstanding brokers
fees amounting to Rs. 6,08,49,566/- as on August 2019 as per
Schedule III of SEBI (Stock Brokers and Sub-brokers)
Regulations, 1992.
2. The facts leading to the filing of the present appeal is, that
the appellant-Company was incorporated in 1979 as 'Deccan
Investments Limited' under the Companies Act, 1956. The
name was subsequently changed to 'Dil Vikas Finance Limited'
in December 1987 and thereafter the name was changed to
'Kratos Energy and Infrastructure Limited' on April 13, 2010.
It is alleged that on May 08, 2001, Bimal Suresh Gandhi, who
was the chief promoter of the appellant-Company committed
suicide which led to change of the present management on June
15, 2001. On account of the untimely death of the promoter and
resignation of the then Directors soon thereafter it is alleged that 3
relevant important and sensitive data and records were not made
available to the present management.
3. On September 25, 2017 the appellant applied for
surrender of its registration as a stock broker. The National
Stock Exchange of India Limited ("NSE") by its letter dated
December 08, 2017 intimated the appellant that their application
for surrender of its membership was approved subject to
fulfillment of certain conditions. One such condition was that
the appellant would clear all outstanding dues to SEBI and to
the concerned stock exchange. The detailed bifurcation of dues
was intimated to the appellant during the meeting held with
SEBI/ NSE officials on April 25, 2018 and thereafter again in
the meeting on March 14, 2019. Since the outstanding amount
was not deposited the application for surrender of the broker
registration of the appellant could not be processed further and,
consequently, by letters dated August 08, 2019 and August 30,
2019 the appellant was requested to deposit the amount failing
which recovery would be made from the deposits already held
with the stock exchange and the balance would be recovered in
accordance with law.
4
4. We have heard Shri Zal Andhyarujina, the learned senior
counsel for the Appellant and Shri Vishal Kanade, the learned
counsel for Respondent No. 1 and Shri Gaurav Joshi, the
learned senior counsel for Respondent No.2.
5. The contention of the appellant is twofold, namely, that no
reason has been given in the impugned communication as to
how the amount of Rs. 6,08,49,566/- was due and payable. It
was urged, that the dues relating to broker fee relates to the
period prior to the period when they came into the management.
In the absence of records, there was no way to verify the
correctness of the entries appearing in the impugned
communication. It was urged, that the brokerage fee claimed is
unsubstantiated and is incorrect in as much as SEBI vide its
email dated March 21, 2018 had intimated the appellant that
only a sum of Rs. 91,242/- was due and payable towards
outstanding broker fee. It was thus urged, that the demand
made as per the impugned order is patently erroneous and
should be set aside.
6. It was also urged, that there has been an inordinate delay
in the initiation of the recovery of the outstanding dues as 5
apparently the brokerage fees relates to the turnover for the
turnover years 1993/1994 to 1997/1998.
7. Having heard the learned counsel for the parties and
having perused the record we find that as per SEBI Circular
dated March 28, 2002 it is the appellants' duty to submit the
turnover details in the specified format to the stock exchange for
calculation of the outstanding brokers fee. The Circular further
provides that upon failure on the part of the stock broker to
furnish the said turnover details, the stock exchange would then
provide the requisite details to SEBI based on their records.
8. We find that in the instant case, the appellant never
submitted its turnover details to NSE and therefore NSE vide its
letter dated October 08, 2003 had furnished the brokerage fees
to SEBI. NSE had determined the fee liability at Rs. 1.48 crores
towards principal and Rs. 1.39 crores as interest as on 2004 and
this determination was communicated to the appellant which is
admitted by the appellant in paragraph 6.14 of the memorandum
of appeal.
9. Thus, it does not lie in the mouth of the appellant to state
at this stage that the bifurcation of the brokerage fee was never 6
intimated to them. The liability was determined as far back as
in the year 2004 which were not only communicated to the
appellant but was accepted as no protest whatsoever was raised
by the appellant since 2004. It is only when the application for
surrender of the registration was being processed that the
outstanding figures of the appellant came to light which was
communicated to the appellant by the impugned
communications.
10. We also find that when the application for surrender of the
registration certificate was filed by the appellant on September
25, 2017, SEBI vide its letter dated August 08, 2019 again
intimated the appellant that the outstanding liability towards
broker fees of Rs. 1.48 crores towards principal and Rs. 4.60
crores towards interest as on that date was due and payable.
Even this letter was accepted by the appellant.
11. The contention that SEBI vide email dated March 21,
2018 intimated the appellant that they are only liable to pay a
sum of Rs. 91,242/- is incorrect in as much as SEBI had clearly
stated that the said email was issued inadvertently on account of
considering an incorrect registration number while computing
the brokers fee liability of the appellant. This error, when 7
noticed, was duly corrected and communicated to the appellant
in the meeting held on April 25, 2018 wherein it was conveyed
to the appellant that the correct amount due and payable was
Rs. 5.77 crores as on that date. The aforesaid facts are admitted
by the appellant in their memorandum of appeal. Thus, it does
not lie in the mouth of the appellant to contend that only a sum
of Rs. 91,242/- was outstanding towards brokers fee.
12. For the reasons stated aforesaid, we do not find any undue
delay in the realization of the outstanding amount towards
brokers fee. The liability was determined as far back as near
2004 which has remained unpaid and the same is required to be
paid by the appellant in the event the surrender application is to
be processed.
13. For the reasons stated aforesaid, the appeal lacks merit and
is dismissed with no order as to costs. The misc. application is
disposed of accordingly.
14. This order will be digitally signed by the Private Secretary
on behalf of the bench and all concerned parties are directed to
act on the digitally signed copy of this order. Certified copy of 8
this order is also available from the Registry on payment of
usual charges.
Justice Tarun Agarwala Presiding Officer
Ms. Meera Swarup PRERNA Digitally signed Technical Member 04.01.2023 MANISH byMANISH PRERNA KHARE PK KHARE Date: 2023.01.09 16:28:45 +05'30'
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