In brief. Disgorgement under Section 11B of the SEBI Act is meant to strip the wrongdoer of the gain made, or the loss averted, by the violation. The 2014 Explanation confirmed the power exists. The method by which SEBI calculates the figure is not codified in a formula and varies with the conduct: profit booked on a trading window, the difference between the manipulated and the counterfactual price, or in some cases the loss the wrongdoer avoided by acting on prohibited information. Because the figure is the regulator's reconstruction of a counterfactual, it is also the part of any large SEBI order most likely to be tested on appeal, and the modern record shows it shrinking on appellate review more often than not.
The chapter you are reading is the operational follow-up to the doctrinal piece on the difference between penalty, disgorgement and refund, which is in Does SEBI Fine You, or Take Back What You Made?. The question here is narrower and more practical: when SEBI quantifies the wrongful gain, how does it actually do the sum, and where is the figure most exposed?
Where does the disgorgement power come from?
Sections 11 and 11B of the SEBI Act, read with the Explanation inserted by the Securities Laws (Amendment) Act, 2014 with retrospective effect from 18 July 2013, confirm that SEBI can direct disgorgement of an amount equivalent to the wrongful gain or loss averted.1 Crucially, disgorgement is restitutionary rather than penal, so it is not capped by the Section 15 family and is measured by the gain itself rather than by a statutory ceiling. The statutory architecture is set out in What Are SEBI's Real Powers?.
What does SEBI actually calculate?
The wrongful gain, with interest, on the regulator's reconstruction of the counterfactual. The reconstruction takes different shapes for different conduct. In a manipulation case, SEBI typically calculates the profit booked on the trades attributable to the manipulation, often quantified as the difference between the price actually realised and a counterfactual price absent the manipulation. In an insider-trading case, the figure is usually the profit avoided or made on trades placed while in possession of UPSI, computed against the post-disclosure price. In a fraudulent public-issue case, the wrongful gain is, in substance, the entire amount raised from investors in violation of the issue regime, against which Sahara is the worked example.
Why is the counterfactual the hard part?
Because there is no observable record of what the price would have been if the violation had not occurred. The regulator's reconstruction has to assume a but-for world, and that assumption is the part of the calculation an appellate forum can most directly test. SAT routinely interrogates the assumptions underlying SEBI's counterfactual: was the manipulation actually the cause of the price impact, was the chosen reference price the right one, were ancillary market events filtered out. The more contested the counterfactual, the more vulnerable the disgorgement figure.
What examples show the figure shrinking on appeal?
Several large modern matters. In Satyam, SEBI's original disgorgement direction of approximately ₹813 crore was set aside by SAT and, on re-adjudication, reduced to approximately ₹622 crore, the story told in What Did the Satyam Fraud Teach Indian Securities Law?. In the NSE Co-location matter, the principal ₹625 crore disgorgement direction against NSE was set aside by SAT in 2023, and on SEBI's re-adjudication in September 2024 the charges were dropped against NSE entirely, with only approximately ₹85 crore directed against the broker OPG Securities, as told in What Was the NSE Co-location Case, and What Did It Actually Find?. In Franklin Templeton, the ₹512 crore management-fee refund direction was moderated by SAT to a ₹250 crore escrow deposit, as told in Why Did Franklin Templeton Have to Wind Up Six Debt Schemes Overnight?. The pattern is not invariable; in the RPL matter, SAT upheld SEBI's ₹447 crore disgorgement direction with 12 per cent interest, although the matter is now pending at the Supreme Court, as told in Did Reliance Manipulate Its Own RPL Share Price in 2007?.
What about the interest component?
Disgorgement directions typically carry interest, often at 12 per cent or 15 per cent per annum from the date the wrongful gain was made. In a long-running matter, the interest component can substantially exceed the principal. Sahara's running interest at 15 per cent per annum from 2008-09 is the most prominent example, and it is the principal reason the aggregate deposit demand has grown to approximately ₹25,781 crore, as set out in How Did the Supreme Court Force Sahara to Return Investor Money?. On appeal, the start date and the rate of interest are themselves contestable.
How do you defend against the disgorgement number?
By attacking the inputs. The defence works on three layers. First, the attribution layer: are the trades attributed to the noticee actually the noticee's, and were they actually placed in execution of the alleged violation. Second, the quantification layer: is the counterfactual price the right reference, is the trading window correctly defined, are unrelated market movements properly stripped out. Third, the interest layer: is the start date correct, is the rate justified, and does the matter's history warrant any reduction in the period over which interest runs. The Satyam and NSE arcs show that pressure on any one of these layers can materially reshape the figure.
What does this mean for noticees and for the regulator?
It means the disgorgement figure should never be read as the final number. For noticees, it means the appellate path on disgorgement is more open than the appellate path on the finding of violation itself, and a disciplined appeal that contests the inputs rather than the conclusion has a meaningful chance of moderating the figure. For the regulator, it means the discipline of building a defensible counterfactual at the order stage is what keeps the figure from being slashed later. For the empirical picture of how monetary directions actually translate into recovery across the record, see If SEBI Says You Owe 500 Crore, Does the Money Actually Come Back?.
Sources & citations
- SEBI Act, 1992, Sections 11 and 11B, read with the Explanation inserted by the Securities Laws (Amendment) Act, 2014 with retrospective effect from 18 July 2013, confirming the power to direct disgorgement of an amount equivalent to the wrongful gain made or loss averted.
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. The case-side figures referenced (Satyam, NSE Co-location, Franklin Templeton, RPL, Sahara) are as set out in the linked chapters and as recorded in the underlying SEBI and appellate orders. Last reviewed: 28 May 2026. Spotted an error? Tell us and we will review it.