Section 28B of The Securities and Exchange Board of India Act, 1992
- (1)Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay, if he had not died, in the like manner and to the same extent as the deceased: Provided that, in case of any penalty payable under this Act, a legal representative shall be liable only in case the penalty has been imposed before the death of the deceased person.
- (2)For the purposes of sub-section (1),—
- (a)any proceeding for disgorgement, refund or an action for recovery before the Recovery Officer under this Act, except a proceeding for levy of penalty, initiated against the deceased before his death, shall be deemed to have been initiated against the legal representative, and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased and all the provisions of this Act shall apply accordingly;
- (b)any proceeding for disgorgement, refund or an action for recovery before the Recovery Officer under this Act, except a proceeding for levy of penalty, which could have been initiated against the deceased if he had survived, may be initiated against the legal representative and all the provisions of this Act shall apply accordingly.
- (3)Every legal representative shall be personally liable for any sum payable by him in his capacity as legal representative if, while his liability for such sum remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
- (4)The liability of a legal representative under this section shall be limited to the extent to which the estate of the deceased is capable of meeting the liability. Explanation.—For the purposes of this section “legal representative” means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character, the person on whom the estate devolves on the death of the party so suing or sued.]
Summary
- If a person dies while owing money under the Act, their legal representative must pay the debt from the inherited estate.
- A legal representative is only forced to pay a penalty if that penalty was officially ordered before the person died.
- Most legal cases for refunds or recovering money can simply continue against the representative exactly where they left off.
- The representative only has to pay up to the total value of the property they inherited.
- If the representative sells or gives away the inherited assets before paying the debt, they become personally responsible for the debt up to the value of those sold assets.
Practical examples
FAQ
1. Do I have to pay out of my own pocket if I inherit a debt from my parent?
No, you only have to pay up to the total value of the estate you inherited, unless you wrongly sell or hide the assets before paying the debt.
2. What happens if a penalty process started but the person died before the final order was signed?
The legal representative does not have to pay the penalty. Penalties are only payable if they were completely imposed before death.
3. Who is considered a legal representative?
Anyone who represents the estate in law, or anyone who wrongly interferes with the property of the deceased person.
Test yourself
Q1.Under Section 28B of The Securities and Exchange Board of India Act, 1992, how does a person's death affect a penalty that was being considered against them?
Q2.Under Section 28B of The Securities and Exchange Board of India Act, 1992, what is the maximum financial liability of a legal representative who inherits an estate in a standard situation?
Q3.Under Section 28B of The Securities and Exchange Board of India Act, 1992, under what condition does a legal representative become personally liable for the deceased person's debt out of their own pocket?
Q4.Under Section 28B of The Securities and Exchange Board of India Act, 1992, which type of ongoing legal proceeding CANNOT be initiated or continued against a legal representative after the original person dies?