The Telegraph
Since 1st March, 1999
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Brokers give up for failing to pay up

Calcutta, March 31: Jhabar Mall Choudhary, a stockbroker for forty years, today hung up his shoes at the age of 63. He is among 150-odd active stockbrokers nationwide who preferred to surrender their trading rights rather than pay their tax on turnover dues.

The Securities and Exchange Board of India (Sebi) had asked brokers to pay at least 50 per cent of their dues by March 31, and pay the rest in instalments over five years.

Many — nearly 100 out of 400 active brokers in Calcutta alone — decided to surrender their trading rights instead, and indicated to Sebi that it could deduct their tax dues from refundable securities deposited with the bourses.

Choudhary, a former president of the Calcutta Stock Exchange, is one of them. He continues to be a director of the bourse, and in the last few days has helped over 100 brokers compute their tax liabilities and clear them.

But as a new financial year dawns, he is going to step down from the board of the exchange that has been his second home for four decades.

Explaining his circumstances, Choudhary says he has little hopes of the exchange refunding his deposits. “So why not use some of it to settle statutory (tax on turnover) dues'” he asks. He has written to Sebi that he had no hopes of the exchange recovering from the lull, and hence was giving up his trading rights.

In Mumbai, some 50-odd brokers are likely to default. Over 400 active members of the Bombay Stock Exchange had cleared their dues — even if partially — and no more than 20-30 members would miss the deadline. Indications are, nearly as many National Stock Exchange members would miss the deadline.

However, no official figures could be obtained. Sebi executive director Pratip Kar — who is responsible for the secondary market — said he did not have the figure handy with him, and a spokesperson for the market regulator said “only the departments concerned would have it”.

The impression on the street is the response was better than most had expected. Most exchanges and Sebi offices were reported to be open till late evening as people came in hordes on the last day.

Since it was mooted, brokers have strongly resisted the tax. After several years of litigation, the Supreme Court in 2000, upheld the market regulator’s right to tax stockbrokers.

Yet unfazed, a group of nearly 200 brokers have recently filed what is known in the United States as a ‘class action law suit’, in the Calcutta High Court, challenging the method of computation of the tax.

The court ordered status quo ante last week, which implies that Sebi might not be able to cancel the trading rights of the petitioners even if they defaulted till the disposal of the petition. It was filed by a handful of Calcutta-based brokers, but following last week’s order, nearly 200 brokers have joined in.

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