LegalAware
LegalAware.ai
EMPOWERING LEGAL AWARENESS

DKG Buildcon Private Limited vs The Adjudicating and Enquiry Officer, SEBI

Civil Appeal · 2022 INSC 960Decided 14 Sept 2022
Civil Appeal No. 1742 of 2009
Ajay Rastogi · B.V. Nagarathna

Background

SEBI investigated suspicious trading and price manipulation in the shares of a company (Shonkh Technology International Ltd./later renamed) linked to stock market manipulator Ketan Parekh, and found that both appellant companies had received shares that were part of this manipulation scheme. SEBI's Investigating Officer issued multiple summons in 2001-2003 asking the appellants to appear, produce documents and furnish information about their share dealings; the appellants failed to respond to the later rounds of summons (issued in April 2003) despite earlier partial compliance in 2001-2002. Because of this non-cooperation, SEBI's Adjudicating Officer imposed a penalty of Rs. 1 crore on each company under Section 15A(a) of the SEBI Act, 1992, for failing to furnish information: a penalty upheld by the Securities Appellate Tribunal (SAT).

Decision Breakdown

The appellants argued the non-compliance was really one continuing default dating back to 2001, so only the lower, pre-amendment penalty cap of Rs. 1,50,000 should apply (the law was amended in October 2002 to raise the maximum penalty to Rs. 1 crore). The Supreme Court held that the April 2003 summons were fresh, independent directions, and the appellants' failure to comply with them was a separate fresh offence occurring after the amendment took effect, so the higher penalty regime validly applied. The Court also held that the SEBI Investigating Authority had statutory power under Section 11C(3) to summon persons and demand documents/information, that the Adjudicating Officer is presumed to have considered the statutory factors under Section 15J when fixing the penalty, and that courts should not interfere with SEBI penalties under Section 15Z unless the amount is wholly arbitrary or grossly disproportionate, which was not the case here given the appellants' sustained non-cooperation in a serious market-manipulation investigation. Both appeals were dismissed and the Rs. 1 crore penalties on each company were upheld.

Lesson Learnt

Repeatedly ignoring a regulator's summons for information can itself become a fresh, separately punishable violation each time a new summons is issued and ignored, cooperating with one round of inquiry does not excuse ignoring later, distinct demands, and courts give regulators like SEBI wide latitude in fixing penalties unless the amount is clearly excessive.

Official source (sci.gov.in)View Judgment (PDF)

More rulings in Securities & Capital Markets Law

Securities & Capital Markets LawSupreme Court of India

Securities and Exchange Board of India v. Vedanta Limited & Ors.

The Supreme Court held that SAT's reasoning was flawed: satisfying the technical conditions for releasing an escrow deposit under Regulation 15B(8) (a distinct, narrower inquiry) does not automatically mean there was no fraud under the separate and broader PFUTP Regulations. The two inquiries serve different purposes. The Court also found SAT had failed to resolve significant factual disputes about the accuracy of the underlying NSE/BSE trading data that SEBI's fraud finding was based on, and had ignored an unexplained contradiction between SEBI's own two internal investigation reports (one finding no impact, a later one finding fraud). Since resolving these disputed facts requires the fact-finding tools available to SAT (summoning witnesses, requiring document production) rather than the Supreme Court's more limited appellate jurisdiction, the Court partly allowed SEBI's appeals and remanded the matter to SAT to determine, on a proper examination of the trading data and other evidence, whether fraud was actually established, while clarifying that mere release of the escrow can never, by itself, disprove fraud.

Decided 9 Sept 2026Read case
Securities & Capital Markets LawDelhi High Court

Securities and Exchange Board of India vs. Devendra Singh Chandel

The Court held that at the leave stage, it need only assess whether the case raises arguable points deserving fuller examination, not decide whether the acquittal will ultimately be overturned. It found the case did raise such arguable points. On the limitation objection, the Court calculated that after excluding the 54 days the court registry took to prepare the certified copy of the judgment, the petition was filed within the prescribed 180-day period. Leave to appeal was accordingly granted, and the matter was directed to be registered and numbered as a full criminal appeal.

Decided 2 Sept 2026Read case
Securities & Capital Markets LawSupreme Court of India

Edelweiss Custodial Services Limited v. NSE Clearing Ltd.

The Supreme Court answered all three key legal questions against the regulators/investors and in favour of the PCMs. First, it held there was no statutory obligation on a PCM to verify the debit/credit positions of a Trading Member's individual clients before liquidating collateral, and the regulatory framework at the relevant time did not even give PCMs visibility into those positions. Second, it held that neither the NCL nor its Committee had the legal power to order "restitution" of securities (worth several hundred crores) against the PCMs: such disgorgement-style relief is available only under specific SEBI Act provisions, not through a stock exchange's byelaw-making power, which is limited to prescribed penalties and excludes orders for payment of money. Third, it held that investors who participated in Anugrah's scheme, chasing guaranteed high returns in an inherently speculative and volatile market, could not shift the loss onto the PCMs for the Trading Member's default. The Court set aside the NCL Committee's and SAT's orders and allowed the PCMs' appeals, while leaving investors free to pursue their own remedies against Anugrah directly.

Decided 2 Sept 2026Read case
Securities & Capital Markets LawSupreme Court of India

Securities and Exchange Board of India v. Rajeev Vasant Sheth and Others

The Supreme Court restored SEBI's finding that the respondents had committed insider trading, holding that the SAT was wrong to accept a "legitimate corporate purpose" defence that had been carved out under the older 1992 PIT Regulations: that defence was not available under the applicable 2015 Regulations, given the specific note appended to Regulation 4(1). The Court found the violation established but exercised its discretion on the quantum of penalty: it held that the original Rs. 25 lakh penalty imposed on Respondent No. 1 was excessive in the facts of the case and reduced it to Rs. 10 lakhs, the same minimum penalty imposed on his daughters, while otherwise upholding SEBI's directions restraining the respondents and requiring disgorgement of the avoided losses with interest.

Decided 11 Aug 2026Read case
Securities & Capital Markets LawSupreme Court of India

Nilesh Shah v. Securities and Exchange Board of India

The Supreme Court held that mutual fund regulations under the SEBI (Mutual Funds) Regulations, 1996 make no distinction between a regulatory breach that causes investors a loss and one that fortuitously results in a gain: a close-ended scheme must be redeemed in full at maturity unless properly rolled over with unitholder consent and regulatory disclosure, and Kotak AMC did neither. The Court rejected the argument that the action should be excused because it ultimately benefited investors, holding that excusing profitable breaches would only incentivize future violations and that market integrity, not investor outcome, is what regulation protects. It upheld findings of inadequate due diligence in investing in the underlying debentures and of delayed, inadequate disclosure to SEBI and unitholders, and found no ground to interfere with the monetary penalties imposed on the asset management company, the trustee company, or the senior executives, dismissing all the appeals with additional costs for the AMC and trustee.

Decided 13 Jul 2026Read case
Securities & Capital Markets LawSupreme Court of India

Reliance Industries Limited & Ors. v. The Securities and Exchange Board of India

The Supreme Court held that SEBI's own method of calculating RIL's share of the futures market was flawed. When open interest across all relevant series and options was correctly counted, RIL's share was 40.10%, not the 93.60% SEBI had used, though this still exceeded prescribed position limits. The Court found that RIL's futures positions were genuine hedges against the real risk of price decline in the much larger 22.5-crore-share cash-segment sale, that there was no requirement for a perfect 1:1 hedge ratio, and that no hedging policy even existed for equity derivatives at the time. On the question of fraud, the Court held that "inducement" is generally a necessary element under the PFUTP Regulations' definition of fraud, and since SEBI could not show RIL had induced others to trade to their detriment, SEBI carried a higher burden to independently prove manipulative intent: a burden it failed to meet, given RIL retained a much larger 70% stake whose value it had no rational incentive to depress. The appeal was therefore partly allowed: the finding of fraud/market manipulation and the resulting disgorgement order (Rs. 250 crore) were set aside, but the separate penalty for violating SEBI's 2001 disclosure/position-limit circular was upheld.

Decided 29 May 2026Read case