The Supreme Court has dismissed an appeal preferred against SEBI (Securities and Exchange Board of India) on the ground that a company failed to fulfill conditions under Para 4, Schedule III of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 i.e., SEBI Regulations.

The two-Judge Bench comprising Justice Ajay Rastogi and Justice Bela M. Trivedi held, “… appellant Company was granted registration after para 4 was put in place by notification dated 21st January, 1998 and the appellant Company failed to satisfy that it fulfilled the conditions of para 4 to Schedule III pursuant to which the appellant has claimed his entitlement of fee continuity benefits. … After going through the material on record, we are satisfied that the appellant Company failed to fulfil the conditions as referred to under Para 4 of Schedule III appended to the Regulations of which a reference has been made.”

The Bench said that the appeal was without any substance.

Senior Advocate Chander Uday Singh and Advocate Bhargava V. Desai appeared on behalf of the appellant/company while Advocate Ramesh Babu M. R. appeared on behalf of the respondent/SEBI.

In this case, an appeal was filed under Section 15(Z) of the Securities and Exchange Board of India Act, 1992 assailing the judgment passed by the Securities Appellate Tribunal affirming the order of the SEBI holding that the appellant did not satisfy the conditions of clause (4) of Schedule III of the SEBI Regulations hence the exemption from payment of fees for the period for which the erstwhile individual Srikant Mantri has paid to the SEBI cannot be converted to the corporate entity MFL (Mantri Finance Limited).

The issue before the Supreme Court was whether the appellant-Company is entitled to fee continuity benefits under Para 4 of Schedule III of the Regulations 1992.

The Apex Court after hearing the contentions of the counsel observed, “It remains uncontroverted that when Srikant Mantri transferred his membership card of CSE to the Company, he was not a whole time Director but was only a Director. Neither CSE nor its internal auditors, were clear of the exact date on which Srikant Mantri had acquired 40% shareholding in the appellant Company. At the same time, it was informed by the Board to the CSE vide letter dated 18th March, 1998 that Srikant Mantri was holding less than 40% of the paid¬up capital of the corporate entity.”

The Court noted that the designation of Srikant Mantri has been indicated as “Director” in all the relevant years’ Annual Returns and that it was also established from the copy retrieved from ROC’s office in respect of AGM.

“It was also recorded by the Tribunal that from the true copies of annual 11 returns provided by the appellant Company, it was revealed that the details of the Directors provided by them nowhere indicate Srikant Mantri as a whole time Director for any of the relevant years”, the Court also noted.

Accordingly, the Court dismissed the appeal.

Cause Title- GPSK Capital Private Limited (Formerly known as Mantri Finance Limited) v. The Securities and Exchange Board of India

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