Capital Market and Securities Laws · Collective Investment Schemes

Section 15D SEBI Act: Penalty for Mutual Fund and CIS Defaults

Updated 11 October 2026 · Fact-checked

Section 15D of the SEBI Act, 1992 penalises persons running collective investment schemes, including mutual funds, who commit listed defaults. The penalty is at least ₹1 lakh, may extend to ₹1 lakh per day of default, and is capped at ₹1 crore. To solve a question, match the facts to clauses (a) to (f), then apply the amount.

Understand Penalties for Defaults under Section 15D

A collective investment scheme (CIS) pools money from investors, manages it on their behalf, and gives them no day-to-day control. Section 11AA of the SEBI Act defines it. The Section expressly includes mutual funds within the phrase "collective investment scheme, including mutual funds" for the purpose of Section 15D. Investors rely on the manager, so the law attaches penalties to defaults.

Section 15D lists six defaults. Each one is a failure by a person who must be, or is, registered with SEBI to run such a scheme. The default may be running a scheme without registration, breaking registration conditions, not applying for listing, not despatching unit certificates, not refunding application money, or not investing the money as the regulations require.

Note what the text lists. It does not name redemption of units as a separate clause. A question on failure to redeem units is therefore tested against the listed clauses, such as breach of registration conditions under clause (b). Do not invent a clause (g). Say which listed clause fits the facts, or state that the facts fit none of them.

The amount is the same in every clause. The penalty shall not be less than ₹1 lakh, may extend to ₹1 lakh for each day the default continues, and is subject to a maximum of ₹1 crore. In clause (a), the daily count runs for each day the person sponsors or carries on the scheme without registration.

Penalties are decided under the SEBI Act's adjudication scheme. Section 15J requires the Board or adjudicating officer to consider the gain made, the loss to investors and whether the default was repeated. Under Section 15JA, all sums realised as penalties are credited to the Consolidated Fund of India.

Key rules to remember

Penalty range under Section 15D: Minimum ₹1,00,000; maximum ₹1,00,000 per day of default; overall cap ₹1,00,00,000; Applies to each of clauses (a) to (f). The penalty is a range, not a fixed sum.
Clause (a): Sponsoring or carrying on a CIS (including a mutual fund) without a certificate of registration; Days counted are those during which the scheme is sponsored or carried on.
Clause (b): Registered CIS fails to comply with the terms and conditions of its certificate of registration; Days counted are those during which the failure continues.
Clauses (c) and (d): (c) no application for listing of schemes; (d) no despatch of unit certificates as per regulations; Both are failures to follow the regulations on listing and despatch.
Clauses (e) and (f): (e) no refund of application money within the specified period; (f) no investment of money collected as specified; Check the regulations for the period or manner. The default is failing to meet it.
Factors for quantum (Section 15J): Gain or unfair advantage + loss to investors + repetitive nature; The adjudicating authority considers these when deciding the amount within the range.
Credit of penalty (Section 15JA): All penalties realised under the Act go to the Consolidated Fund of India; The penalty does not go to SEBI or to investors.

How to solve Penalties for Defaults under Section 15D questions

Use this method for any question on penalties under Section 15D. Write the answer in the order: provision, facts, conclusion.

1Identify the person. Check whether it is a CIS or mutual fund that is registered, or one that should be registered.
2Find the default in the facts and match it to clause (a), (b), (c), (d), (e) or (f) of Section 15D. Name the clause.
3Quote the rule in plain words: the penalty is at least ₹1 lakh, up to ₹1 lakh per day of default, with a maximum of ₹1 crore.
4Count the days if the default continues, and compute days × ₹1 lakh. Then apply the ₹1 crore cap.
5Mention that the actual amount lies within the range and depends on the factors in Section 15J: gain, investor loss and repetition.
6State the conclusion: the clause breached, the maximum possible penalty on the facts, and that realised sums are credited to the Consolidated Fund of India under Section 15JA.

Quickest way: Clause, days, cap

When to use it: Use when a numerical or short-answer question gives a default and a number of days.

Name the clause that fits the default.
Multiply days by ₹1 lakh to get the upper figure.
If the result exceeds ₹1 crore, write ₹1 crore as the maximum.
Write that the penalty cannot be below ₹1 lakh.
Add one line on Section 15J factors and Section 15JA credit.

Common mistakes in Penalties for Defaults under Section 15D

Stating the penalty as a fixed ₹1 lakh per day.
The per-day figure is remembered and the minimum is forgotten.
Fix: Say it is a range: minimum ₹1 lakh, up to ₹1 lakh per day, capped at ₹1 crore.
Forgetting the ₹1 crore ceiling when many days are involved.
Students multiply days by ₹1 lakh and stop there.
Fix: After multiplying, compare with ₹1 crore. Anything above 100 days is capped.
Citing Section 15D for a default that is not in clauses (a) to (f).
Students assume it covers every mutual fund default.
Fix: Match the facts to a listed clause. Section 15E covers asset management companies, and Section 15EA covers AIFs, InvITs and REITs.
Inventing a separate clause for failure to redeem units.
The topic title or search phrase suggests one.
Fix: Use only the clauses in the text. Apply clause (b) if the facts show a breach of registration conditions, and say so.
Saying the penalty is paid to SEBI or to investors.
Students link the penalty to the regulator or to the loss suffered.
Fix: Write that under Section 15JA it is credited to the Consolidated Fund of India.
Ignoring Section 15J in the conclusion.
Students stop once the amount is computed.
Fix: Add that the authority considers gain, investor loss and repetition when fixing the quantum.

Worked examples

Example 1

Sunrise Pooled Investments, an unregistered entity, ran a pooled investment scheme of the kind that needs a SEBI certificate of registration. It operated the scheme for 40 days before SEBI acted. State the maximum penalty under Section 15D.

Show the solution

Provision: under Section 15D(a), a person who must obtain a certificate of registration but sponsors or carries on a CIS without it is liable to a penalty.
Amount: not less than ₹1 lakh, up to ₹1 lakh for each day, with a maximum of ₹1 crore.
Days: the scheme was carried on for 40 days.
Computation: 40 × ₹1,00,000 = ₹40,00,000, which is below the ₹1 crore cap.
Range: the penalty is at least ₹1,00,000 and at most ₹40,00,000.
Quantum: the authority considers gain made, investor loss and repetition under Section 15J.

Answer: Clause (a) applies. The penalty is at least ₹1,00,000 and may extend to ₹40,00,000. The amount is credited to the Consolidated Fund of India.

Example 2

A registered mutual fund fails to refund application money to investors within the period set by the regulations. The failure continues for 150 days. What is the maximum penalty under Section 15D?

Show the solution

Provision: Section 15D(e) applies to a registered CIS, including a mutual fund, that fails to refund application money within the period specified in the regulations.
Amount: at least ₹1 lakh, up to ₹1 lakh per day of continuing failure, capped at ₹1 crore.
Computation: 150 × ₹1,00,000 = ₹1,50,00,000.
Cap: this exceeds ₹1 crore, so the maximum is ₹1 crore.
Factors: under Section 15J, the authority considers the gain, investor loss and repetition within the range.

Answer: Under clause (e), the penalty is at least ₹1,00,000 and the maximum is ₹1,00,00,000, because the per-day total of ₹1,50,00,000 is cut down by the cap.

Exam tips

Learn clauses (a) to (f) as a short list and name the clause in every answer.
Always write the range and the cap. A bare per-day figure loses marks.
In numerical questions, test the cap after multiplying days by ₹1 lakh.
Keep Sections 15D, 15E, 15EA and 15EB separate: mutual funds and CIS, AMCs, AIFs/InvITs/REITs, and investment advisers/research analysts.
Close with the Section 15J factors and Section 15JA credit when the question asks for a full explanation.

Practice questions from Collective Investment Schemes

Penalties for Defaults under Section 15D: frequently asked questions

What is the penalty under Section 15D of the SEBI Act?

It is not less than ₹1 lakh and may extend to ₹1 lakh for each day the default continues, subject to a maximum of ₹1 crore. The same range applies to all six clauses.

Does Section 15D cover failure to redeem units?

The text lists six defaults and redemption is not one of them by name. If the facts show a breach of the conditions of registration, clause (b) can apply. Always match the facts to a listed clause.

Who does Section 15D apply to?

It applies to persons who sponsor or run collective investment schemes, including mutual funds, whether registered or required to be registered. Clause (a) covers those running without registration.

Where does the penalty money go?

Under Section 15JA, all sums realised as penalties under the SEBI Act are credited to the Consolidated Fund of India.

How is the exact amount decided?

Under Section 15J, the Board or adjudicating officer considers the gain or unfair advantage, the loss caused to investors and whether the default was repeated. The amount stays within the Section 15D range.