SEBI Can Levy Interest From Adjudication Order Date Even If Not Mentioned | Supreme Court Says Liability Under SEBI Act Applies Retrospectively Through Statutory Mandate
Kiran Raj
The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan held that interest on unpaid penalties imposed by the Securities and Exchange Board of India (SEBI) shall accrue from the expiry of the compliance period set in the original adjudication orders, not from the subsequent demand notices. The Court dismissed the appeals challenging the imposition of interest, stating that once the adjudication orders attained finality, the liability to pay interest arose automatically under the law. The Court further directed the appellants to pay the interest calculated by SEBI within 15 days from receipt of the judgment.
The appellants were promoter-directors of M/s. Brijlaxmi Leasing and Finance Limited, a company listed on the Bombay Stock Exchange and engaged in financial services. In 1995-96, the company launched its IPO with a fully paid-up share capital of 56,48,500 shares, later split in 2005. SEBI conducted an examination and found violations by the appellants of Regulation Nos.13(4), 13(4A), and 13(5) of the SEBI (Prohibition of Insider Trading) Regulations, 1992.
Following show cause notices, the SEBI Adjudicating Officer issued orders on 28.08.2014, imposing penalties under Section 15-I of the SEBI Act. The penalties imposed were Rs.11,00,000 on Jaykishor Chaturvedi, Rs.5,00,000 on Siddharth Jaykishor Chaturvedi, and Rs.7,00,000 on Ankur Jaykishor Chaturvedi. The appellants challenged the adjudication orders before the Securities Appellate Tribunal (SAT), which dismissed the appeals on 04.08.2015. The Supreme Court also upheld the penalties in its judgment dated 28.02.2019 in Civil Appeal Nos. 11311 of 2013 etc.
On 13.05.2022, SEBI issued demand notices under Section 28A of the SEBI Act, directing the appellants to pay the penalty amounts with interest at 12% per annum from the date of the adjudication orders. The appellants failed to comply, leading SEBI to issue attachment notices on 23.06.2022 to various banks and depositories, targeting all accounts and holdings of the appellants.
The appellants contested these recovery proceedings before the SAT, arguing that the interest demand was excessive and not legally sustainable, as the original adjudication orders did not provide for any interest. The SAT dismissed the appeals, affirming SEBI’s authority to recover interest from the date of the penalty orders. The appellants then approached the Supreme Court.
The appellants argued that SEBI’s Recovery Officer exceeded jurisdiction by levying interest retrospectively from the date of the adjudication orders, instead of from 30 days after the demand notices. They relied on Section 220(2) of the Income Tax Act, 1961, asserting that interest could only accrue after 30 days from a notice of demand and that Explanation 4 to Section 28A of the SEBI Act, inserted in 2019, could not be applied retrospectively.
They cited Supreme Court precedents, including Sedco Forex International Drill Inc. v. CIT, J.K. Synthetics Ltd v. CTO, and State of Punjab v. Bhajan Kaur, to argue that interest imposition is a matter of substantive law and cannot be retrospectively applied. They further contended that SEBI’s adjudication orders, which had attained finality, could not be rewritten to include interest.
Conversely, SEBI maintained that the statutory framework permits recovery of interest from the date of default, in line with Section 220 of the Income Tax Act read with Section 28A of the SEBI Act. They asserted that the adjudication orders, which mandated payment within 45 days, constituted valid demands and that the liability to pay interest began once this period expired without compliance. SEBI also cited the judgment in Dushyant N. Dalal v. SEBI to support the view that interest on penalties is recoverable under law and equity.
The Court observed "It is a settled principle that statutory dues not paid within the prescribed time attract statutory interest, irrespective of whether such interest was specifically mentioned in the original order or not."
It stated "The liability to pay interest arises as a matter of law by operation of Section 28A read with Section 220 of the Income Tax Act."
The Bench noted "Under the SEBI Act, the levy of penalties under various circumstances is governed by Chapter VIA... Adjudication amounts to a crystallization of liability, and the demand is a natural sequitur."
The Court held that the incorporation of Section 220 of the Income Tax Act into Section 28A of the SEBI Act makes it clear that interest is applicable from the date of default. The Court clarified "The adjudication officer’s order which specified payment within 45 days, effectively operates as a notice of demand, rendering any separate demand notice redundant."
It further recorded "Interest on unpaid penalties is compensatory in nature, not penal. Its primary purpose is not to punish the defaulter, but to make good the financial loss occurred to the Revenue on account of delay."
Referring to Dushyant N. Dalal (2017) 9 SCC 660, the Court stated that "Interest would be payable in equity... despite the fact that Section 28A belongs to the realm of procedural law... interest would be chargeable under Section 28A read with Section 220(2)."
The Court clarified that Explanation 4 to Section 28A introduced in 2019 "did not bring about any substantive change but merely clarified the existing legal position."
The Court directed that "the appellants are liable to pay interest at 12% per annum on the unpaid penalty amounts for the period of delay."
The Bench held that "interest must accrue from the expiry of the 45-day compliance period following the adjudication orders dated 28.08.2014."
The Court concluded that "The appellants are directed to pay interest calculated by the respondent, within a period of 15 days from the date of receipt of a copy of this judgment."
The appeals were dismissed. No costs were awarded. All pending miscellaneous applications stood closed.
Advocates Representing the Parties:
For the Appellant(s): Dr. Purvish Jitendra Malkan, Sr. Adv., Ms. Dharita Malkan, Adv., Mr. Alok Kumar, Adv., Mr. Jitendra Malkan, Adv., Mr. Kush Goel, Adv., Ms. Deepa Gorasia, Adv., Ms. Bhavna Sarkar, Adv., Ms. Khushboo Aakash Sheth, AOR.
For the Respondent(s): Mr. Amarjit Singh Bedi, Adv., Ms. Surekha Raman, Adv., Mr. Shreyash Kumar, Adv., For M/s. K J John and Co, AOR.
Case Title: Jaykishor Chaturvedi & Others v. Securities and Exchange Board of India
Neutral Citation: 2025 INSC 846
Case Number: Civil Appeal Nos. 1551-1553 of 2023
Bench: Justice J.B. Pardiwala, Justice R. Mahadevan
