The court established that the merged entity was not entitled to the benefit of fee continuity and upheld the authority of SEBI to demand fresh turnover/registration fees.

KAPADIA, J.

( 1 ) DELAY condoned.

( 2 ) ADMIT.

( 3 ) THE above two civil appeals are directed against the decisions dated 18. 5. 2006 and 4. 5. 2007 delivered by the securities Appellate Tribunal, Mumbai in appeal Nos. 267/04 and 245/04 respectively.

( 4 ) THE short question that arises for our consideration in these civil appeals filed under Section 15z of the securities and Exchange Board of India Act, 1992 (for short the "1992 Act") is whether the appellants were entitled to the benefit of fee continuity under para 7 of Circular dated 30. 9. 2002 issued by SEBI.

( 5 ) FOR the sake of convenience, we may mention hereinafter the facts in the case of Ratnabali Capital markets Ltd. ("rcml") which are as under.

( 6 ) IN 1995 Ratnabali Securities Ltd. ("rsl") was registered as a broker with National Stock Exchange ("nse" ). In terms of Schedule III of SEBI (Stock-brokers and Sub-brokers) Regulations, 1992 ("the Regulations"), RSL had paid initial registration fees for the first year and thereafter it had paid fees on turnover basis for subsequent four years. No further fees on turnover basis was paid by RSL under the said Regulations for continuation of registration except a fee of rupees five thousand for a block of next five years. RSL operated in cash and spot market.

( 7 ) SEBI adopted recommendations of Gupta Committee stating that no company whose net worth was less than rupees three crores would be allowed to trade as a broker in the derivative segment of the Stock Exchange. To meet this net worth criteria, RSL and RCML merged under the scheme of Amalgamation sanctioned by the order of the calcutta High Court. Under that order, all rights, licences, assets, properties and registrations of RSL stood transferred by operation of law to RCML.

( 8 ) ON 30. 9. 2002 SEBI issued a circular stating that in the case of merger carried out as a result of compulsion of law, fees would not have to be paid afresh by a transferee entity provided that majority shareholders of transferor entity (RSL) continues to hold majority shareholding in the transferee entity (RCML ).

( 9 ) AFTER the merger of RSL with RCML, a demand was made by SEBI for registration fees on turnover basis. Under the said Regulations, no stock-broker can buy, sell or deal in securities unless he holds a certificate granted by SEBI under its Regulations. Under the said Regulations, the stock-broker is required to pay fees for registration in the manner provided in the Regulations. Under Regulation 10, every applicant eligible for grant of a certificate has to pay fees in the manner specified in Schedule III. Under that Schedule, every stock-broker whose annual turnover does not exceed rupees one crore during any financial year has to pay rupees five thousand as registration fees for each financial year and whereas the annual turnover exceeds rupees one crore during any financial year he has to pay rupees five thousand plus one hundredth of one per cent of the turnover in excess of rupees one crore for each financial year. We quote hereinbelow clause (c) of para 1 of Schedule III, which reads as under:

"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"

A reading of clause (c) makes it clear that where the stock-broker has paid registration fees either under clause (a) or clause (b) he shall have to pay rupees five thousand for every block of five financial years commencing from the sixth financial year after the date of initial registration in order to keep his registration in force.

( 10 ) WHAT RCML is now claiming is the benefit of initial registration of RSL as a stock-broker. According to RCML, when the above two companies stood merged on 9. 2. 2000, which merger was approved by Calcutta High Court, all asset