The Supreme Court, in the case of Jaykishor Chaturvedi & Etc v Securities and Exchange Board of India (2025), held that interest on unpaid penalties becomes payable from the expiry of the period specified in the original adjudication order, and no separate demand notice is required once liability is crystallised.
The appellants challenged the imposition of interest by the Securities and Exchange Board of India (SEBI). An adjudication order passed in 2014 for violation of regulation Nos. 13(4) and 13(4A), read with 13(5) of the SEBI (Prohibition of Insider Trading) Regulations, 1992, imposed penalties, which were upheld by the Supreme Court in 2019.
In 2022, the SEBI issued demand notices directing payment of penalties with interest at 12% per year from 2014 to 2022. On failure to comply, the SEBI issued attachment notices against bank accounts and other assets. Appeals before the Securities Appellate Tribunal were dismissed.
The court considered section 28A of the Securities and Exchange Board of India Act, 1992 (SEBI Act), introduced in 2013, which provides a recovery mechanism. In default, penalties are treated as arrears, attracting statutory interest under section 220 of the Income Tax Act, 1961 (IT Act). The court held that neither the SEBI Act nor its rules require a separate demand notice once liability is adjudicated.
The next issue was the date from which interest became payable, either from the expiry of the period in the adjudication order (2014) or 30 days from the SEBI’s demand notice (2022). The appellants argued that, under section 156 of the IT Act, interest was payable 30 days after a demand notice. The court rejected this, noting that section 156 is not incorporated in section 28A of the SEBI Act, and that the adjudicating officer may fix the payment period.
The court further observed that, under section 220(1) of the IT Act read with section 28A of the SEBI Act, interest becomes payable when the demand is unmet within the prescribed time. The appellant’s failure rendered them “defaulters” under section 220(4) of the IT Act, justifying accrual of interest from expiry of the period in the adjudication order.
The original order was held to be the statutory trigger for calculating interest. This judgment prevents defaulters from delaying payment by waiting for formal orders.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
