Predictability and finality sit at the heart of any workable settlement regime. SEBI’s Consultation Paper[1] is a genuine and welcome attempt to strengthen precisely those qualities.
This note poses a few questions in the same constructive spirit.
Can an entity that has already settled a default with SEBI remain exposed to a fine levied by a stock exchange, exercising authority that SEBI itself has delegated, for the identical default?
If the answer is yes, was that residual exposure contemplated? And if it was not, can it be brought inside a single, coherent settlement framework?
Those are the questions examined here, prompted by the Securities Appellate Tribunal’s recent ruling in Hindustan Foods Limited v. BSE & SEBI[2], in the hope that they may assist SEBI as it continues to refine the Settlement Framework.
On 13 August 2026 the Securities Appellate Tribunal (“SAT”) disposed of, in a few crisp paragraphs, a question most listed companies would prefer never to have tested. The following day, 14 August 2026, SEBI published a 79-page Consultation Paper aimed at repairing almost every aspect of the settlement process, except, as events have shown, this one.
The facts of Hindustan Foods Limited v. BSE & SEBI (“Hindustan Foods”) can be stated in two sentences. A board-composition lapse under Regulation 17(1)(b) of the LODR Regulations was settled with the Securities and Exchange Board of India (“SEBI”) for ₹24.32 lakh. BSE thereafter imposed a fine of ₹52.21 lakh for the same default under SEBI’s Standard Operating Procedure (“SOP”) circulars. SAT, reading the words “in addition to” in Regulation 98 of the Listing Obligations and Disclosure Requirements Regulations, 2015 (“LODR”) [3]together with the settlement order’s own recital that preserved exchange action, upheld BSE’s order and rejected the pleas of double jeopardy and res judicata.
Before this is mistaken for a case comment, it is not. What follows is a policy question that the SAT’s decision in Hindustan Foods merely happens to illuminate. The most accurate description is a blind spot: not an error, not a deliberate omission, but simply a corner the Consultation Paper’s attention does not reach.
The Consultation Paper’s stated objective is predictability, a simplified formula, rationalised base amounts, capped aggravating and mitigating factors, a narrower gap between settled and contested outcomes, and an express preference that “settlement is a rule and rejection is an exception.” Each measure is intended to make the settlement path more practical and foreseeable. That is fair, and it deserves recognition as a thoughtful, considered effort.
Yet what becomes of that reform, and of the predictability it seeks, if an entity settles an alleged or perceived default with SEBI, remits the settlement amount, and complies fully, only to remain exposed to an independently calculated stock-exchange fine for the very same default, as Hindustan Foods now demonstrates in plain terms?
Whether such post-settlement exchange exposure will prove frequent or rare is a different enquiry. What Hindustan Foods has made clear is that the blind spot is real and requires SEBI’s attention.
Why does addressing it matter?
It introduces uncertainty and undermines finality even within the securities-law domain. The practical consequence can be illustrated as follows:
An entity comes forward suo motu to settle an LODR violation. The settlement framework rewards early, voluntary disclosure with the lowest multiplier. The entity settles promptly and pays the amount. Yet if the stock exchange thereafter levies its own SOP fine for the identical default, the promise of settlement finality and predictability is left incomplete. The entity is drawn into exchange proceedings that may become protracted litigation, and the total cost and disruption may exceed the benefit the settlement was designed to deliver.
Where the blind spot lurks:
Regulation 98 of the LODR and SEBI SOP Circulars, which delegate enforcement powers to Stock Exchanges, do not themselves create a gap in the finality of settlement. Regulation 98 permits stock-exchange action for a contravention in addition to SEBI action, while the SEBI SOP Circular merely preserves SEBI’s powers under securities laws; neither provides that exchange action must survive a settlement with SEBI.
The gap opens only on SEBI’s own side: as highlighted in Hindustan Foods, the settlement order itself carried a recital that it was “without prejudice” to action that may be initiated by the recognised stock exchanges.
The settlement framework needs to be fixed to promote the predictability SEBI seeks to achieve. If this blind spot (of leaving open the stock exchange fine exposure for identical defaults already settled with SEBI) is addressed in the ongoing consultative exercise, it will provide a great deal of clarity to entities that wish to settle, and counter the fear that may otherwise take root in the minds of those reading Hindustan Foods, which has become something of a buzzword on social media in the listed-company and securities-law space.
This blind spot, a conscious choice?
Hopefully, it is not. If it is instead a conscious choice, SEBI owes itself, and the market, an answer to: what purpose does this choice serve?
SEBI’s settlement framework is meant to achieve predictability and final closure at least in SEBI’s own domain of securities law. If that closure can still be undone by the Stock Exchanges, for identical defaults already settled with SEBI, while sitting entirely within SEBI’s own delegated powers, it is worth re-examining the choice.
What fixing this blind spot would actually cost – would it at all?
Fixing this blind spot would pose no real difficulty; if anything, it aligns squarely with the overhaul that SEBI has itself undertaken from the ground up.
Two suggestive fixes follow:
First: the same settlement order that disposes of a SEBI proceeding for a default could also be drafted to do away with any parallel exchange fine proceedings for the identical default, leaving no scope, and no possibility, of the kind that surfaced in Hindustan Foods.
Alternate: the exchange’s exposure for the same default could be factored into the settlement framework itself along with aggravating factors that shape the settlement amount.
Either way, both fixes converge on the same point, for SEBI and applicants alike: finality and predictability.
The very predictability the Consultation Paper sets out to deliver: a settlement amount that is not just calculated with precision, but final in what it actually costs the applicant. All that is being espoused here is finality. The Paper’s own expanded definition of “specified proceeding” now reaches beyond SEBI and SAT, all the way to appeals pending before the Supreme Court, yet stops short of the exchanges. Why leave the stock exchange outside the purview?
If, for a default, the consequences include a fine that the stock exchange can impose, within the securities laws and under SEBI’s own delegated power, why not cover it within the settlement framework? Why not factor it in? Why leave it open? Leaving it open would mean that, within SEBI’s own securities-law framework, for the same default, SEBI settles its part while leaving the entity to be penalised by the exchange, which would not achieve the very purpose of predictability envisaged in the consultation paper.
SEBI’s Officers already record their proceedings as disposed of once the settlement amount has been paid by an entity[4]. Further, SEBI has also treated disciplinary and penal actions taken by a company as sufficient reason not to impose an additional penalty for the same default, expressly in the interest of finality[5]. If SEBI can withhold levying an additional penalty after a matter has reached closure at the corporate level, it can certainly bring finality and predictability to settlement proceedings.
Why SEBI should consider fixing this blind spot:
In today’s digital domain, the Consultation Paper has not travelled alone. Within days of the order, Hindustan Foods had moved well beyond the law reports, discussed on LinkedIn, in market chat, on compliance desks comparing notes on what a settlement actually buys.
The Consultation Paper is, at its core, a positive push, a genuine attempt to improve the efficacy of settlement as a mechanism entities actually want to use. Hindustan Foods, arriving the day before it, is a counterweight to that. And the two do not weigh equally in the minds of the people SEBI’s Consultative Paper is trying to reach.
At play would be the function of loss aversion: People are affected more by the prospect of a loss than by an equivalent gain, and respond to it more quickly and readily. Set against that tendency, a positive reform sits quietly in a 79-page document, while a negative outcome despite the settlement, as exposed by Hindustan Foods, travels on its own.
Before entities are deterred from seeking settlement, SEBI may swiftly act to address the blind spot, especially when it is exposed by Hindustan Foods.
This piece is offered in the spirit that a settlement mechanism people trust is a shared responsibility, not the regulator’s alone.
[1] SEBI, Consultation Paper on Review of SEBI (Settlement Proceedings) Regulations, 2018 (Aug. 14, 2026), https://www.sebi.gov.in/reports-and-statistics/reports/
[2] Hindustan Foods Ltd. v. BSE Ltd., Appeal No. 178 of 2024 (Sec. Appellate Trib., Aug. 13, 2026)
[3] Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Regulation 98, Gazette of India, pt. III sec. 4 (Sept. 2, 2015)
[4] Settlement Order No. SO/SM/S./2022-23/6873 dated May 13, 2022 in the matter of Minda Industries Limited; Settlement Order Ref. No. Order/VV/GSS/2020-21/9395 dated October 13, 2020 in the matter of Titan Company Limited; Settlement Order No. SO/AK/2024-25/8014 dated March 04, 2025 in the matter of Shri Yashish Dahiya; Settlement Order No. SO/AN/SM/2025-26/8339 dated July 30, 2025 in the matter of AVG Logistics Limited; Settlement Order No. SO/SM/RG/2025-26/8259 dated December 17, 2025 in the matter of inspection of NSDL conducted during FY 2023-24
[5] Adjudication Order No. EAD-2/SS/SK/2018-19/1484 (Sec. & Exch. Bd. of India Oct. 31, 2018) in the matter of Marksans Pharma Ltd.; Adjudication Order No. EAD-2/SS/SK/2018-19/1485–1490 (Sec. & Exch. Bd. of India Oct. 31, 2018) in the matter of Marksans Pharma Ltd.; Adjudication Order No. Order/SV/GD/2023-24/30107–30130 (Sec. & Exch. Bd. of India Mar. 20, 2024) in the matter of Radico Khaitan Ltd.
