Drafting, Pleadings and Appearances · Adjudications and Appeals under SEBI Laws

Adjudication under SEBI Act and Depositories Act: Officer, Procedure and Penalty

Updated 11 October 2026 · Fact-checked

Adjudication is a quasi-judicial inquiry in which a SEBI officer, not below the rank of Division Chief, decides whether a person broke securities law and what penalty to impose. The officer gives a hearing, can summon witnesses and documents, and must weigh gain, investor loss and repetition of default.

Understand Adjudication under SEBI Act and Depositories Act

SEBI can punish some defaults by a money penalty. A penalty cannot be imposed on a bare allegation. The law requires an inquiry, and the person concerned must get a reasonable opportunity of being heard. That inquiry is called adjudication, and the officer who holds it is the adjudicating officer.

The power comes from three Acts. Each names its penalty sections one by one, not as a continuous range.

Section 15-I(1) of the SEBI Act, 1992 covers sections 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB.
Section 19H(1) of the Depositories Act, 1996 covers sections 19A, 19B, 19C, 19D, 19E, 19F, 19FA and 19G.
Section 23-I(1) of the Securities Contracts (Regulation) Act, 1956 covers sections 23A, 23B, 23C, 23D, 23E, 23F, 23G and 23H.

All three are worded almost the same way. Learn one and you know the other two.

Under each, the Board may appoint any officer not below the rank of a Division Chief as adjudicating officer. The officer holds the inquiry in the prescribed manner, which means under the SEBI procedural rules for adjudication. The officer can summon and enforce the attendance of any person who knows the facts, and can call for any document that is useful or relevant to the inquiry. If satisfied that the person failed to comply with a listed section, the officer may impose the penalty provided by that section.

The quantum is not left to whim. Each Act has a matching section that requires due regard to the same three factors: (a) the disproportionate gain or unfair advantage, wherever quantifiable; (b) the loss caused to an investor or group of investors; (c) the repetitive nature of the default. The scope of each section differs:

Section 15J of the SEBI Act applies to penalties under section 15-I, section 11 or section 11B. It binds the Board as well as the adjudicating officer.
Section 19-I of the Depositories Act applies to penalties under section 19 or section 19H. It also binds the Board as well as the adjudicating officer.
Section 23J of the SCRA applies to penalties under section 12A or section 23-I. It also binds SEBI as well as the adjudicating officer.

There is also a check on the officer. Under section 15-I(3) the Board may call for and examine the record. If it finds the order erroneous to the extent that it is not in the interests of the securities market, it may enhance the penalty after hearing the person. This cannot be done after three months from the date of the adjudicating officer's order or disposal of the appeal, whichever is earlier. Orders are appealable to the Securities Appellate Tribunal, which is a separate topic.

Key rules to remember

Who can adjudicate: Officer not below the rank of Division Chief, appointed by the Board (the word is 'may'); Same in section 15-I(1) SEBI Act, section 19H(1) Depositories Act and section 23-I(1) SCRA.
Sections covered by the power: SEBI Act: 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA, 15HB; Depositories Act: 19A, 19B, 19C, 19D, 19E, 19F, 19FA, 19G; SCRA: 23A, 23B, 23C, 23D, 23E, 23F, 23G, 23H; Do not quote the whole list unless asked. The sections are named individually in each Act, so do not describe them as a continuous range.
Hearing requirement: Inquiry in the prescribed manner + reasonable opportunity of being heard to the person concerned; Without a hearing the penalty order is open to challenge.
Powers during inquiry: Summon and enforce attendance of any person acquainted with the facts; require production of documents useful or relevant to the inquiry; Section 15-I(2), section 19H(2), section 23-I(2).
Penalty factors: (a) disproportionate gain or unfair advantage, if quantifiable; (b) loss to investor or group of investors; (c) repetitive nature of default; Section 15J SEBI Act (penalties under section 15-I, 11 or 11B); section 19-I Depositories Act (section 19 or 19H); section 23J SCRA (section 12A or 23-I). Each binds the Board or SEBI as well as the adjudicating officer. The law says 'due regard', so the officer must record these.
Enhancement of penalty by the Board: Board may enhance if order is erroneous to the extent it is not in the interests of the securities market; hearing is mandatory; not after 3 months from the order or disposal of appeal, whichever is earlier; Section 15-I(3), section 19H(3), section 23-I(3). Section 15-I(3) refers to appeal under section 15T and section 23-I(3) to appeal under section 23L. Section 19H(3), as printed in the supplied text, cites 'section 23A'. Do not treat that as a verified appeal route; in the exam, say only 'disposal of the appeal'.
Punishment for non-payment under SCRA: Section 23M(2): imprisonment not less than one month, up to ten years, or fine up to ₹25 crore, or both; Applies to failure to pay a penalty or comply with a direction or order. Section 23M(1) allows imprisonment up to ten years or fine up to ₹25 crore for contravention where no punishment is provided elsewhere.

How to solve Adjudication under SEBI Act and Depositories Act questions

Use this order for any adjudication question. It follows the paper's pattern of provision, analysis and conclusion.

1Identify the Act. Decide whether the default falls under the SEBI Act, the Depositories Act or the SCRA, and name the adjudication section (15-I, 19H or 23-I).
2State the power to appoint. The Board may appoint an officer not below the rank of Division Chief to hold the inquiry.
3Check procedure on the facts. Was there notice, a reasonable opportunity of being heard, and an inquiry in the prescribed manner? Note any gap.
4Apply the inquiry powers. Mention summoning witnesses and calling for documents where the facts involve missing evidence.
5Apply the three penalty factors one by one to the facts: gain, loss, repetition. Say where a factor is not quantifiable or not present.
6Conclude with the likely order. State that the penalty must follow the relevant penalty section and the factors, and note the Board's power to enhance under sub-section (3) and the appeal route.
7If drafting is asked, prepare the show cause notice or reply in order: facts, alleged violation, provision, relief or reasons.

Quickest way: Provision, facts, factors, remedy

When to use it: Use when a short case question gives limited time and asks what the adjudicating officer can do or how the penalty is decided.

Write the section for the Act in the question and one line on the Division Chief rule.
Write 'hearing first' and tie it to the facts.
List gain, loss and repetition as (a), (b), (c) and tick each against the facts.
Close with Board enhancement within three months of the order or disposal of the appeal, whichever is earlier. Add that the appeal route is covered in the separate appeals topic.

Common mistakes in Adjudication under SEBI Act and Depositories Act

Saying the Board must appoint an adjudicating officer.
Older text used 'shall' and many notes still carry it.
Fix: The sections now say the Board 'may' appoint. Write 'may'.
Mixing up the three sections of the penalty factors.
The wording is identical across the Acts, so students blur the numbers.
Fix: Pair them: SEBI Act 15-I and 15J; Depositories Act 19H and 19-I; SCRA 23-I and 23J.
Listing penalty factors as 'gain, loss, and the size of the company' or similar.
Students add what seems fair instead of what the text says.
Fix: Use only the three statutory factors: disproportionate gain or unfair advantage, loss to investors, repetitive nature.
Forgetting that the gain factor applies only 'wherever quantifiable'.
The qualifier is short and easy to skip.
Fix: Write the phrase. If the gain cannot be quantified, say so and rely on the other factors.
Stating that the Board can enhance the penalty at any time, or without hearing.
Students remember the power but not its conditions.
Fix: State both conditions: opportunity of being heard, and no enhancement after three months from the order or appeal disposal, whichever is earlier.
Treating rank as 'Division Chief or above' without the words 'not below'.
Loose paraphrasing.
Fix: Use the exact phrase 'not below the rank of a Division Chief'.

Worked examples

Example 1

Sunrise Securities Ltd, a stock broker, is alleged to have breached a provision of the SEBI Act for which a penalty is prescribed under one of the sections listed in section 15-I(1). SEBI wants to impose a penalty. Advise on who can decide it and how the inquiry must be conducted.

Show the solution

Provision: under section 15-I(1) of the SEBI Act, the Board may appoint any officer not below the rank of a Division Chief as adjudicating officer to adjudge penalties under the listed sections.
Procedure: the officer must hold an inquiry in the prescribed manner after giving Sunrise Securities Ltd a reasonable opportunity of being heard.
Powers: under section 15-I(2) the officer can summon and enforce the attendance of any person acquainted with the facts and require production of relevant documents.
Decision: if satisfied that the company failed to comply with the relevant section, the officer may impose the penalty provided by that section.
Conclusion: SEBI must act through such an officer, after a hearing, and cannot impose the penalty on the allegation alone.

Answer: A SEBI officer not below the rank of Division Chief, appointed under section 15-I, must hold an inquiry after giving Sunrise Securities Ltd a reasonable hearing. The officer may summon witnesses and documents and, if satisfied of the default, impose the penalty provided by the relevant section.

Example 2

An adjudicating officer finds that a depository participant, Bharat Depository Services Pvt Ltd, repeatedly failed to comply with a Depositories Act obligation. The default earned it a gain of ₹4,00,000 which can be quantified, and caused some investors a loss of ₹2,50,000. Which factors must the officer consider, and can the Board raise the penalty later?

Show the solution

Provision: section 19-I of the Depositories Act requires the Board or the adjudicating officer, when adjudging penalty under section 19 or 19H, to have due regard to three factors.
Factor (a): disproportionate gain or unfair advantage, wherever quantifiable. Here ₹4,00,000 is quantifiable, so the officer should record it.
Factor (b): loss caused to an investor or group of investors. Here ₹2,50,000 is the loss and must be considered.
Factor (c): the repetitive nature of the default. The facts show repeated failure, which weighs towards a higher penalty within the limit of the penalty section.
Enhancement: under section 19H(3) the Board may call for the record. If it finds the order erroneous to the extent that it is not in the interests of the securities market, it may enhance the penalty after hearing the company.
Time limit: this cannot be done after three months from the date of the adjudicating officer's order or disposal of the appeal, whichever is earlier.

Answer: The officer must give due regard to the gain of ₹4,00,000, the investor loss of ₹2,50,000 and the repeated nature of the default under section 19-I. The Board may enhance the penalty under section 19H(3) only after hearing the company and within three months of the order or appeal disposal, whichever is earlier.

Exam tips

Write the section number and the Act together, for example 'section 15-I of the SEBI Act, 1992', so the examiner sees the provision first.
In case questions, apply each of the three penalty factors to the facts by name and do not stop at a general statement.
For drafting questions on a show cause notice or reply, show the order: facts, provision allegedly breached, hearing request, relief. The Act text does not prescribe a notice format, so state that the notice is issued under the prescribed procedure.
Mention the Board's enhancement power and its three-month limit as a closing point; many students skip it.
Link the topic to appeals. Note that the appeal route is covered in the separate appeals topic. In this topic, say only 'disposal of the appeal'. The supplied text cites section 15T for the SEBI Act and section 23L for the SCRA, so use those numbers only for those Acts.

Practice questions from Adjudications and Appeals under SEBI Laws

Adjudication under SEBI Act and Depositories Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalPenalties, Adjudication and Securities Appellate Tribunal

Adjudication under SEBI Act and Depositories Act: frequently asked questions

Who can be appointed as an adjudicating officer under the SEBI Act?

Any officer of SEBI not below the rank of a Division Chief. Section 15-I(1) says the Board may make this appointment for the purpose of adjudging penalties under the listed sections.

What factors must an adjudicating officer consider while fixing the penalty?

Three factors: the disproportionate gain or unfair advantage, wherever quantifiable; the loss caused to an investor or group of investors; and the repetitive nature of the default. They appear in section 15J of the SEBI Act, section 19-I of the Depositories Act and section 23J of the SCRA.

Can SEBI increase a penalty imposed by the adjudicating officer?

Yes. The Board may call for the record and, if the order is erroneous to the extent it is not in the interests of the securities market, enhance the penalty after hearing the person. This cannot be done after three months from the date of the order or disposal of the appeal, whichever is earlier.

Does the adjudicating officer have powers like a court?

Only the powers the Act gives. During the inquiry the officer can summon and enforce attendance of persons acquainted with the facts and require production of relevant documents. The officer must also give a reasonable opportunity of being heard.