SEBI's authority reaffirmed in procedural adjudication, while PIT Regulations operate independently of Chapter VIA measures.
In a significant development, the Delhi High Court has overturned a decision by a Single Judge concerning procedural irregularities in the adjudication proceedings initiated by the Securities and Exchange Board of India (SEBI) against Amit Jain. The Division Bench, comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, pronounced its judgment on December 11, 2025, upholding SEBI's procedural framework under its Adjudication Rules.
The case revolved around the appointment of an Adjudicating Officer (AO) to probe alleged violations of the SEBI (Prohibition of Insider Trading) Regulations, 1992, and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 by Amit Jain, a shareholder in Himalaya Granites Ltd. The Single Judge had earlier set aside the Show Cause Notice and subsequent adjudication proceedings, citing the absence of a recorded opinion under Rule 3 of the SEBI Adjudication Rules, which he deemed a jurisdictional flaw.
SEBI contended that the Single Judge misinterpreted the procedural requirements, asserting that the appointment of an AO does not constitute a quasi-judicial determination but rather initiates the inquiry process. The Division Bench agreed with SEBI, clarifying that the inquiry under Rule 5 is meant to establish contravention, liability, and penalty, with the AO's appointment merely marking the start of this process.
The judgment underscores the distinction between administrative and adjudicatory actions within SEBI's procedural framework. It reiterates that SEBI's authority to appoint an AO is an administrative step, not requiring a formal opinion, and emphasizes that the adjudication process involves a sequential inquiry to ascertain contravention and liability before determining penalties.
Furthermore, the court affirmed that the PIT Regulations operate independently of SEBI's adjudicatory mechanisms under Chapter VIA of the SEBI Act, 1992. The invocation of proceedings under Chapter VIA does not necessitate prior determination under the PIT Regulations, as remedial or penal measures under Chapter VIA are additional to those under the Regulations.
This ruling provides clarity on the procedural nuances of securities law adjudication and reinforces SEBI's regulatory authority in safeguarding market integrity and investor interests.
Bottom Line:
Securities Law - The procedural framework under SEBI Adjudication Rules mandates a sequential inquiry to ascertain contravention, liability, and penalty imposition. The appointment of an Adjudicating Officer (AO) is an administrative step and does not, at that stage, entail any quasi-judicial determination.
Statutory provision(s): SEBI Act, 1992 Section 15I, SEBI Adjudication Rules, 1995 Rules 3, 4, 5, SEBI (Prohibition of Insider Trading) Regulations, 1992 Regulation 14, Chapter VIA of SEBI Act.
Securities and Exchange Board of India v. Amit Jain, (Delhi)(DB) : Law Finder Doc Id # 2821807
