Section 23M of The Securities Contracts (Regulation) Act, 1956
- (1)Without prejudice to any award of penalty by the adjudicating officer 1[or the Securities and Exchange Board of India] under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations or byelaws made thereunder, for which no punishment is provided elsewhere in this Act, he shall be punishable with imprisonment for a term which may extend to ten years, or with fine, which may extend to twentyfive crore rupees or with both.
- (2)If any person fails to pay the penalty imposed by the adjudicating officer 1[or the Securities and Exchange Board of India] or fails to comply with 2[the direction or order], he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees, or with both.
Summary
- If a person breaks, tries to break, or helps someone else break any provisions of this Act, rules, regulations, or bye-laws, and no separate punishment is specified elsewhere, it is a criminal offence.
- The punishment for these general violations can include a jail term of up to ten years, a fine of up to twenty five crore rupees, or both.
- If a person fails to pay a penalty imposed on them or fails to follow any direction or order, they face a mandatory minimum jail term of one month, which can extend up to ten years, a fine of up to twenty five crore rupees, or both.
- These criminal prosecutions can happen in addition to and separate from any administrative penalties imposed by SEBI or an adjudicating officer.
Practical examples
FAQ
1. What is the maximum punishment under Section 23M for a general violation of the Act?
The maximum punishment is imprisonment for a term of up to ten years, a fine of up to twenty five crore rupees, or both.
2. What happens if I fail to pay a penalty imposed by SEBI or the adjudicating officer?
You can face a criminal prosecution with a mandatory minimum jail sentence of one month, which can go up to ten years, or a fine of up to twenty five crore rupees, or both.
Test yourself
Q1.Under Section 23M(1) of The Securities Contracts (Regulation) Act, 1956, what is the maximum prison sentence that can be imposed for a general contravention of the Act, its rules, or bye-laws for which no punishment is provided elsewhere?
Q2.Under Section 23M(2) of The Securities Contracts (Regulation) Act, 1956, what is the mandatory minimum prison sentence for failing to pay a penalty imposed by SEBI or the adjudicating officer?
Q3.Under Section 23M of The Securities Contracts (Regulation) Act, 1956, who can be prosecuted for a violation besides the person who directly commits the contravention?
Q4.Under Section 23M of The Securities Contracts (Regulation) Act, 1956, what is the relationship between criminal prosecution in court and administrative penalties under the Act?