SEBI settlement does not bar stock exchanges from imposing independent SOP fines.

Hindustan Foods Limited was a listed company. Under Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), at least half of its eight-member Board was required to comprise Independent Directors.

The Company was non-compliant with this requirement during various periods between 27 August 2018 and 8 November 2022.

In January 2023, the Company applied to SEBI for settlement of the non-compliance and, pursuant to a settlement order dated 10 October 2023, paid ₹24,32,000.

Separately, BSE initiated proceedings for the same violation and, by order dated 10 December 2023, imposed a fine of ₹52,21,500 under the SEBI Circular dated 22 January 2020.

The Company paid the fine under protest and appealed to the Securities Appellate Tribunal, contending that the BSE proceedings were barred by res judicata, double jeopardy and proportionality because the matter had already been settled with SEBI.

Whether BSE could impose a fine for violation of Regulation 17(1)(b) of the LODR Regulations after the Company had settled the same non-compliance with SEBI and paid the settlement amount

Whether the separate proceedings and fine imposed by BSE were barred by the principles of res judicata or double jeopardy

The Tribunal applied Regulation 98(1) of the LODR Regulations, which provides that a listed entity contravening the Regulations is, “in addition to” liability under the securities laws, liable to actions by the respective stock exchange, including imposition of fines, suspension of trading and freezing of promoter holdings.

It relied on the SEBI Circular dated 22 January 2020, particularly clause 7, which states that the prescribed exchange action is without prejudice to SEBI’s power to act under the securities laws.

The Tribunal also considered Section 15JB of the SEBI Act, 1992, governing settlement of administrative and civil proceedings, and the express term in the SEBI settlement order reserving action by recognised stock exchanges under the Circular.

It further relied on Alien Developers Private Limited v. BSE & Another, where it held that regulatory compliances before SEBI and BSE operate in different spheres and that the plea of double jeopardy is untenable.

The Tribunal held that the Company’s settlement with SEBI did not extinguish BSE’s independent regulatory power.

Regulation 98 expressly makes exchange action additional to liability under the securities laws and authorises the stock exchange to impose fines for contravention of the LODR Regulations.

The SEBI Circular similarly preserves SEBI’s statutory powers, while the settlement order specifically stated that it was without prejudice to any action by recognised stock exchanges under the Circular.

Since the Company was bound by the LODR Regulations, the SEBI Circular and the terms of the settlement, the settlement amount paid to SEBI could not prevent BSE from imposing a separate SOP fine.

The Tribunal also rejected res judicata and double jeopardy because SEBI and BSE exercise regulatory powers in distinct spheres; the BSE fine was therefore not a second prosecution or punishment impermissibly imposed for the same purpose.

The Tribunal held that BSE was entitled to impose the fine of ₹52,21,500 notwithstanding the Company’s prior settlement with SEBI and payment of ₹24,32,000.

The pleas of res judicata and double jeopardy were rejected, and the BSE order dated 10 December 2023 was upheld.

Pending interlocutory applications were disposed of, with no order as to costs.