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Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India

Civil Appeal · 2025 INSC 846Decided 15 Jul 2025
C.A. No.-001551-001553 - 2023
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

The appellants, promoter-directors of a listed company, were penalized in 2014 by SEBI's Adjudicating Officer for insider trading violations, a penalty that was ultimately upheld by the Supreme Court in 2019. SEBI did not recover the penalty for nearly nine years and, in 2022, issued demand and attachment notices seeking the penalty plus 12% annual interest calculated all the way back from the original 2014 adjudication order. The appellants challenged this before the Securities Appellate Tribunal, arguing the interest was being applied retrospectively and unlawfully, but the Tribunal dismissed their appeals, leading to this further appeal to the Supreme Court.

Decision Breakdown

The Court held that once SEBI's 2014 adjudication order, which itself specified a 45-day payment window, attained finality after the appellants' unsuccessful challenges, it operated as the statutory demand for payment, so no separate "notice of demand" under the Income Tax Act was legally required to trigger interest. Interest under Section 220 of the Income Tax Act (as applied via Section 28A of the SEBI Act) is compensatory rather than punitive, meant to make good the time-value of money the exchequer was deprived of, and therefore accrues automatically from the expiry of the compliance period once liability has crystallized. Since the later 2022 demand notice merely repeated the original demand rather than creating a fresh liability, the Court found no error in SEBI charging 12% interest from 1994's 45-day deadline onward, and dismissed all the appeals, directing payment within 15 days.

Lesson Learnt

A finalized regulatory penalty does not stop accruing interest just because enforcement is delayed. Once an adjudication order fixes a payment deadline, interest runs automatically from that deadline, and a later "reminder" demand notice does not reset or shorten that clock.

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

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