India’s Securities market code revision should lay down penalty provisions in black and white

Subscribe to enjoy similar stories.India’s securities enforcement framework has long faced a contradiction. Parliament has progressively introduced minimum penalties to strengthen deterrence. At the same time, it has retained broad adjudicatory discretion through mitigating factors.

The coexistence of these two approaches has not produced balance; it has created uncertainty.This fault line resurfaced in the split decision of the Securities Appellate Tribunal (SAT) in Sukhraj Kaur Rajbans vs. Sebi (January 2026). The issue is: where a statute prescribes a minimum penalty, can an adjudicator reduce it below that threshold, or impose none, based on mitigating circumstances? The statutory framework appears, at first glance, to admit little ambiguity.

Several provisions of the Securities and Exchange Board of India (Sebi) Act follow this familiar formulation: “not less than X, but which may extend to Y.” This suggests: fix a minimum floor to ensure deterrence, while allowing discretion within a defined band. Yet, this structure sits alongside Section 15J of the Sebi Act, which requires adjudicating authorities to consider factors such as disproportionate gain, investor loss and the repetitive nature of a default. This is replicated in the Securities Contracts Regulation Act and Depositories Act.

The tension lies in reconciling these provisions. Are mitigating factors relevant only within the statutory range, or do they permit departure from the minimum? The SAT’s split verdict offers two competing answers. The majority adopts a purposive approach, treating Section 15J as a substantive safeguard against disproportionate punishment.