In A First, SEBI Imposes Criminal Sanction Exercising New-Found Statutory Powers

• SEBI exercises new powers to arrest and commit an individual defaulter to imprisonment;
• The recourse to imprisonment exercised over other measures;
• Exposes the critical need to have guidelines on use of such power by the Recovery Officer.

The Securities and Exchange Board of India ("SEBI"), in a recent order¹ committed an individual defaulter, Mr. Vinod Hingorani, to civil imprisonment for a period of six months or until the dues are paid, for defaulting on payment of monetary penalty imposed on him by SEBI in the past. The said individual was a non-executive chairman of Adam Comsof Limited and Kolar Biotech Limited. SEBI exercised this authority under Rule 77 of Part V of Schedule II of the Income Tax Act, 1961 read with the newly added Section 28A of the SEBI Act, 1992. This is one of the first cases wherein SEBI has exercised its new found statutory powers to arrest a person and impose civil imprisonment.