The Securities Exchange Board of India (“SEBI”), in exercise of powers conferred under Section 11(1) read with Section 28(A) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) vide Circular No. SEBI/HO/RRD_PoD_TPD/P/CIR/2025/05[1] dated January 10, 2025, issued the procedure for seeking waiver or reduction of interest in respect of recovery proceedings initiated for failure to pay penalty (“Circular”). The provisions laid down in this Circular shall come into effect immediately.
I. Introduction:
Section 28(A) of the SEBI Act, Section 23(JB) of the Securities Contracts (Regulation) Act, 1956 (“SCRA”), and Section 19(IB) of the Depositories Act, 1996 (collectively referred to as “Relevant Securities Laws Provisions”) stipulate that, during the recovery of dues, the provisions of Sections 220 to 227, 228(A), 229, 232, along with the Second and Third Schedules of the Income-tax Act, 1961 (“IT Act”), and the Income-tax (Certificate Proceedings) Rules, 1962, as amended from time to time, shall apply with necessary modifications. These provisions are to be treated as if they form part of the relevant abovementioned acts and refer to the amount due under these acts instead of income tax under the IT Act.
Section 220(2) of the IT Act authorizes the Recovery Officer of SEBI to recover the outstanding amount along with applicable interest. Section 220(2A) grants the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner the power to reduce or waive the amount of interest paid or payable.
Accordingly, the Board has delegated the power to waive or reduce the interest levied in recovery proceedings for failure to pay penalties to the competent authority provided hereunder:
(a) The panel of executive directors of SEBI, for amounts of interest less than INR 2,00,00,000 (Indian Rupees Two Crores only).
(b) The panel of whole-time members, in other cases.
Further, the Board has decided that the waiver or reduction of interest shall not apply in the following instances and must be promptly returned:
(a) When interest is imposed on intermediaries for failure to remit fees to the Board, in accordance with respective intermediary regulations.
(b) When interest on the amount directed to be disgorged or refunded is levied, in line with orders issued under sections 11, 11(B), and 11(4) of the SEBI Act.
II. Procedure for Application:
(a) The application for waiver or reduction of interest shall be submitted to the Recovery Officer with jurisdiction over the matter, in the format detailed in Annexure – A of the Circular with all supporting documents that satisfy the requirements under Clauses (i), (ii), and (iii) of Section 220(2A) of the Income-tax Act, 1961.
(b) The application may be filed for the period after the service of the notice of demand and only if the principal amount due under the notice of demand has been fully paid.
(c) The Recovery Officer shall present the complete application, in all respects, to the Competent Authority for consideration.
(d) Further, the order accepting or rejecting the application, either in full or in part, shall be passed within 12 (twelve) months from the end of the month in which the completed application shall be received. However, for pending applications on the date of issuance of this Circular, the order shall be passed within 12 (twelve) months from the end of the month of the Circular’s issuance.
(e) It is clarified that no order rejecting the application, either in full or in part, shall be passed without giving the applicant an opportunity to be heard and any application which is not complete or does not conform to the requirements of this Circular shall be returned to the applicant.
[1] https://www.sebi.gov.in/legal/circulars/jan-2025/procedure-for-seeking-waiver-or-reduction-of-interest-in-respect-of-recovery-proceedings-initiated-for-failure-to-pay-penalty-_90689.html