In brief. A SEBI adjudication proceeding under Section 15-I, read with the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, runs through five recognisable steps: a show-cause notice, the noticee's written reply, a personal hearing before the Adjudicating Officer, written submissions and, finally, a reasoned order. The order can only act on charges the show-cause notice actually put to the noticee. The Supreme Court's decision in T. Takano v. SEBI (2022) confirmed that the noticee is entitled to disclosure of all relevant material relied upon by SEBI, including the investigation report, subject to narrow redactions. Reading those steps in order tells you what to expect at each, and where the order is open to challenge.
The hearing is the part of the SEBI process most clients are anxious about and the one they often least understand. The chapter at How Do You Read a SEBI Order? walks the anatomy of the final order. This chapter walks the process that produces it.
Where does the procedure come from?
From Section 15-I of the SEBI Act, which authorises the Board to appoint an Adjudicating Officer to hold an inquiry and impose penalties for the defaults specified in Sections 15A to 15HB, and from the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, which set out the procedural steps in detail.1 The substantive cap for any given default is in the relevant Section 15 provision; how the AO sizes the penalty within that cap is governed by Section 15J, the subject of How Does SEBI Decide How Much to Fine You?. The architecture of the four enforcement tracks in which adjudication sits is at How Does SEBI Actually Enforce the Law?.
Step one: what does the show-cause notice actually do?
It frames the case. The SCN sets out the alleged violations, the provisions said to have been breached, the material the Adjudicating Officer proposes to rely on, and a deadline by which the noticee must reply showing cause why action should not be taken. The two things to read in any SCN are the charges and the relied-upon material. The charges define the scope of what can survive into the final order; an order that travels beyond the charges in the SCN is open to challenge. The relied-upon material is what the noticee is entitled to inspect and address, the rule that became forceful in T. Takano.2
Step two: how should the reply to a SCN actually be drafted?
As if it were the case itself. The reply is not a placeholder. It is the noticee's first and often best opportunity to deny the alleged conduct, contest the legal characterisation, distinguish or rely on case law, and put the noticee's own evidence on record. A disciplined reply answers each charge separately, addresses each piece of relied-upon material specifically, and identifies any further material the noticee asks SEBI to disclose. The reply is read in the personal hearing, in any subsequent written submissions, and in the Adjudicating Officer's reasoned order; a thin reply is a missed opportunity that does not recover later.
Step three: what happens at the personal hearing?
The noticee, usually represented by counsel, presents the substantive defence to the Adjudicating Officer. The hearing is not adversarial in the criminal sense, but it is the noticee's chance to clarify the reply, address questions from the AO, and make oral submissions on the legal framework. The hearing is recorded in a hearing memo signed by the AO; that memo will be referenced in the final order. Counsel routinely follow the hearing with written submissions consolidating the oral argument and any additional case law cited.
Step four: what about the Takano right to documents?
It runs through the hearing. In T. Takano v. SEBI, decided on 18 February 2022, the Supreme Court held that SEBI must disclose to a noticee the relevant material it has relied upon to arrive at its satisfaction, including the investigation report, and that the test for disclosure is relevance, not SEBI's own assertion of non-reliance.2 Narrow redactions are permitted, but only for third-party personal information and sensitive information about the functioning of the securities market. The practical consequence is that, where the noticee identifies relevant material the SCN did not annex, the proper response is to request it formally, on the record, before the hearing closes. An order that proceeded without disclosing relevant material is exposed on appeal.
Step five: what makes the final order strong or weak?
Reasoning. Section 15J requires the AO, in fixing the penalty, to have due regard to the three statutory factors (disproportionate gain, investor loss, repetitive nature) and, after Adjudicating Officer, SEBI v. Bhavesh Pabari (2019), to any other relevant circumstance.3 An order that recites the factors without engaging them, or that fixes a number without explaining the path from the conduct to the figure, is the textbook target for a SAT appeal. The strong order, conversely, walks the AO's reasoning from charge to evidence to legal framework to factor analysis to quantum, in that order, in language a SAT bench can follow.
What about the timeline?
It varies. A standard matter, from SCN to final order, typically runs over twelve to eighteen months, often longer if disclosure questions, adjournments or remand-related proceedings intervene. Settlement, the off-ramp set out in Can You Settle With SEBI Without Admitting Guilt?, is available throughout. The disciplined practice is to evaluate, at the SCN stage and again after the personal hearing, whether the case warrants contest, settlement or quiet acceptance.
Why does the process matter as much as the substance?
Because procedural failure is, on the modern record, the single most common reason a SEBI order is reduced or set aside on appeal. The chapter at How Do You Win a Penalty Reduction at the Securities Appellate Tribunal? walks the appellate side of that observation; this chapter is the upstream version of the same point. Get the procedure right at the AO level and the substantive case stands on the strongest possible ground. Get the procedure wrong and the substantive case is exposed regardless of its merits.
Sources & citations
- SEBI Act, 1992, Section 15-I (power of the Board to appoint an Adjudicating Officer and to hold an inquiry), read with the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, setting out the procedural steps for adjudication.
- T. Takano v. SEBI, Supreme Court of India, judgment dated 18 February 2022, 2022 SCC OnLine SC 210, holding that SEBI must disclose to a noticee the relevant material it has relied upon, including the investigation report, subject to narrow redactions for third-party and sensitive information.
- Adjudicating Officer, SEBI v. Bhavesh Pabari, Supreme Court of India, judgment dated 28 February 2019, (2019) 5 SCC 90, holding that the factors in Section 15J are illustrative and not exhaustive, and that the Adjudicating Officer retains discretion to consider other relevant circumstances in fixing the quantum of penalty.
About this article. Part of Legal Wires' SEBI Enforcement series, an analytical guide to India's securities enforcement record. This is general information and commentary, not legal advice; do not rely on it for any specific matter. Prepared with AI assistance and reviewed by the Legal Wires editorial team. Statutory provisions and judgments are cited above. Last reviewed: 28 May 2026. Spotted an error? Tell us and we will review it.