Introduction

In Jaykishor Chaturvedi & Ors. v. Securities and Exchange Board of India (Civil Appeal Nos. 1551–1553 of 2023; 2025 LiveLaw (SC) 730), the Supreme Court addressed a critical issue: whether interest can be levied retrospectively on unpaid SEBI penalties and whether SEBI is required to issue a separate demand notice post adjudication. The appellants—Jaykishor Chaturvedi and others—had been penalized in 2014 under SEBI’s insider trading regulations (Regulations 13(4), 13(4A), and 13(5)), and were later found defaulting on payment. After the adjudication orders were upheld by the Supreme Court itself, SEBI imposed interest at 12% per annum from 2014 and issued demand notices only in 2022. The appellants challenged: (a) the retrospective application of interest, and (b) whether the demand notices in 2022 were required before levying interest.

Arguments of the Appellants:

The appellants contended:

• No Retrospective Interest

Interest cannot be levied from 2014 because, the appellants argued, SEBI became entitled to charge interest only post issuance of a demand notice. They maintained that without a demand notice, the appellants remained ignorant of any dues and could not be classified as defaulters deserving interest liability.

• Separate Demand Notice Is Mandatory

They emphasized that the adjudication order did not fix a period for payment, and without such a timeframe, no demand crystallized. They relied on SEBI’s procedure and analogies to income-tax practice, asserting that separate demand notices are indispensable before interest liability arises.

• Penal vs. Compensatory Nature

The appellants asserted that interest serves punitive ends, not compensatory ones. Hence, levying interest without clear statutory mandate and due notice is arbitrary and punitive, beyond SEBI’s jurisdiction.

• Nature of Demand Notice

They contended that only the formal demand notices in 2022 could constitute a legally effective demand under Sections 28A and 220 of the Income Tax Act, as incorporated by reference into the SEBI Act; until that date, the appellants were not aware of any outstanding dues.

Arguments of the Respondent (SEBI):

SEBI, backed by the Securities Appellate Tribunal’s dismissal in favor of the respondent, argued:

• Retrospective Interest is Lawful

SEBI pointed to Section 220(1) read with Section 28A of the SEBI Act, which automatically prompts interest upon default, and Explanation 4 to Section 28A, effective from 21 February 2019, confirming that interest accrues from when the amount becomes payable, i.e. immediately after the expiry of the payment period.

• Crystallization through Adjudication Order

SEBI maintained that once an adjudication order specifies a timeline (45 days, in this case), it effectively crystallizes liability and suffices as demand. Therefore, no separate demand notice is necessary post that order.

• Power to Fix Payment Period:

The adjudicating officer, SEBI submitted, has the power to stipulate a payment window. Such stipulation is sufficient to trigger the defaulter’s liability and accrue interest.

• Interest is Compensatory, Not Penal:

SEBI argued that interest is merely compensatory, meant to offset revenue loss due to delayed realization of dues. It does not impose punitive burden, but merely reflects the time value of money and the need to preserve public finance.

• Preventing Revenue Leak and Default Tactics:

Allowing defaulters to await demand notices and indefinitely delay payment undermines SEBI’s ability to enforce its regime and threads the needle for unprecedented violations.

The Court’s Judgment:

A bench comprising Justices JB Pardiwala and R Mahadevan dismissed the appellants’ contentions in totality and upheld SEBI’s position. Their reasoning spanned several key findings:

• Interest Applies Retrospectively:

Relying on Section 28A’s Explanation 4, the Court held that interest accrues from the date the penalty becomes payable—i.e. the day after the expiry of the timeline fixed by the adjudication order. The retrospective application up to the date of actual payment aligns with SEBI’s legal framework. Hence, the accrual date was fixed in 2014, not 2022.

• Adjudication Order Serves as Deemed Demand Notice:

The 45‑day payment period specified in the adjudication order amounts to a deemed demand notice. Consequently, the appellants were defaulters under Section 220(4) of the IT Act, and no separate demand notice by SEBI was mandatory.

• Adjudication Power Includes Payment Terms:

In the SEBI framework, denial to pay within a specified period transforms the adjudication order into a stand‑alone demand. Authorities are empowered to fix payment duration, and such timelines, once lapsed, duly authorize interest.

• Interest is Compensatory:

The Court emphasized interest isn’t punitive but a tool to redress the financial disadvantage suffered by the revenue due to delayed payment. Granting compounding can never be construed as penal: it simply compensates for the time-value loss.

• Demand Notice Does Not Re-Issue Liability:

While acknowledging that SEBI issued demand notices only in 2022, the Court clarified those merely reiterated the binding demand already triggered in 2014. The subsequent demand did not alter liability or create new debt.

• Preventing Defaulters from Gaming the System:

The Court invoked principle: allowing reliance solely on a separate demand notice would let defaulters indefinitely delay payments under pretext of awaiting formal demands—harboring revenue loss and weakening SEBI’s enforcement.

• Statutory Interpretation:

The Court noted Section 156 of the Income Tax Act requires demand notices for tax demands; but since that provision is not mirrored in the SEBI Act, reliance on Income‑tax mechanisms was unwarranted. The adjudication order sufficed as the statutory trigger per Section 220 read with Section 28A.

In their final reckoning, the Court held:

• Liability to pay interest on unpaid penalties accrues from the date the adjudication order’s compliance period expires (i.e. the 46th day after issuance).
• Separate demand notices, once liability crystallized, are redundant—they may reiterate but do not create fresh liability.
• The imposition of 12% interest per annum from 2014 through 2022 is lawful, and SEBI may proceed with enforcement actions, including attachment of accounts.