Section 23JB of The Securities Contracts (Regulation) Act, 1956
1[23JB. Recovery of amounts.--(1) If a person fails to pay the penalty imposed 2[under this Act] or fails to comply with a direction of disgorgement order issued under section 12A or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:--
- (a)attachment and sale of the person's movable property;
- (b)attachment of the person's bank accounts;
- (c)attachment and sale of the person's immovable property;
- (d)arrest of the person and his detention in prison;
- (e)appointing a receiver for the management of the person's movable and immovable properties, and for this purpose, the provisions of sections 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961(43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961. Explanation 1.--For the purposes of this sub-section, the person's movable or immovable property or monies held in bank accounts shall include any property or monies held in bank accounts which has been transferred, directly or indirectly on or after the date when the amount specified in certificate had become due, by the person to his spouse or minor child or son's wife or son's minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or his son's minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son's minor child, as the case may be, continue to be included in the person's movable or immovable property or monies held in bank accounts for recovering any amount due from the person under this Act. Explanation 2.--Any reference under the provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962 to the assessee shall be construed as a reference to the person specified in the certificate. Explanation 3.--Any reference to appeal in Chapter XVIID and the Second Schedule to the Incometax Act, 1961(43 of 1961), shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 23L of this Act.
- (2)The Recovery Officer shall be empowered to seek the assistance of the local district administration while exercising the powers under sub-section (1).
- (3)Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (7), pursuant to non-compliance with any direction issued by the Board under section 12A, shall have precedence over any other claim against such person.
- (4)For the purposes of sub-sections (1), (2) and (3), the expression Recovery Officer means any officer of the Board who may be authorised, by general or special order in writing to exercise the powers of a Recovery Officer.
Summary
- If someone fails to pay a penalty, fails to follow a disgorgement order under Section 12A, or fails to pay fees to SEBI, their money can be recovered by force.
- A Recovery Officer signs a certificate showing the exact amount owed and starts recovery actions.
- The officer can seize and sell movable and immovable property, freeze bank accounts, arrest and jail the debtor, or appoint a receiver to manage their assets.
- The recovery process follows the rules of the Income-tax Act, 1961, treating the debtor like a tax defaulter.
- If the debtor transferred assets without proper payment to a spouse, minor child, son's wife, or grandchild after the debt became due, those assets can still be seized.
- The Recovery Officer can demand help from the local district administration to carry out these duties.
- When recovering money because a SEBI order under Section 12A was ignored, this claim takes priority over all other claims against the person.
Practical examples
FAQ
1. What triggers a recovery action under Section 23JB?
It is triggered when a person fails to pay a penalty under the Act, fails to comply with a disgorgement order under Section 12A, or fails to pay fees owed to SEBI.
2. Can a Recovery Officer arrest a person who owes money?
Yes, one of the legal modes of recovery is the arrest of the person and their detention in prison.
3. What happens if the debtor transferred property to their family to avoid paying?
If property or money was transferred after the debt was due to a spouse, minor child, son's wife, or son's minor child without adequate payment, the Recovery Officer can still seize those assets.
4. Does the recovery of disgorgement under Section 12A have any special priority?
Yes, the recovery of amounts due to non-compliance with a Section 12A direction takes precedence over any other claims against that person.
5. Who can help the Recovery Officer during asset seizure?
The Recovery Officer is legally empowered to seek and receive assistance from the local district administration.
Test yourself
Q1.Under Section 23JB of The Securities Contracts (Regulation) Act, 1956, which of the following is NOT a permissible mode of recovering unpaid amounts?
Q2.Under Section 23JB of The Securities Contracts (Regulation) Act, 1956, if a person transfers their bank balance to their minor child after a penalty certificate is issued, how does the law treat this transfer?
Q3.Under Section 23JB of The Securities Contracts (Regulation) Act, 1956, what priority is given to the recovery of amounts resulting from a violation of SEBI directions under Section 12A?
Q4.Under Section 23JB of The Securities Contracts (Regulation) Act, 1956, whose assistance can the Recovery Officer seek when carrying out recovery actions?