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Supreme Court of India allows SEBI appeal in matter pertaining to interpretation of Section 12(1) of SEBI Act, 1992.

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The National Stock Exchange Members Association had previously approached the Delhi High Court and challenged part of a 2002 SEBI Circular which had directed stock brokers to pay registration fee for each registration they held with different stock exchanges. Further, the petitioners therein had also challenged the structure and manner of fee being levied by SEBI through the circular.

Subsequently, the division bench of Delhi high court in 2005, while setting aside the order of the single judge bench had interpreted the expression “a certificate” referred to in Section 12(1) of the SEBI Act, 1992 to mean that a stock broker would require only one certificate even if he operates from multiple stock exchanges and had also directed SEBI to refund any additional fees paid by stock brokers after initial registration.

This interpretation was not accepted by the Supreme Court of India. The Supreme Court of India was of the view that interpretation of statutes must be “purposive” in order to further the intent of the legislature, and hence, the decision of the lower court was set aside. A purposive interpretation is one where literal meaning of the enactment is in accordance with the legislative purpose.

According to the Supreme Court of India, “a certificate” as per Section 12(1) of the SEBI act read with the SEBI(Stock Broker Regulations) 1992 leads to an inevitable conclusion that a stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under the 2002 SEBI Circular. Further, the fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992.

Based on the above, the Supreme Court of India allowed the appeal of SEBI.

It is to be noted that, as observed in the judgement itself, since 2014, stock brokers only require one registration with SEBI and have to individually apply for memberships with each exchange.

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