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

- **Citation:** 2025 INSC 846
- **Court:** Supreme Court of India
- **Decided:** 2025-07-15
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jaykishor-chaturvedi-etc-v-securities-and-exchange-board-of-india-38605
- **Pages:** 36

## Headnote

Whether interest on penalties imposed by the Adjudicating Officer
is payable by the appellants, and if so, from which date- whether
from the date of the adjudication orders passed by the Adjudicating
Officer or the demand notices issued by the respondent-SEBI.
Headnotes†
Securities and Exchange Board of India Act, 1992 - s.28A -
Income Tax Act, 1961 - s.220(1), (2), (4) - Recovery of
amounts - When tax payable and when assessee deemed
in default - Interest on unpaid penalties imposed by the
Adjudicating Officer, if payable by the appellants - If yes, from
which date- whether interest on the unpaid penalty should
accrue from the expiry of the 45-day period stipulated in the
Adjudicating Officer's orders dtd.28.08.2014, or from the expiry
of 30 days following the respondent's notices dtd.13.05.2022:
Held: Adjudicating Officer's order itself constituted a clear and
enforceable demand for payment of penalties within 45 days -
This order attained finality following the appellants' unsuccessful
challenges before the SAT and this Court, thereby crystallizing
the liability - Once the adjudication order has attained finality,
the obligation to pay the penalty stands revived from the date of
adjudication - U/s.220(1), Income Tax Act r/w s.28A, SEBI Act,
interest becomes payable upon failure to meet the demand within
the prescribed time - Thus, appellants' failure to comply within
the specified time rendered them 'defaulters' u/s.220(4), Income
Tax Act, justifying the accrual of interest from the expiry of the
45-day compliance period - Further, since s.156, Income Tax Act
* Author
[2025] 8 S.C.R.
139
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
is not incorporated into the SEBI Act, the original order must be
treated as the statutory trigger for the purpose of calculation of
interest - Moreover, the demand notice dtd.13.05.2022 merely
reiterated the earlier demand and did not create a fresh liability -
The enabling provision to recover interest was already in vogue
when the adjudication order was passed - Appellants liable to pay
interest at 12% p.a on the unpaid penalty amounts for the period
of delay - Plea of the appellants that interest cannot be levied
retrospectively, misplaced - Interest to accrue from the expiry of
the 45-day compliance period following the adjudication orders
dtd.28.08.2014 - Order of the Tribunal dismissing the challenge
to the notices of attachment issued against the appellants, not
interfered with - SEBI Rules, 1995 - SEBI (Prohibition of Insider
Trading) Regulations, 1992 - Regulation Nos.13(4) and 13(4A)
r/w 13(5). [Paras 10, 11.3, 11.5, 11.6]
Securities and Exchange Board of India Act, 1992 - Explanation 4
to s.28A - Appellants contended that the Explanation 4 to s.28A
inserted in 2019, cannot be applied retrospectively, as it alters
the legal position as it stood earlier by introducing provisions
relating to the levy of interest:
Held: An "explanation" in any law clarifies, restricts, or expands
the scope of the main provision - The nature and effect of an
Explanation must be understood in the context of the object of
the Act, and in particular, the provision to which the Explanation is
inserted - Explanation 4 to s.28A inserted on 21.02.2019, explicitly
states that interest u/s.220, Income Tax Act shall accrue from the
date the amount became payable - The liability to pay penalty
stood triggered from the date of adjudication and that no separate
notice of demand is necessary - Further, in the present case, as
the adjudication order itself specified the time for payment of the
penalty, the liability to pay interest would commence upon the expiry
of the period mentioned in the assessment notice - The Explanation
introduced in 2019, did not bring about any substantive change
but merely clarified the existing legal position - Also, where the
original adjudication order under the SEBI Act does not specify any
time for payment, the period of 30 days u/s.220, Income Tax Act
should be

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[2025] 8 S.C.R. 138 : 2025 INSC 846
Jaykishor Chaturvedi & Etc.
v.
Securities and Exchange Board of India
(Civil Appeal No(s). 1551-1553 of 2023)
15 July 2025
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
Whether interest on penalties imposed by the Adjudicating Officer
is payable by the appellants, and if so, from which date- whether
from the date of the adjudication orders passed by the Adjudicating
Officer or the demand notices issued by the respondent-SEBI.
Headnotes†
Securities and Exchange Board of India Act, 1992 - s.28A -
Income Tax Act, 1961 - s.220(1), (2), (4) - Recovery of
amounts - When tax payable and when assessee deemed
in default - Interest on unpaid penalties imposed by the
Adjudicating Officer, if payable by the appellants - If yes, from
which date- whether interest on the unpaid penalty should
accrue from the expiry of the 45-day period stipulated in the
Adjudicating Officer's orders dtd.28.08.2014, or from the expiry
of 30 days following the respondent's notices dtd.13.05.2022:
Held: Adjudicating Officer's order itself constituted a clear and
enforceable demand for payment of penalties within 45 days -
This order attained finality following the appellants' unsuccessful
challenges before the SAT and this Court, thereby crystallizing
the liability - Once the adjudication order has attained finality,
the obligation to pay the penalty stands revived from the date of
adjudication - U/s.220(1), Income Tax Act r/w s.28A, SEBI Act,
interest becomes payable upon failure to meet the demand within
the prescribed time - Thus, appellants' failure to comply within
the specified time rendered them 'defaulters' u/s.220(4), Income
Tax Act, justifying the accrual of interest from the expiry of the
45-day compliance period - Further, since s.156, Income Tax Act
* Author
[2025] 8 S.C.R.
139
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
is not incorporated into the SEBI Act, the original order must be
treated as the statutory trigger for the purpose of calculation of
interest - Moreover, the demand notice dtd.13.05.2022 merely
reiterated the earlier demand and did not create a fresh liability -
The enabling provision to recover interest was already in vogue
when the adjudication order was passed - Appellants liable to pay
interest at 12% p.a on the unpaid penalty amounts for the period
of delay - Plea of the appellants that interest cannot be levied
retrospectively, misplaced - Interest to accrue from the expiry of
the 45-day compliance period following the adjudication orders
dtd.28.08.2014 - Order of the Tribunal dismissing the challenge
to the notices of attachment issued against the appellants, not
interfered with - SEBI Rules, 1995 - SEBI (Prohibition of Insider
Trading) Regulations, 1992 - Regulation Nos.13(4) and 13(4A)
r/w 13(5). [Paras 10, 11.3, 11.5, 11.6]
Securities and Exchange Board of India Act, 1992 - Explanation 4
to s.28A - Appellants contended that the Explanation 4 to s.28A
inserted in 2019, cannot be applied retrospectively, as it alters
the legal position as it stood earlier by introducing provisions
relating to the levy of interest:
Held: An "explanation" in any law clarifies, restricts, or expands
the scope of the main provision - The nature and effect of an
Explanation must be understood in the context of the object of
the Act, and in particular, the provision to which the Explanation is
inserted - Explanation 4 to s.28A inserted on 21.02.2019, explicitly
states that interest u/s.220, Income Tax Act shall accrue from the
date the amount became payable - The liability to pay penalty
stood triggered from the date of adjudication and that no separate
notice of demand is necessary - Further, in the present case, as
the adjudication order itself specified the time for payment of the
penalty, the liability to pay interest would commence upon the expiry
of the period mentioned in the assessment notice - The Explanation
introduced in 2019, did not bring about any substantive change
but merely clarified the existing legal position - Also, where the
original adjudication order under the SEBI Act does not specify any
time for payment, the period of 30 days u/s.220, Income Tax Act
should be deemed to apply for making the payment, failure of which
would trigger the liability to pay interest - Thus, the adjudication
officer's order which specified payment within 45 days, effectively
140
[2025] 8 S.C.R.
Supreme Court Reports
operates as a notice of demand, rendering any separate demand
notice redundant - Adjudication amounts to a crystallization of
liability, and the demand is a natural sequitur - Thus, there is
no corresponding requirement for issuance a separate notice
of demand seeking payment of the amount determined under
the adjudication order - Adjudication authority is well within his
powers to fix a period for payment of the amount specified in the
adjudication order, and upon default, the liability to pay interest
becomes inevitable - Securities Laws (Amendment) Act, 2014 -
Securities and Exchange Board of India (Procedure for Holding
Inquiry and Imposing Penalties) Rules, 1995 - Income Tax Act,
1961. [Paras 11.4, 9.9]
"Legislation by incorporation"; "Legislation by reference" -
Income Tax Act, 1961 - ss.220(1), 156 - Limited reference to
s.156 in s.220(1) not to be treated either as a "legislation by
incorporation" or a "legislation by reference" - Explained -
Securities and Exchange Board of India Act, 1992.
[Para 9.6, 9.8]
Income Tax Act, 1961 - Securities and Exchange Board of
India Act, 1992 - Interest on unpaid penalties - Nature -
Compensatory, not penal - Purpose, stated. [Para 11.5]
Securities and Exchange Board of India Act, 1992 -
Adjudication, when triggered - Chapter VIA - s.28A - Levy
of penalties - Penalties and Adjudication - Securities Laws
(Amendment) Act, 2014 - SEBI (Prohibition of Insider Trading)
Regulations, 1992 - Securities and Exchange Board of India
(Procedure for Holding Inquiry and Imposing Penalties) Rules,
1995 - Income Tax Act, 1961 - ss. - s.220(1), (2), (4), 156.
[Para 9.9]
Case Law Cited
Sedco Forex International Drill Inc. v. Commissioner of Income Tax
[2005] Supp. 5 SCR 302 : (2005) 12 SCC 717; Shyam Sundar
& others v. Ram Kumar and Another [2001] Supp. 1 SCR 115 :
(2001) 8 SCC 24; Keshavlal Jethalal Shah v. Mohanlal Bhagwandas
and Another [1968] 3 SCR 623 - distinguished.
J.K. Synthetics Ltd. v. CTO [1994] 3 SCR 964 : (1994) 4 SCC
276 - held not applicable.
[2025] 8 S.C.R.
141
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
State of Punjab v. Bhajan Kaur [2008] 7 SCR 1111 : (2008) 12
SCC 112; Shiv Kumar Sharma v. Santhosh Kumari [2007] 10
SCR 17 : (2007) 8 SCC 600; Shamsu Suhara Beevi v. G.Alex
and another [2004] Supp. 3 SCR 653 : (2004) 8 SCC 569;
The Collector of Customs, Madras v. Nathella Sampathu Chetty
and Ors., MANU/SC/0089/1961 : AIR 1962 SC 316; Ujagar Prints
and Ors. v. Union of India (UOI) and Ors., MANU/SC/0675/1988 :
AIR 1989 SC 516; Girnar Traders and Ors. v. State of Maharashtra
and Ors. (2011) 3 SCC 1; Calcutta Jute Manufacturing Co. and
Another v. Commercial Tax Officer [1997] Supp. 1 SCR 474 :
(1997) 106 (STC) 433; Bhai Jaspal Singh v. CCT [2010] 14 SCR
41 : (2011) 1 SCC 39; Dushyant N. Dalal and Another v. SEBI
[2017] 11 SCR 448 : (2017) 9 SCC 660 - referred to.
Commissioner of Income-Tax v. Dhanalakshmy Weaving Works
(2000) 245 ITR 13 : 1999 SCC OnLine Ker 597 - referred to.
List of Acts
Securities and Exchange Board of India Act, 1992; Income Tax
Act, 1961; Securities and Exchange Board of India (Procedure
for Holding Inquiry and Imposing Penalties) Rules, 1995; SEBI
(Prohibition of Insider Trading) Regulations, 1992; Securities Laws
(Amendment) Act, 2014; Income Tax (Certificate Proceedings)
Rules, 1962; Companies Act.
List of Keywords
Violation of the SEBI (Prohibition of Insider Trading) Regulations,
1992; Adjudication order; Penalties; Interest on penalties;
Adjudicating Officer; Date of the adjudication orders; Demand
notices issued by SEBI; Interest on the unpaid penalty; From the
expiry of the 45-day period stipulated in the Adjudicating Officer's
orders; From the expiry of 30 days following SEBI's notices; Interest
on unpaid penalty levied retrospectively; Adjudicating Officer's
order; Demand for payment of penalties within 45 days; Show
cause notices; Obligation to pay penalty; Revived from the date
of adjudication; Defaulters; Accrual of interest from the expiry of
the 45-day compliance period; Unpaid penalty amounts; Period of
delay; Enabling provision; Notices of attachment; No separate notice
of demand necessary; Separate demand notice; No fresh liability;
Legislation by incorporation; Legislation by reference; Explanation;
Notice of demand; Adjudication authority; Arrears of income tax.
142
[2025] 8 S.C.R.
Supreme Court Reports
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 1551-1553
of 2023
From the Judgment and Order dated 29.09.2022 of the Securities
Appellate Tribunal, Mumbai in AN Nos. 626, 627 and 628 of 2022
Appearances for Parties
Advs. for the Appellants:
Dr. Purvish Jitendra Malkan, Benni Chatterji, Sr. Advs., Dharita
Malkan, Khushboo Aakash Sheth.
Advs. for the Respondent:
Pratap Venugopal, Sr. Adv., M/S. K J John And Co, Amarjit Singh
Bedi, Ms. Surekha Raman, Shreyash Kumar, Imlikaba Jamit.
Judgment / Order of the Supreme Court
Judgment
R. Mahadevan, J.
1.
All these appeals are filed under Section 15Z of the Securities and
Exchange Board of India Act, 19921 challenging the common judgment
and order dated 29.09.20222 passed by the Securities Appellate
Tribunal, Mumbai3, in Appeal Nos.626 to 628 of 2022 preferred by
the appellants. By the impugned order, the Tribunal dismissed the
challenge to the notices of attachment dated 23.06.2022 issued
against the appellants.
FACTUAL MATRIX
2.
According to the appellants, they are the promoter-directors of
M/s. Brijlaxmi Leasing and Finance Limited, a company incorporated
under the Companies Act and limited by shares, which is listed on the
Bombay Stock Exchange and engaged in providing various financial
services, including lending, loan syndication, advisory, and portfolio
management, among others.
1
Hereinafter referred to as "SEBI Act"
2
For short, "the impugned order"
3
For short, "the Tribunal"
[2025] 8 S.C.R.
143
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
2.1. The company in the year 1995-96 went in to initial public offer
for fully paid-up share capital of 56,48,500 shares of face value
of Rs.10/- each. The fully paid up 5,64,85,000 shares of the
company were split from Rs.10/- to Re.1 each from 30.06.2005.
2.2. While so, the respondent conducted examination of scrip of
the company and found that the promoters and directors of
the company purchased shares of the company on various
dates between October 2012 and July 2013 in violation of the
provisions of Regulation Nos.13(4) and 13(4A) read with 13(5)
of the SEBI (Prohibition of Insider Trading) Regulations, 19924.
2.3. Upon issuance of show cause notices, the Adjudicating Officer
passed adjudication orders on 28.08.2014 under section 15-I
of the SEBI Act read with Rule 5 of the SEBI Rules, 1995,
imposing penalty on the appellants.
2.4. Challenging the aforesaid orders, the appellants by names
Jaykishor Chaturvedi, Siddharth Jaykishor Chaturvedi, and
Ankur Jaykishor Chaturvedi preferred appeals bearing Nos.435,
436 and 434 of 2014, respectively, before the Tribunal under
Section 15E of the SEBI Act. Vide order dated 04.08.2015,
the Tribunal dismissed these appeals. Aggrieved by the same,
the appellants preferred further appeals bearing Civil Appeal
Nos.14729, 14730, and 14728 of 2015, respectively, before
this Court.
2.5. By a common judgment dated 28.02.2019 in C.A.No(s).11311
of 2013 etc. cases, a 3-Judge Bench of this Court disposed of
all these appeals upholding the quantum of penalty imposed
on the appellants.
2.6. Thereafter, the respondent through its Recovery Officer, Western
Regional Office, issued demand notices dated 13.05.2022
directing the appellants to pay the penalties imposed by the
Adjudicating Officer vide orders dated 28.08.2014 along with
interest @ 12% p.a. from 28.08.2014 to 13.05.2022. However,
the appellants failed to comply with the demand for payment
issued by the respondent.
4
For short, "the PTI Regulations"
144
[2025] 8 S.C.R.
Supreme Court Reports
2.7. Consequently, the respondent issued notices of attachment of
bank accounts on 23.06.2022, to the Principal Officer / Chairman
& Managing Director /CEO of all Banks in India, ordering the
following attachment with immediate effect:
(a) All account/s by whatever name called including lockers
of the Defaulter (appellants), either singly or jointly with
any other person/s held with the Bank.
(b) All other amount/ proceeds due or may become due to
the Defaulter (appellants) or any money held or may
subsequently hold for or on account of the Defaulter
(appellants).
2.8. The Respondent also issued notices of attachment of demat
accounts on 23.06.2022 to National Securities Depository Ltd.
and Central Depository Services (I) Ltd., ordering the following
attachment with immediate effect:
(a) All Demat account/s by whatever name called of the
Defaulter, either singly or jointly with any other person/s
held with the Depositories.
(b) All funds/folios/schemes held by whatever name called of
the defaulters (appellants), either singly or jointly with any
other person/s held with the Depositories.
2.9. Aggrieved by the aforesaid actions taken by the respondent, the
appellants preferred appeals bearing Nos.626, 627, and 628
of 2022 before the Tribunal on the ground that the recovery
proceedings and attachment notices issued are excessive in
nature and grossly disproportionate to the penalties imposed
by the Adjudicating Officer. By the impugned order, the Tribunal
dismissed all these appeals. Hence, the appellants are before
us with the present Civil Appeals.
CONTENTIONS OF THE PARTIES
3.
The main contention of the learned counsel for the appellants is that
the Recovery Officer of the respondent exceeded the powers vested
under section 28A of the SEBI Act by imposing retrospective interest
computed from the date of the original adjudication orders dated
28.08.2014 under section 15-I of the SEBI Act, despite the absence
of any provision for the imposition of interest in the said order.
[2025] 8 S.C.R.
145
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
3.1. Elaborating further, the learned counsel submitted that the
scheme of recovery proceedings under the SEBI Act is governed
by Section 28A read with Sections 220 to 227, 228A, 229, 232,
along with the Second and Third Schedules to the Income Tax
Act, 1961, and the Income Tax (Certificate Proceedings) Rules,
1962. Section 220(2) in unambiguous terms, stipulates that
interest would be imposable at the rate of 1% per month after the
30th day from the date of the demand notice as it stood prior to
insertion of Explanation- 4 to Section 28A, which came into force
on 21.02.2019. Explanation - 4 states that the interest referred
to in Section 220 of the Income Tax Act, 1961 shall commence
from the date the amount becomes payable by the person. This
implies that prior to the insertion of Explanation - 4 to Section
28A of the SEBI Act, interest was to be levied in accordance
with Section 220 of the Income Tax Act, 1961 - that is, after 30
days from the issuance of the notice of demand, and not from
the date the amount became payable by the person. Whereas,
the notice of demand dated 13.05.2022 issued under section
28A of the SEBI Act by the respondent comprised the penalty
amount imposed along with interest at 12% p.a. computed from
the date of the adjudication orders.
3.2. It is further submitted that Section 220 of the Income Tax Act,
1961 provides for the recovery of any amount payable under
a notice of demand. Section 156 of the Income Tax Act, 1961
defines a notice of demand as a demand, in the prescribed
form for the payment of any tax, interest, penalty, fine or any
other sum payable in consequence of any order passed. The
phrase, "in consequence of any order passed" refers to the
original adjudication orders dated 28.08.2014 which imposed
only a penalty and did not award any interest. Therefore, the
Recovery Officer of the respondent exceeded his jurisdiction by
computing interest on the penalty amount at 12% per annum
from the date of the adjudication orders, when such order did
not direct the payment of any interest.
3.3. It is also submitted that the demand notices, in essence, amount
to a rewriting of the original adjudication orders, which had
already attained finality. Hence, interest on the penalty would
be leviable only at the rate of 1% per month from 13.05.2022,
i.e., 30 days after the date of the demand notices issued by
146
[2025] 8 S.C.R.
Supreme Court Reports
the respondent, and not from 28.08.2014, the date of the
adjudication orders.
3.4. Placing reliance on the decisions of this Court in Sedco Forex
International Drill Inc. v. Commissioner of Income Tax5, Shyam
Sundar & others v. Ram Kumar and another6, and Keshavlal
Jethalal Shah v. Mohanlal Bhagwandas and another7, the
learned counsel submitted that the insertion of Explanation - 4
to Section 28A of the SEBI Act, which came into effect from
21.02.2019, cannot be applied retrospectively, as it alters the
legal position as it stood earlier by introducing provisions relating
to the levy of interest. It is also submitted that the imposition
of interest is a matter of substantive law, and therefore, cannot
have retrospective application [See: J.K. Synthetics Ltd v. CTO8
and State of Punjab v. Bhajan Kaur9]. Thus, according to the
learned counsel, Explanation - 4 to Section 28A of the SEBI Act,
would not apply to the case of the appellants, as the amendment
was introduced long after the original adjudication orders, which
had attained finality by a common judgment dated 28.02.2019
in C.A.No(s).11311 of 2013 etc. cases. Since the amendment
cannot be applied retrospectively, in light of the decisions referred
to above, interest for the purposes of Section 28A shall not
commence from the date of the adjudication orders. Instead,
it shall be computed in accordance with the plain language of
Section 220(2) of the Income Tax Act, 1961 i.e., after 30 days
from the date of notice of demand.
3.5. The learned counsel further pointed out that in Dushyant N.
Dalal and another v. SEBI10, this Court after referring to various
judgments, upheld the levy of interest in equity as a principle of
law, in the absence of express statutory provisions for interest. In
that case, the appeal related to an adjudication order of penalty
dated 13.11.2009 i.e., prior to the insertion of Section 28A into
the SEBI Act, which provision was introduced by the Securities
5
(2005) 12 SCC 717
6
(2001) 8 SCC 24
7
[1968] 3 SCR 623
8
(1994) 4 SCC 276
9
(2008) 12 SCC 112
10
(2017) 9 SCC 660
[2025] 8 S.C.R.
147
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
Laws (Amendment) Act, 2014, with effect from 18.07.2013.
Whereas, in the present case, the adjudication orders against
the appellants are dated 28.08.2014 i.e., after the insertion of
Section 28A into the SEBI Act. Section 28A as it then stood,
was clear and unambiguous, providing for the levy of interest
under section 220(2) of the Income Tax Act, 1961 at the stage
of recovery, in the event of non-payment of penalties imposed
under the adjudication orders within 30 days from the date of
service of the demand notices by the Recovery Officer. Despite
being cognizant of the power to provide for future interest, as
was done in Dushyant N. Dalal, the Adjudicating Officer in the
case of the present appellants, made no such provision for
future interest and the adjudication orders therefore attained
finality in their existing form.
3.6. Referring to the judgments of this Court in Shiv Kumar Sharma
v. Santhosh Kumari11, and Shamsu Suhara Beevi v. G.Alex
and another12, the learned counsel submitted that it is trite law
that the exercise of equity cannot override or violate express
statutory provisions; and the equity jurisdiction may be invoked
only where the law is silent or does not operate in the field.
3.7. With these submissions and case laws, the learned counsel
prayed that these appeals be allowed by setting aside the levy
of interest at 12% p.a. charged from 28.08.2014, as well as the
recovery certificates issued by the respondent and the notices
of attachment issued in pursuance thereof.
4.
Per contra, the learned counsel for the respondent submitted that
the issues involved herein are no longer res integra, having been
conclusively adjudicated by this Court in Dushyant N. Dalal (supra),
wherein, this Court affirmed the authority of SEBI to levy interest,
including on penalty amounts, pursuant to Section 28A of the SEBI
Act read with Section 220 of the Income Tax Act, 1961. In doing so,
this Court expressly rejected the contrary views previously adopted
by the Securities Appellate Tribunal, which had limited the recovery
of interest to periods subsequent to the enactment of Section 28A
in 2013. This Court further clarified that the provision for levying
11
(2007) 8 SCC 600
12
(2004) 8 SCC 569
148
[2025] 8 S.C.R.
Supreme Court Reports
interest embodies both substantive and procedural elements of law,
thereby enabling SEBI to recover interest from the date on which
the liability originally arose, in consonance with principles of equity
and the Interest Act, 1978.
4.1. It was further submitted that in the present case, the cause of
action arose on 28.08.2014, i.e., upon the imposition of penalties
by the Adjudicating Officer of SEBI, on each of the appellants,
accompanied by a direction to effect payment within 45 days
from the date of receipt of the adjudication orders. Section
220(1) of the Income Tax Act, 1961 does not contemplate the
issuance of any independent notice of demand, but refers to
the notice of demand served under Section 156. It mandates
that the amount specified in such notice shall be paid within
30 days, failing which interest at the rate of 12% per annum
becomes payable under Section 220(2) on the amounts specified
therein, calculated from the expiry of the period prescribed
under Section 220(1). Since Section 156 of the Income Tax
Act is not incorporated into Section 28A of the SEBI Act, the
expression 'notice of demand' referred to in Section 220(1),
for the purposes of recovery under the SEBI Act would be
referrable to the demand raised by SEBI - inter alia through a
penalty order passed under Chapter VIA of the SEBI Act. In
the instant case, the direction issued by the Adjudicating Officer
of SEBI in the adjudication orders dated 28.08.2014, requiring
payment of penalties by the appellants within 45 days from
the receipt of the said orders, would constitute the 'notice of
demand' contemplated under section 156 of the Income Tax
Act (with necessary modification as envisaged by Section 28A
(1) of the SEBI Act). Consequently, the appellants' failure to
comply with the said direction would render them 'deemed
defaulters' within the meaning of Section 220(4) of the Income
Tax Act. Therefore, the levy of interest from 28.08.2014 until
the date of payment is fully warranted and justified as per the
applicable statutes and the settled legal position.
4.2. It was also submitted that Section 28A of the SEBI Act makes
the provisions of Sections 220 to 227, 228A, 229, 232 and the
Second and Third Schedules to the Income Tax Act, 1961 and
the Income Tax (Certificate Proceedings) Rules, 1962 apply
[2025] 8 S.C.R.
149
Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
"with necessary modifications" as if the said provisions and
Rules made thereunder were the provisions of the SEBI Act.
In the present case, the order of the Adjudicating Officer of
SEBI dated 28.08.2014 itself required that the penalty amount
be paid within 45 days from the date of receipt of the order.
The demand notices dated 13.05.2022 issued by the Recovery
Officer of SEBI were necessitated solely due to the appellants'
failure to pay the penalty demanded and were intended to inform
them of the outstanding dues as on that date, along with the
proposed recovery actions, such as, attachment and detention.
The appellants had unsuccessfully challenged the imposition of
the penalty before both the Tribunal and this Court. Therefore,
they cannot now contend that the cause of action for payment of
the penalty arose only on 13.05.2022, when notice was issued
by the Recovery Officer of SEBI.
4.3. Ultimately, it was submitted that as on date, the appellants
remain liable to pay the following sums by way of interest:
Name
Penalty
amount (Rs.)
Recovered
amount till
date (Rs.)
Interest
pending
(Rs.)
Siddharth J.Chaturvedi
5,00,000/-
5,00,465.85
5,34,640.77
Jaykishore Chaturvedi
11,00,000/-
11,00,000/-
11,79,533.33
Ankur J. Chaturvedi
7,00,000/-
7,00,000/-
7,41,133,33
4.4. Thus, according to the learned counsel, there is no merit in
the present appeals and the same are liable to be dismissed.
DISCUSSION AND FINDINGS
5.
We have heard the learned counsel appearing on either side and
perused the materials available on record.
6.
Concededly, the Adjudicating Officer passed the adjudication
orders dated 28.08.2014, imposing penalties of Rs.11,00,000/- in
the case of Jaykishor Chaturvedi, Rs.5,00,000/- in the case of
Siddharth Jaykishor Chaturvedi and Rs.7,00,000/- in the case of
Ankur Jaykishor Chaturvedi, for the alleged violation of Regulation
Nos.13(4) and 13(4A) read with 13(5) of the PIT Regulations. The
said adjudication orders were affirmed by the 3-Judge Bench of this
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Court vide judgment dated 28.02.2019 in C.A. No (s).11311 of 2013
etc. cases and hence, the same had attained finality.
7.
Seemingly, the appellants failed to pay the penalties imposed by
the Adjudicating Officer, even after the same was affirmed by this
Court. Consequently, the respondent issued demand notices dated
13.05.2022, directing the appellants to pay the penalties along with
interest @ 12% per annum from 28.08.2014 to 13.05.2022 within 15
days from the date of receipt of the notices, failing which, recovery
proceedings would be initiated against them. Even then, the appellants
failed to make the payments. As a result, the respondent issued
notices of attachment of the bank accounts and demat accounts
against the appellants. Challenging the same, the appellants preferred
appeals, which were dismissed by the Tribunal, by the impugned
order dated 29.09.2022, observing that the penalty amount had
not been paid even though the adjudication orders were passed
eight years ago. It further held that if the amount is not paid within
45 days, interest becomes payable under Section 28A of the SEBI
Act. Aggrieved by the dismissal of the appeals, the appellants have
preferred these appeals before us.
8.
Now, the questions to be determined in these appeals are, whether
interest on penalties imposed by the Adjudicating Officer is payable
by the appellants, and if so, from which date - whether from the
date of the adjudication orders passed by the Adjudicating Officer
or the demand notices issued by the respondent?
9.
Before proceeding further, it is necessary to examine the legal position
related to the issue involved herein.
9.1. Chapter VI A, comprising of Sections 15A-15HB prescribe
penalties for various defaults under the SEBI Act viz., failure
to furnish information, return, etc. Section 15A provides that
a person who fails to file a return or furnish information, shall
be liable to a penalty which shall not be less than one lakh
rupees but which may extend to one lakh rupees for each day
during which, such failure continues, subject to a maximum
of one crore rupees. Likewise, Sections 15B-15HB impose
monetary penalties for other contraventions. However, none
of these sections themselves mention that interest is payable
on the penalty; and they only set out the penalty amounts.
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Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
Even Section 15JA merely directs that penalties recovered are
credited to the Consolidated Fund.
9.2. Section 15I authorizes SEBI to appoint adjudicating officers
to impose penalties under Sections 15A-15HB. But, it does
not by itself mention any interest liability on delayed payment.
9.3. Section 15J directs that in determining the penalty amount
under Sections 15A-15HB, the adjudicating officer shall have
due regard to certain factors viz., disproportionate gain, loss
to investors, repetitive nature of default, etc. It also contains
no provision for interest on delayed payments.
9.4. Although outside Chapter VI-A, Section 28A which was inserted
by the Securities Laws (Amendment) Act, 2014 in Chapter VII,
dealing with Miscellaneous matter, with effect from 18.07.2013,
deals with the recovery when any person fails to pay amounts
due under the Act. It states that if a person fails to pay a penalty
imposed under the SEBI Act, the SEBI Recovery Officer may
prepare a certificate specifying the amount due and recover it
by attachment or other measures. Crucially, it provides that for
the purposes of recovery, the provisions of Sections 220 to 227,
228A, 229, 232, the Second and Third Schedules to the Incometax Act, 1961 and the Income-tax (Certificate Proceedings)
Rules, 1962 - shall apply, with necessary modifications, as if
those provisions and the rules were the provisions of the SEBI
Act and referred to amounts due under this Act, instead of
income-tax. In particular, Income-tax Act, Section 220 (which
is thereby incorporated) imposes interest at 1% per month (or
part thereof) on any tax (here, SEBI dues) remaining unpaid
after the due date. Thus, Section 28A effectively makes all sums
due to SEBI (including penalties) recoverable as arrears and
subjects them to statutory interest under the Income-tax Act. For
ease of reference and specificity, the provisions of Section 28A
of the SEBI Act and Section 220 of the Income Tax Act, 1961
are reproduced below:
"28-A. Recovery of amounts. - (1) If a person fails
to pay the penalty imposed by the adjudicating officer
or fails to comply with any direction of the Board for
refund of monies or fails to comply with a direction
of disgorgement order issued under section 11-B or
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fails to pay any fees due to the Board, the Recovery
Officer may draw up under his signature a statement
in the specified form specifying the amount due from
the person (such statement being hereafter in this
Chapter referred to as certificate) and shall proceed
to recover from such person the amount specified
in the certificate by one or more of the following
modes, namely:-
(a) attachment and sale of the person's movable
property;
(b) attachment of the person's bank accounts;
(c) attachment and sale of the person's immovable
property;
(d) arrest of the person and his detention in prison;
(e)appointing a receiver for the management of the
person's movable and immovable properties,
and for this purpose, the provisions of sections 220 to
227, 228A, 229, 232, the Second and Third Schedules
to the Income-tax Act, 1961 and the Income-tax
(Certificate Proceedings) Rules, 1962, as in force from
time to time, insofar as may be, apply with necessary
modifications as if the said provisions and the rules
made thereunder were the provisions of this Act and
referred to the amount due under this Act instead of
to income-tax under the Income-tax Act, 1961.
Explanation 1.- For the purposes of this sub-section,
the person's movable or immovable property or
monies held in bank accounts shall include any
property or monies held in bank accounts which has
been transferred directly or indirectly on or after the
date when the amount specified in certificate had
become due, by the person to his spouse or minor
child or son's wife or son's minor child, otherwise than
for adequate consideration, and which is held by, or
stands in the name of, any of the persons aforesaid;
and so far as the movable or immovable property or
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Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
monies held in bank accounts so transferred to his
minor child or his son's minor child is concerned, it
shall, even after the date of attainment of majority
by such minor child or son's minor child, as the case
may be, continue to be included in the person's
movable or immovable property or monies held in
bank accounts for recovering any amount due from
the person under this Act.
Explanation 2.- Any reference under the provisions of
the Second and Third Schedules to the Income-tax
Act, 1961 and the Income-tax (Certificate Proceedings)
Rules, 1962 to the assessee shall be construed as
a reference to the person specified in the certificate.
Explanation 3. - Any reference to appeal in Chapter
XVIID and the Second Schedule to the Income-tax
Act, 1961 shall be construed as a reference to appeal
before the Securities Appellate Tribunal under section
15T of this Act.
13[Explanation 4.
The interest referred to in section 220 of the Incometax Act, 1961 shall commence from the date the
amount became payable by the person.
(2) The Recovery Officer shall be empowered to seek
the assistance of the local district administration while
exercising the powers under sub-section (1).
(3) Notwithstanding anything contained in any other
law for the time being in force, the recovery of amounts
by a Recovery Officer under sub-section (1), pursuant
to non-compliance with any direction issued by the
Board under section 11B, shall have precedence over
any other claim against such person.
(4) For the purposes of sub-sections (1), (2) and (3),
the expression "Recovery Officer" means any officer
13
The Explanation Inserted by Act 21 of 2019, s. 42 and the Second Schedule (w.e.f. 21.2.2019)
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of the Board who may be authorised, by general or
special order in writing, to exercise the powers of a
Recovery Officer.]"
"220.When tax payable and when assessee
deemed in default.
(1) Any amount, otherwise than by way of advance
tax, specified as payable in a notice of demand under
section 156 shall be paid within [thirty days]14 of the
service of the notice at the place and to the person
mentioned in the notice:
Provided that, where the [Assessing Officer]15 has
any reason to believe that it will be detrimental to
revenue if the full period of [thirty days] aforesaid is
allowed, he may, with the previous approval of the
[Joint Commissioner]16, direct that the sum specified
in the notice of demand shall be paid within such
period being a period less than the period of [thirty
days] aforesaid, as may be specified by him in the
notice of demand.
[(1A) Where any notice of demand has been
served upon an assessee and any appeal or other
proceeding, as the case may be, is filed or initiated
in respect of the amount specified in the said notice
of demand, then, such demand shall be deemed to
be valid till the disposal of the appeal by the last
appellate authority or disposal of the proceedings,
as the case may be, and any such notice of demand
shall have the effect as specified in section 3 of
the Taxation Laws (Continuation and Validation of
Recovery Proceedings) Act, 1964 (11 of 1964).]
(2) If the amount specified in any notice of demand
under section 156 is not paid within the period limited
14
Substituted by Act 4 of 1988, Section 85, for " thirty-five days" (w.e.f. 1.4.1989)
15
Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988)
16
Substituted by Act 21 of 1998, Section 3, for " Deputy Commissioner" (w.e.f. 1.10.1998)
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Jaykishor Chaturvedi & Etc. v. Securities and Exchange Board of India
under sub-section (1), the assessee shall be liable
to pay simple interest at [one per cent.]17[for every
month or part of a month comprised in the period
commencing from the day immediately following the
end of the period mentioned in sub-section (1)]18 and
ending with the day on which the amount is paid:
[Provided that, where as a result of an order under
section 154, or section 155, or section 250, or section
254, or section 260, or section 262, or section 264]19
[or an order of the Settlement Commission under
sub-section (4) of section 245-D]20[the amount
on which interest was payable under this section
had been reduced, the interest shall be reduced
accordingly and the excess interest paid, if any,
shall be refunded:]21
[Provided further that where as a result of an order
under sections specified in the first proviso, the
amount on which interest was payable under this
section had been reduced and subsequently as a
result of an order under said sections or section
263, the amount on which interest was payable
under this section is increased, the assessee shall
be liable to pay interest under sub-section (2) from
the day immediately following the end of the period
mentioned in the first notice of demand, referred to
in sub-section (1) and ending with the day on which
the amount is paid:]
[Provided further that in respect of any period
commencing on or before the 31st day of March,
1989 and ending after that date, such interest
17
Substituted by Act 4 of 1988, Section 85, for " fifteen per cent. per annum from the day commencing after
the end of the period mentioned in sub-Section (1)" (w.e.f. 1.4.1989)
18
Substituted by Act 4 of 1988, Section 85, for "fifteen per cent. per annum from the day commencing after
the end of the period mentioned in sub-Section (1)" (w.e.f. 1.4.1989)
19
Inserted by Act 13 of 1963, Section 14 (w.e.f. 1.4.1962)
20
Inserted by Act 4 of 1988, Section 85 (w.e.f. 1.4.1989)
21
Inserted by Act 13 of 1963, Section 14 (w.e.f. 1.4.1962)
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shall, in respect of so much of such period as falls
after that date, be calculated at the rate of one and
one-half per cent for every month or part of a
month.]22
...."
In conclusion, once Section 28A of the SEBI Act came into force
with effect from 18.07.2013, the legal position stands settled
that any penalty imposed by the Adjudicating Officer under the
SEBI Act and remaining unpaid beyond the stipulated period is
recoverable in the same manner as arrears of income tax under
the Income Tax Act, 1961. As a necessary corollary, interest
on such unpaid penalty also becomes statutorily leviable under
section 220(2) of the Income Tax Act, which prescribes simple
interest at the rate of 1% per month (12% per annum) for any
amount specified in a demand notice that is not paid within the
prescribed time.
9.5. To elucidate further, we will also look into the provision of Section
156 of the Income Tax Act, 1961, which reads as under:
"156. Notice of demand- When any tax, interest,
penalty, fine or any other sum [Certain words omitted
by Act 13 of 1966, Section 32 and Schedule III (w.e.f.
1.4.1967).] is payable in consequence of any order
passed under this Act, the [Assessing Officer]23 shall
serve upon the assessee a notice of demand in the
prescribed form specifying the sum so payable:
[Provided that where any sum is determined to be
payable by the assessee under sub-section (1) of
section 143, the intimation under that sub-section
shall be deemed to be a notice of demand for the
purposes of this section.]24
9.6. It is clear from the above provision that when any tax, interest,
penalty, fine or any other sum (other than advance tax) is
22
Inserted by Act 4 of 1988, Section 85 (w.e.f. 1.4.1989)
23
Substituted by Act 4 of 1988, Section 2, for" Income-tax Officer" (w.e.f. 1.4.1988)
24
Inserted by Act 18 of 2008, Section 40 (w.e.f. 1.4.2008)
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