Shiva Kirti Singh, J.— Both the appeals have been preferred under Section 15-Z of the Securities and Exchange Board of India Act, 1992 (for brevity “the SEBI Act”) against a common judgment and order dated 9-5-2006 2006 SCC OnLine SAT 134 rendered by the learned Securities Appellate Tribunal (for brevity “SAT”) in Appeal No. 123 of 2004 and other analogous appeals filed by the stockbrokers (the respondents herein) to challenge the action of the Securities and Exchange Board of India (for short “SEBI”) denying them the benefit of fee continuity in terms of Para 4 of Schedule III to the Securities and Exchange Board of India (Stockbrokers and Sub-Brokers) Regulations, 1992 (hereinafter called “the Regulations”).
2. SAT formulated the issue falling for determination in the form of a question — “whether stockbrokers who have converted their individual/partnership membership into a corporate entity prior to 1-4-1997 are entitled to the fee continuity benefit in terms of Para 4 of Schedule III….”. Since SAT answered the question in favour of the stockbrokers (the respondents herein), SEBI is in appeal.
3. The basic facts are common in all the matters inasmuch as the broker concerned was previously member of the Bombay Stock Exchange (for short “BSE”) in his individual capacity or as a partnership firm. He opted to form a corporate entity under the provisions of the Companies Act, 1956 prior to 1-4-1997 and carried on the Brokers' business under the name and style of new corporate entity by getting its membership converted through approval of BSE leading to registration by SEBI as a corporate entity. Undoubtedly, no stockbroker or sub-broker can buy, sell or deal in securities unless it is granted Certificate of Registration by SEBI under the Regulations and for that, ordinarily the stockbroker is required to pay the requisite fees in the manner provided in the Regulations. In particular, Regulation 10 provides that every applicant eligible for the grant of a certificate shall pay such fees and in such manner as is specified in Schedule III to the Regulations.
4. Although the controversy relates to Para 4 of Schedule III, some other paragraphs are also relevant and hence these along with Para 4 are extracted hereinbelow:
“I. Fees to be paid by the stockbroker
1. Every stockbroker shall subject to Paras 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 years, a sum of rupees five thousand for each financial year; or
(b) Where the annual turnover of the stockbroker 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 stockbroker, 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.
2. Fees referred to in clauses (a) and (b) of Para 1 above shall be paid—
(a) in respect of Financial Year 1992-1993 within one month of the commencement of these Regulations;
(b) in respect of the financial year beginning on the 1st day of April, 1993 and the following financial years on or before the first day of October of the financial year to which such payment relates;
and such fees shall be computed with reference to the annual turnover relating to the preceding financial year.
3.***
4. Where a corporate entity has been formed by converting the individual or partnership membership card of the exchange, such corporate entity shall be exempted from payment of fee for the period for which the erstwhile individual or partnership member, as the case may be, has already paid the fees subject to the condition that the erstwhile individual or partner shall be the whole-time Director of the corporate member so converted and such Director will continue to hold a minimum of 40 per cent shares of the paid-up equity capital of the corporate entity for a period of at least three years from the date of such conversion.
Explanation.—It is clarified that the conversion of individual or partnership membership card of the exchange into corporate entity shall be deemed to be in continuation of the old entity and no fee shall be collected again from the converted corporate entity for the period for which erstwhile entity has paid the fee as per the Regulations.
4-A.***
5. If a stockbroker fails to remit fees in accordance with Paras 1 and 2, he shall be liable to pay interest at 15% per annum for each month of delay or part thereof.
Provided that the liability to pay interest as aforesaid may be in addition to any other action which the Board, may take as deemed fit against the stockbroker under the Act, or the Regulations:
Provided further ….
II.***
III. Manner of fees to be paid
The fees specified above shall be paid on or before the 1st day of October each year payable by draft in favour of ‘The Securities and Exchange Board of India’ at Bombay, or at the respective regional office.”
5. The case of SEBI is that since Para 4 of Schedule III was introduced by an amending Notification dated 21-1-1998 which states in Para 2 that the amendment will be effective from the date of the Notification i.e. 21-1-1998, the annual fee payable by registered brokers would remain unaffected for the earlier year ending 31-3-1997 and it can at best be effected only in respect of fees payable for the year 1-4-1997 onwards. On such premise it has been forcefully contended on behalf of the appellants that SAT has erred in granting retrospectivity to the provisions of Para 4 by granting the benefit of fee continuity even to entities which acquired corporate membership on conversion even prior to 1-4-1997.
6. The submission of Mr C.U. Singh, learned Senior Counsel for SEBI, are to the following effect:
(1) SEBI cannot make retrospective Regulations.
(2) Rules and regulations are generally prospective unless explicitly made retrospective.
(3) While bestowing a new benefit, the statutory authority concerned can always choose a cut-off date.
(4) Unless the cut-off date suffers from arbitrariness, there can be no interference.
(5) Materials like press statement or letter cannot act as estoppel against the statutory provisions such as the Regulations.
7. In support of the first and second submission it has been pointed out that Section 30 of the SEBI Act vests the Board with the power to make regulations consistent with the Act and the rules made thereunder so as to carry out the purposes of the Act and there is nothing specific in this section granting power to frame regulations with retrospective effect. To further support this proposition, reliance has been placed upon judgments in (1) K. Narayanan v. State of Karnataka 1994 Supp (1) SCC 44, (1994) 26 ATC 724, (2) Mohd. Rashid Ahmad v. State of U.P. (1979) 1 SCC 596 and (3) Mahadeolal Kanodia v. Administrator General of W.B. AIR 1960 SC 936, (1960) 3 SCR 578 In K. Narayanan 1994 Supp (1) SCC 44, (1994) 26 ATC 724 a retrospective rule was struck down on the ground of unjust and unfair effect upon a section of officials and therefore held discriminatory and violative of Articles 14 and 16. In Mohd. Rashid Ahmed (1979) 1 SCC 596 the Court was dealing with service matter and was called upon to decide whether a particular rule could be given retrospective effect. Since the statute vested the State Government with power to frame rules even with retrospective effect, the relevant provision was held to be retrospective after reiterating an established rule of construction
“that retrospective operation is not to be given to a statute so as to impair an existing right or obligation other than as regards the matter of procedure, unless that effect cannot be avoided without doing violence to the language of enactment”.
Similar view was expressed in Mahadeolal AIR 1960 SC 936, (1960) 3 SCR 578.
8. Reliance was also placed upon a Constitution Bench judgment in K.S. Paripoornan v. State of Keralav (1994) 5 SCC 593. There the issue related to retrospectivity but in an entirely different context of whether there must be clear intendment in the law if an amendment dealing with substantive rights is to apply to pending legal proceedings, initiated prior to the commencement of the amending Act. The majority held that the intendment in such a situation must be in clear terms. In C. Gupta v. Glaxo-Smithkline Pharmaceuticals Ltd. (2007) 7 SCC 171, the Court, in the context of benefits under the Workmen's Compensation Act, reiterated the well-established law that an enactment in order to be read as retrospective, must have an express provision to that effect or same effect must flow by necessary implication or intendment.
9. The aforementioned case laws have been noticed out of deference to the submissions but in fact they do not serve much purpose because the law governing the field is otherwise also quite settled. Although the amending notification introducing Para 4 of Schedule III is effective from 21-1-1998, on the plea of convenience and logic the appellant has itself clarified that the provisions of Para 4 will be effective from an earlier date viz. 1-4-1997. By relying upon some case laws such as in NCTE v. Shri Shyam Shiksha Prashikshan Sansthan (2011) 3 SCC 238 it has been contended that the appellant is entitled to fix a cut-off date such as 1-4-1997. It has been highlighted that fees are to be computed and paid for every financial year hence introduction of the concession under Para 4 w.e.f. beginning of a Financial Year 1997-98 is reasonable and serves a purpose. The appellant emphasised the reasons for introducing incentive for corporatisation of individual or partnership entities for carrying out business of brokerage in shares, etc. by referring to a speech of the then Finance Minister as well as a Memorandum explaining the provisions in the Finance Bill, 1997. It was argued on behalf of the appellant that capital gains exemptions were granted as a one-time measure during the financial year concerned to encourage corporatisation of stockbrokers' cards and hence the action of SEBI in introducing Para 4 of Schedule III in the Regulations needs to be construed only as a prospective measure and not as one conferring benefit to even such entities who had acquired corporate entity prior to 1-4-1997.
10. In reply Mr Shyam Divan, learned Senior Advocate appearing for some of the respondents used the same background facts to contend that in principle SEBI accepted the proposition that if the same entity had paid fees as a stockbroker and it continues to do the same business by converting into a corporate entity then fees paid for the earlier years needed recognition. On this principle the effect of Para 4 to Schedule III was to place an embargo on the powers of SEBI on and after the amendment introduced w.e.f. 21-1-1998 to collect any fees from the new entity by ignoring the fees earlier paid by the previous avatar of the new entity. According to Mr Divan a fee is a fiscal levy and, therefore, principles applicable to interpretation of legal provisions governing a fiscal levy are attracted in the present case and not the rules of interpretation governing other laws. According to him the plain language of Para 4 is decisive and that led to the decision under appeal against SEBI. According to him even if some amount of ambiguity is found in the relevant provision then the interpretation which is favourable to the brokers needs to be adopted. He further made a distinction between power to levy a duty or fee and the power of collection. According to him a competent authority, in this case SEBI, can decide for itself whether to proceed with collection or not. Embargo on collection, according to him, is clearly prospective in the present facts.
11. On behalf of the respondents reliance was placed upon the judgment in Mathuram Agrawal v. State of M.P. (1999) 8 SCC 667 wherein, in the context of municipal taxes, this Court held that the intention of the legislature in a taxing statute is to be gathered from the express language particularly where it is plain and unambiguous. It is not permissible to add or substitute words for giving a meaning to such statutes for the purpose of serving the perceived spirit or intention of the legislature. Reliance was also placed upon Somaiya Organics (India) Ltd. v. State of U.P. (2001) 5 SCC 519 for supporting the submission that in law there is a clear distinction between levy and collection of taxes. In Somaiya Organics (2001) 5 SCC 519 the Constitution Bench noted that Article 265 of the Constitution uses the words “levy” and “collect”. The Court went on to hold that these words are not synonymous terms. This distinction was required to be made in that case because certain provisions had been declared illegal only prospectively. In that context it was held that while “levying” would mean the assessment or charging or imposing of tax, “collection” would mean the fiscal realisation of the tax levied or imposed. It was also pointed out that ordinarily collection of tax is a stage subsequent to the levy of the same. It is not necessary to multiply case laws cited on these points.
12. The respondents referred to a press release dated 28-12-2001 publicising the decisions that were taken in the meeting of SEBI on that date. In sub-para (e) of Para 2 it is disclosed that SEBI considered the representations made by the brokers in the light of relevant materials and decided the following:
“2. Broker Fees — Amendment to SEBI (Stockbroker and Sub-Broker) Regulations
(a)-(d) ***
(e) the fee continuity benefit which was given to all brokers, who had corporatised after 21-1-1998 [the date on which SEBI (Stockbroker and Sub-Broker) Regulations were amended] and also to those who corporatised between 1-4-1997 and 21-1-1998 would be extended to all brokers who had corporatised prior to 1-4-1997, provided that SEBI has not collected fees from any such broking entity already.
(f) ***
13. It was also pointed out that the Explanation of Para 4 to Schedule III of the Regulations was inserted through an amendment regulation of 2002 w.e.f. 20-2-2002 and submitted that the entire provision in the Explanation was to give statutory base to the decision contained in the press release highlighted above. The Explanation reads thus:
“Explanation.—It is clarified that the conversion of individual or partnership membership card of the exchange into corporate entity shall be deemed to be in continuation of the old entity and no fee shall be collected again from the converted corporate entity for the period for which the erstwhile entity has paid the fee as per the Regulations.”
14. Reliance was placed upon judgments in K.P. Varghese v. ITO (1981) 4 SCC 173 and also in CST v. Indra Industries (2000) 9 SCC 66 in support of the submission that the Press Release may not be having statutory effect but it helps in understanding the intention of SEBI Board which issued the release. In other words, the respondents sought to rely upon the principle of contemporanea expositio as propounded in K.P. Varghese (1981) 4 SCC 173. In Indra Industries (2000) 9 SCC 66 the circulars issued by the Income Tax Department were held to have binding effect upon the taxing authorities though it may not be binding on the courts or on the assessee.
15. For highlighting the general principles concerning retrospectivity of a statutory Act, rule or notification, Mr Divan relied upon a Constitution Bench judgment in CIT v. Vatika Township (P) Ltd. (2015) 1 SCC 1 In paras 27, 28 and 29 the Court recollected the clear legal position agreed to by the parties and thereafter some exceptions as to when and why the general rule against retrospectivity is inapplicable, was pointed out in para 30 which is as follows:
“30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators' object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Union of India v. Indian Tobacco Assn. (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in Vijay v. State of Maharashtra (2006) 6 SCC 289. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here.”
The Court then concluded that:
“31. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity.”
The Court also extracted relevant explanation in respect of “declaratory statutes” from the book Principles of Statutory Interpretation by Justice G.P. Singh to make the legal position clear that if a statute is curative, explanatory or merely declaratory of an earlier law, it is generally intended to have retrospective operation.
16. The learned counsel appearing on behalf of several other respondents have supported the contentions advanced by Mr Divan that on plain construction of the regulation concerned i.e. Para 4 of Schedule III, it can safely be held that the provisions merely look at some past happenings but the benefits are to accrue to the eligible entities only in future and hence the provisions do not operate retrospectively. Further stand of the respondents is that SEBI itself cannot question the validity of the circulars and policy decisions declared by SEBI Board and such circulars and declarations granting benefits even from a retrospective date cannot be held bad in law in view of law noticed and laid down in Vatika case (2015) 1 SCC 1. The matter could have been different if SEBI had attempted to impose liabilities or create obligations upon stockbrokers from a retrospective date. In case of conferment of benefits, no vested rights are adversely affected and in such cases retrospective operation is protected and permissible on the principles noticed in Vatika case (2015) 1 SCC 1.
17. In reply Mr C.U. Singh referred to the policy circular dated 28-3-2002 which inter alia states that pursuant to a judgment of this Court dated 1-2-2001 (2001) 3 SCC 482 directing SEBI to amend the Regulations in light of recommendations of the R.S. Bhatt Committee Report, SEBI had examined representations from the brokers and issued clarifications contained in Part A of the circular. Part A, inter alia, contains a clarification in respect of applicability of the notification on exemption from fees on corporatisation. The clarification reads thus:
“the spirit behind Notification dated 21-1-1998 was to give benefit of this amendment to stockbrokers who have converted their individual stock partnership membership into corporate on or after 1-4-1997. Accordingly such stockbrokers shall be given the benefit of continuity subject to the satisfaction of conditions mentioned in the notification”.
18. On a careful consideration of the rival submissions and keeping in view the relevant case laws relied upon by the parties we have examined analytically and carefully Para 4 as well as the explanations thereto in Schedule III of the Regulations. We find that Para 4 was no doubt inserted through an amendment with effect from 21-1-1998 but it does not disclose, either explicitly or even by necessary implication, that although possessing the required qualifications, a corporate entity formed earlier to 21-1-1998 would not be exempted from payment of fee for the period for which the erstwhile individual or partnership members has already paid the fees. In respect of a legislation of fiscal character such as the present provision which relates to fees, it will not be proper or permissible to read into or delete words which do not exist in the provision. Further even if there is any scope of doubt, the benefit of such doubt will go to the subject i.e. the stockbrokers and not to authority, in this case SEBI. We further find that the explanation to Para 4 introduced with effect from 20-2-2002 takes complete care of any doubt, if at all it could exist, by providing a deeming fiction that in the case of conversion of entities having individual or partnership membership card into a corporate entity, the corporate entity shall be deemed to be a continuation of the entity in respect of collection of fees from the converted corporate entity. Further, an embargo has been created against collection of fees again from the converted corporate entity. This explanation is statutory in nature and like Para 4 it also does not restrict the benefits of conversion to entities converted on or after any particular date. The explanation does not talk of making any refund nor does it render the initial levy or assessment of fee as bad but forbids the collection of such fees if the converted corporate entity is entitled to fee continuation benefit in terms of Para 4 of Schedule III to the Regulations.
19. Following the judgment in Somaiya Organics (2001) 5 SCC 519, we agree that “levy” and “collection” are not synonyms and generally they occur at different stages. In the present case the legislative intention is to put an embargo on collection in future, in case the converted corporate entity is found entitled to the benefits of fee continuity. Such embargo is clearly to operate prospectively even if there existed some kind of liability in the past on account of fees leviable prior to insertion of Para 4 of Schedule III to the Regulations. In any case the rationale in not permitting retrospective operation of laws is only to ensure that subjects are not adversely affected by creation of legal liabilities and obligations for a period already bygone. In the present case the provisions do not create any obligation or liability. They only confer benefits by way of fee continuity on account of fees already paid by the earlier entity before its conversion into a new corporate entity.
20. Even if we were to apply the test of fairness, no exception can be taken to extension of the benefit of fee exemption as provided by the relevant provision in the Regulations. Since the policy behind grant of benefits is to encourage corporatisation of individual or partnership members of a stock exchange, the action of extending such benefits without any curb on the basis of date of conversions cannot be held as unfair.
21. As noted earlier SEBI itself extended the benefit to those converting not only from 21-1-1998 but from 1-4-1997. There is nothing in Para 4 or in the explanation to support the stand of SEBI that the benefits must be confined to conversions taking place after a particular date when no such date finds place in the Regulations. As a result, the appeals preferred by SEBI are dismissed and the judgments and orders under appeal passed 2006 SCC OnLine SAT 134 by SAT are upheld. In the facts of the case the parties shall bear their own costs.