Penalties for comparable front-running conduct must be proportionate and uniformly imposed.

The appeals challenged the order dated 23 October 2025 passed by the Quasi-Judicial Authority of SEBI under Section 15T of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”).

The appellants’ demat accounts had allegedly been used by Jitendra Kewalramani, an authorised person, as “mule” accounts for front-running trades relating to three large clients.

The appellants did not dispute the findings of liability and confined their challenge to the proportionality of the monetary penalties and debarment imposed upon them.

The penalties ranged from ₹5 lakh to ₹12 lakh, and the debarment periods ranged from one to two years, while the alleged unlawful gains attributed to the appellants ranged from ₹3.87 lakh to ₹11.05 lakh.

The appellants also relied on a subsequent SEBI order in Madhav Stock Vision Pvt. Ltd. v. SEBI, where, despite disgorgement of approximately ₹2.51 crore in a front-running matter, a penalty of ₹5 lakh had been imposed on each noticee.

They further submitted that the principal actor, Kewalramani, had paid the disgorgement amount pursuant to settlement proceedings.

Whether the penalties imposed on the appellants under the SEBI Act were disproportionate and inconsistent with the treatment accorded to noticees in a comparable front-running matter, particularly in light of Section 15J of the SEBI Act?

Whether the period of debarment imposed on the appellants required reduction on the ground of proportionality?

Whether the Tribunal should interfere with the impugned order despite the appellants’ acceptance of the findings on liability?

The Tribunal applied Section 15T of the SEBI Act, which confers appellate jurisdiction on the Securities Appellate Tribunal over orders passed by SEBI authorities.

It considered Section 15J of the SEBI Act, which requires the adjudicating authority to take relevant proportionality factors into account while determining the quantum of penalty, including the disproportionate gain or unfair advantage, loss caused to investors, and the repetitive nature of the default.

The alleged front-running conduct attracted Section 15HA of the SEBI Act, under which penalties may be imposed for fraudulent and unfair trade practices.

The Tribunal also referred to Rahul H. Shah v. SEBI, Appeal No. 83 of 2012, decided on 11 May 2012, relied upon by SEBI for the proposition that name-lending may constitute fraudulent activity.

The governing principle applied by the Tribunal was that regulatory penalties and debarment must be proportionate, consistently imposed, and not arbitrary when compared with similarly situated cases.

The appellants’ acceptance of liability limited the Tribunal’s examination to penalty and debarment.

Although SEBI had stated that the factors under Section 15J were considered in the impugned order, the Tribunal found the sanctions imposed on the appellants to be grossly disproportionate when compared with Madhav Stock Vision, where each noticee received only a ₹5 lakh penalty despite joint disgorgement of approximately ₹2.51 crore.

The Tribunal noted that the noticees in Madhav Stock Vision were described as actively involved in front-running, whereas the appellants’ case was that their accounts had been used as mule accounts.

It further compared the substantially lower alleged gains of the present appellants—up to ₹11.05 lakh—with the penalties of ₹5 lakh to ₹12 lakh and debarment periods of one to two years imposed upon them.

In view of the requirement of uniformity and proportionality in regulatory action, and without disturbing the findings of liability or the remaining directions, the Tribunal held that a uniform penalty of ₹5 lakh and one-year debarment for each appellant would meet the ends of justice.

The Tribunal modified the impugned order insofar as it concerned the appellants by reducing the penalty to ₹5 lakh for each appellant and limiting the period of debarment to one year.

All other portions of the impugned order were left undisturbed; pending interlocutory applications were disposed of, and there was no order as to costs.