In brief. When SEBI penalises a market participant, the rupee figure can swing from ₹1 lakh to ₹25 crore for conduct that, on paper, looks almost identical. The provision meant to discipline that swing is a single sentence: Section 15J of the SEBI Act, 1992. This is the story of how three short factors became the battleground for one of Indian securities law's longest fights, the question of whether a regulatory penalty is a mechanical sum or a reasoned judgment. The answer lurched from judgment to arithmetic and back, through a 2015 Supreme Court ruling that forced ₹1 crore fines for trivial delays, an Act of Parliament in 2017, and a three-judge bench in 2019 that finally settled it.
Two listed companies file the same disclosure 100 days late. Neither delay misled a single investor; neither promoter made a rupee from the lapse. Under one reading of the law, each pays ₹1 lakh. Under another, each pays ₹1 crore, a hundredfold difference for identical, harmless conduct. For most of the last two decades, which of those two worlds you lived in depended not on what you did, but on how a court happened to read one sentence of the SEBI Act. That sentence is Section 15J.
Why does the size of a SEBI penalty matter as much as the finding itself?
In enforcement, the headline is the finding: "SEBI holds X liable for fraudulent trading." But the consequence lives in the quantum. A finding without a proportionate number is toothless; a number without principle is arbitrary power. The SEBI Act splits the job in two. Section 15-I says who decides a penalty, the Adjudicating Officer, sitting in a quasi-judicial proceeding. Section 15J says how much, or more precisely, what the Adjudicating Officer must think about before fixing the figure.1 Everything that makes a penalty feel fair, or feel like a shakedown, is concentrated in that second question.
What does Section 15J actually say?
Section 15J directs the Adjudicating Officer, while adjudging the quantum of penalty, to "have due regard to" three factors:2
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.
Notice what this is not. It is not a formula. It hands the officer no multiplier and no table. It names three considerations, roughly: what did you gain, whom did you hurt, and have you done this before. Then it trusts a reasoned mind to weigh them. That trust is exactly what would later be fought over.
So is a SEBI penalty a reasoned judgment, or a mechanical figure?
For years the working assumption was judgment. An Adjudicating Officer who imposed a large penalty on a first-time, no-gain, no-loss defaulter could expect the Securities Appellate Tribunal (SAT) to ask why the 15J factors had not pulled the number down. Quantum was something you argued. Then, in late 2015, the Supreme Court appeared to say the opposite, and the assumption collapsed.
How did the Roofit decision turn penalties into arithmetic?
In SEBI v. Roofit Industries Ltd, decided on 26 November 2015, the Supreme Court read the version of Section 15A(a) in force between 2002 and 2014 as an absolute command. That version set a penalty of "one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less."3 On the Court's reading, the Adjudicating Officer had no discretion at all: multiply ₹1 lakh by the number of days, stop at the ₹1 crore ceiling, and treat the 15J factors as simply irrelevant.
The real-world effect was immediate and harsh. A disclosure delayed by more than a hundred days hit the ceiling automatically, so SEBI found itself issuing ₹1 crore penalties for paperwork that was late but harmless, with no investor misled and no gain pocketed.3 A provision written to guide proportionality had been read to abolish it. Practitioners watched routine disclosure defaults attract fraud-scale numbers, and the obvious question hung in the air: could that really be what Parliament meant?
Could Parliament fix what a court had read into the statute?
It did, twice over. The Securities Laws (Amendment) Act, 2014 had already begun restructuring the penalty sections, converting rigid amounts into ceilings the officer works up to. The cap for fraudulent and unfair trade practices under Section 15HA, for instance, rose to ₹25 crore or three times the profit made, whichever is higher.4 A ceiling, by definition, implies a judgment about where beneath it to land, and that judgment is Section 15J's work.
Then Parliament addressed the Roofit window head-on. The Finance Act, 2017 inserted an Explanation into Section 15J declaring that the Adjudicating Officer's power to fix penalty under Sections 15A to 15HA "shall be and shall always be deemed to have been exercised under the provisions of this section."5 In plain terms, 15J discretion was always there, including for the 2002 to 2014 defaults that Roofit had treated as mechanical. Parliament had effectively told the courts they had misread the statute, and said so retrospectively.
How did the Supreme Court finally settle it in Bhavesh Pabari?
The courts got there too. A two-judge bench, doubting Roofit, referred the question to a larger bench. In Adjudicating Officer, SEBI v. Bhavesh Pabari, decided on 28 February 2019, a three-judge bench held that clauses (a), (b) and (c) of Section 15J are illustrative, not exhaustive.6 The Adjudicating Officer must weigh those factors where they exist, but is not confined to them and is not stripped of discretion; other relevant circumstances may be considered too. Roofit's no-discretion reading was disapproved, and 15J was held to have applied to Section 15A(a) defaults throughout the contested window.6 The penalty became, once again, a reasoned judgment rather than a sum.
What does this mean when you are actually defending a SEBI penalty?
Section 15J is the single most reliable lever a noticee has on quantum, and after Bhavesh Pabari it is unambiguously available. The disciplined argument runs through the three factors and beyond them: there was no quantifiable disproportionate gain; no investor loss has been shown; the default is a first occurrence, not part of a pattern; and any genuinely mitigating circumstance, such as prompt cure, cooperation, or a technical rather than deliberate breach, is a permissible "other" factor the officer may weigh.
The flip side is procedural, and it is where many penalties fall on appeal. An Adjudicating Officer who fixes a number without visibly engaging the 15J factors leaves the order open to challenge for non-application of mind. SAT routinely reduces or remands penalties imposed without that reasoning. The lesson cuts both ways: for the regulator, record the 15J analysis; for the defence, demand it.
Why should a single sentence carry this much weight?
Because Section 15J is the rule-of-law check on a regulator's power to punish. It is the difference between an authority that fines by formula and one that must justify proportionality, an authority that must look at gain, harm and history before it reaches for a number. The decade-long fight from Roofit to Bhavesh Pabari was never really about disclosure delays or rupee ceilings. It was about whether regulatory punishment in India is mechanical or reasoned. The settled answer, that it is reasoned, is why the size of a SEBI penalty is, today, something you can argue rather than merely suffer. For the empirical backdrop of how these penalties actually fall across the enforcement record, see our data study, How Does India's Securities Regulator Actually Work?
Sources & citations
- SEBI Act, 1992, ss. 15-I (power to adjudicate) and 15J (factors to be taken into account while adjudging quantum of penalty).
- SEBI Act, 1992, s. 15J, clauses (a) to (c).
- Chairman, SEBI v. Roofit Industries Ltd, Supreme Court of India, judgment dated 26 November 2015, reported at 2015 (12) SCALE 642, holding the pre-2014 Section 15A(a) penalty non-discretionary.
- Securities Laws (Amendment) Act, 2014, restructuring of the penalty provisions, including the Section 15HA cap of ₹25 crore or three times the profit, whichever is higher.
- Finance Act, 2017, Explanation inserted into Section 15J of the SEBI Act, clarifying retrospectively that the Adjudicating Officer's power under Sections 15A to 15HA is exercised under Section 15J.
- Adjudicating Officer, SEBI v. Bhavesh Pabari, Supreme Court of India, judgment dated 28 February 2019, (2019) 5 SCC 90, holding the Section 15J factors illustrative, not exhaustive, and disapproving Roofit.
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. Judgments and statutory provisions are cited above; where SEBI findings are described, they are the regulator's findings or allegations as recorded in its orders and, where applicable, as modified on appeal. Last reviewed: 27 May 2026.
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