Supreme Court Directs Bombay High Court To Decide Writ Petition Pertaining To Capping Of Professional Fees Charged By Investment Advisers By 31.07.2021.

Purnartha Investment Advisers Private Limited, one of the Investment Advisers based in Mumbai moved the Hon'ble Supreme Court in Special Leave Petition inter alia, seeking a stay on the effect and operation of the aforesaid regulations as the same has come into effect on 01.04.2021. The Petition was heard on 11.05.2021 by a vacation bench comprising of Hon'ble Mr. Justice U. U. Lalit and Hon'ble Mr. Justice B. R. Gavai. Prior to this Petitioners preferred a Writ Petition before the Bombay High Court challenging the aforesaid circular and amendment to the Regulations, 2013 which is pending adjudication. The Petition raises a very important question of utmost public importance as to whether a "Regulator" like SEBI in the guide of regulating a profession/vocation can –prescribe "professional fees" to be charged by such professionals. None of the existing provisions of the SEBI Act confers a power upon SEBI to prescribe professional fees to be charged by the professionals and ex-facie the said Regulation is ultra-vires. The said regulation is likely to affect the public at large as the Petitioner itself caters to over 11,000 clients and employs about 500 employee and numerous channel partners. The capping on the fees is likely to affect the livelihood of the employees of the Petitioner Company and a large number of similarly situated Investment Adviser Companies.

The assailed regulations are stated to be made under Section 30(1) read with Section 11(2)(b) of SEBI Act. And provisions Section 30(2) and Section 11 of the act does not confer onto SEBI the authority or power to make regulations in respect of prescribing fees which can be charged by investment advisers, who in turn will charge it from their clients. Legislature has always provided for power of SEBI to regulate. By applying the principle of esjudem generis, it can be interpreted that Section 30(db) can't be read to include power or prescribe ceiling on fees.

The Special Leave Petition was filed through M/s Karanjawala and Co. The Petitioners were represented by Senior Advocates, Dr. Abhishek Manu Singhvi and Dr. Milind Sathe, assisted by Mr. Rahul Totala, Advocate from Bombay, and instructed by Partners, Debmalya Banerjee and Samarjit Pattnaik, and Advocates Kartik Bhatnagar, Vikas Gogne, Satyam Chaturvedi, Rahul Tyagi, Vardan Wanchoo and Nicholas Choudhury.

Dr. Singhvi, inter alia, pointed out to the Bench that the instant matter was case of putting a cap on the fees charged by professionals which is completely de hors the settled provisions of law. He added that the Hon'ble High Court completely missed the issue that the impugned provisions and the circulars were completely illegal as they were not issued under any statutory power vested within S.E.B.I. Dr. Singhvi cited examples of services provided by other professions such as Architects, Chartered Accountants and Advocates, whereby their governing bodies have refused to put a cap on their professional fees

Mr. Rafique Dada, Senior Advocate, appearing on behalf of the caveator, SEBI, objected to the submissions made by Dr. Singhvi.

The bench observed that the issues involved in the matter were of urgent nature and would have severe implications in case the disposal of the Writ Petition by the Bombay High Court is spilled over to the next financial year, since the High Court, while admitting the matter had not considered any interim arrangement to protect the interest of the Petitioner. However, since the main petition is pending disposal before the Bombay High Court, the Hon'ble Supreme Court did not deem fit to make any observation with respect to the merits of the case at this stage and owing to the gravity of the issue, disposed of the SLP requesting the Bombay High Court to expedite the hearing and decide the Writ Petition by 31.07.2021