SAT’s Decision in Hindustan Foods Limited v. BSE Limited & Anr.
Introduction
The Securities Appellate Tribunal (“SAT”), in its order dated August 13, 2026 in Hindustan Foods Limited v. BSE Limited & Anr.1 has held that a settlement entered into by a listed entity with the Securities and Exchange Board of India (“SEBI”) does not, in the circumstances of the case, preclude the concerned stock exchange from subsequently imposing a fine for the same underlying non-compliance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”).
The decision concerned non-compliance with Regulation 17(1)(b) of the LODR Regulations which requires that where the chairperson of the board of directors is a non-executive director, at least half of the board must consist of independent directors. The company had settled the matter with SEBI concerning (i) the proviso to Regulation 17(1)(b) and (ii) Regulation 27(2) read with Regulation 4(1)(e), and paid a settlement amount of approximately INR 2.43 million. The BSE Limited (“BSE”) subsequently imposed a fine of approximately INR 5.22 million under the framework prescribed by SEBI for non-compliance with the LODR Regulations. SAT rejected the company’s challenge based on res judicata and double jeopardy.
The decision is significant for listed entities considering settlement with SEBI because it makes clear that the scope of protection afforded by a settlement is determined by the terms of the settlement and the applicable regulatory framework. Where the LODR Regulations expressly contemplate action by stock exchanges “in addition to” action under securities laws, and the settlement order expressly reserves such action, settlement with SEBI will not necessarily bring the regulatory matter to an end.
Key Takeaways
In its order, SAT:
- held that Regulation 98 of the LODR Regulations provides the statutory basis for stock exchange action, explicitly stating that a listed entity in contravention “shall, in addition to liability for action in terms of the securities laws, be liable for action by the respective stock exchange(s),” including imposition of fines;
- relied on the express terms of the settlement order, which recorded that the settlement was “without prejudice” to action, if any, that may be initiated by the recognized stock exchanges under SEBI’s January 22, 20202 circular;
- rejected the argument that settlement with SEBI, by itself, precluded BSE from imposing a fine for the same regulatory non-compliance, noting that the company’s liability to the stock exchange arises from a distinct statutory mechanism operating alongside SEBI’s enforcement jurisdiction; and
- followed its earlier decision in Alien Developers Private Limited v. BSE & Anr.3 (“Alien Developers”) where SAT had observed that regulatory compliances vis-à-vis BSE and SEBI operate in different spheres (though noting that the Alien Developers case also involved the company having furnished a bank guarantee and accepted fines without demur, before changing its stand).
The decision, however, should not be read as establishing that a stock exchange may automatically impose a second sanction following every SEBI settlement. The reasoning is based materially on the statutory scheme under Regulation 98 of the LODR Regulations, the specific scope of the settlement order under the Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018 and, importantly, the express reservation of stock exchange action in the settlement order. The precise terms of any settlement order, the defaults covered by it and the regulatory provision pursuant to which the stock exchange acts, therefore remain materially relevant.
Background
Hindustan Foods Limited (“Company”) is a listed company on the National Stock Exchange of India Limited and BSE. Mr. Shrinivas V. Dempo was appointed as a non-executive non-independent director on September 25, 1999, and subsequently elected chairman. In July 2018, the Company issued 0.4 million equity shares of INR 10 each on a preferential placement basis, with Mr. Shrinivas V. Dempo as one of the two allottees and a promoter. As the chairperson of the board of directors was a non-executive director (and a promoter), the Company was required under Regulation 17(1)(b) of the LODR Regulations to have at least half of its eight-member board, i.e., four directors, as independent directors.
The Company was non-compliant with Regulation 17(1)(b) of the LODR Regulations during different periods between August 27, 2018 and November 8, 2022. In January 2023, the Company approached SEBI for settlement of the non-compliance. A settlement order was subsequently passed on October 10, 2023, pursuant to which the Company paid approximately INR 2.43 million.
Separately, BSE initiated proceedings against the Company for the same non-compliance. The Company challenged BSE’s action, including on the grounds of res judicata and proportionality. BSE nevertheless imposed a fine of approximately INR 5.22 million by an order dated December 10, 2023. The Company paid the fine under protest and appealed to SAT under Section 23L of the Securities Contracts (Regulation) Act, 1956.
The Company’s solitary contention before SAT was that, having already settled the same regulatory issue with SEBI and paid the settlement amount, the imposition of a further fine by BSE was impermissible on the grounds of res judicata and double jeopardy.
SEBI, in response, submitted that settlement under Section 15JB of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) provides immunity only in accordance with the terms of the settlement and that the settlement order in the present case expressly preserved possible action by the recognized stock exchanges. SEBI further relied on Regulation 98 of the LODR Regulations, which provides for action by the respective stock exchange in addition to liability under the securities laws.
Key Points in the SAT’s Judgment
Issue I: Whether settlement with SEBI precluded BSE from imposing a fine for the same non-compliance?
The principal issue before SAT was whether the Company’s settlement with SEBI barred BSE from taking action for the same violation of Regulation 17(1)(b).
SAT rejected the contention. SAT’s analysis centered on Regulation 98(1) of the LODR Regulations, which provides that a listed entity contravening the LODR Regulations shall, “in addition to liability for action in terms of the securities laws,” be liable to action by the respective stock exchange in the manner specified in SEBI circulars or guidelines. The actions expressly contemplated under Regulation 98(1) include the imposition of fines.
By using the words “in addition to,” Regulation 98 makes clear that actions by stock exchange(s) are cumulative and not a substitute for action under the securities laws. SEBI’s January 22, 20204 circular similarly operates within this framework, establishing a structure under which stock exchange(s) impose fines for specified non-compliances under LODR Regulations while preserving SEBI’s independent power to take action under the securities laws.
SAT also referred to clause 7 of SEBI’s January 22, 20205 circular, which states that the provisions of the circular are “without prejudice to the power of SEBI to take action under the securities laws.” The interaction among these three instruments was critical to the outcome: (i) Regulation 98 provides the statutory basis for stock exchange action; (ii) the circular prescribes the operational mechanism; and (iii) the settlement order expressly preserved the exercise of that power in this case.
On the facts before it, SAT therefore regarded the Company’s liability to the stock exchange as arising from a regulatory mechanism that operates alongside, rather than as a subset of SEBI’s enforcement jurisdiction. SAT noted that the Company was bound by the SEBI Act, the LODR Regulations and the circulars issued by SEBI and the stock exchanges.
Issue II: Whether the terms of the settlement order protected the Company from subsequent stock exchange action?
The terms of the settlement order were central to SAT’s conclusion. The settlement order expressly recorded:
“This Settlement Order is without prejudice to action, if any, that may be initiated by the recognized stock exchanges in terms of SEBI Circular SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020.”
SAT placed significant reliance on this provision in reaching its conclusion. The Company, having accepted the settlement on terms that expressly preserved the possibility of stock exchange action, could not subsequently contend that the settlement extinguished BSE’s regulatory jurisdiction in respect of the same non-compliance.
This aspect of the decision is particularly important in the context of settlement strategy for listed entities. Section 15JB(2) of the SEBI Act permits settlement of administrative and civil proceedings on such terms as may be determined in accordance with the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018. The provision therefore does not establish that every settlement confers an unrestricted immunity from other regulatory action. The scope of protection must be assessed by reference to the settlement order and the specific defaults and proceedings covered by it.
The decision consequently indicates that the protective scope of a settlement order cannot be assessed solely by reference to the monetary consideration paid or the underlying contravention. Express reservations of rights in favor of stock exchanges or other regulators may materially limit the extent of the protection afforded by such settlement.
Issue III: Whether the imposition of the BSE fine amounted to double jeopardy or was barred by res judicata?
The Company argued that imposing a further fine for the same non-compliance after payment of the SEBI settlement amount amounted to double jeopardy and was barred by res judicata. SAT rejected the contention.
In reaching this conclusion, SAT relied on its earlier decision in Alien Developers. In that case, SAT had rejected a similar double-jeopardy argument, observing that regulatory compliances vis-à-vis BSE and SEBI “operate in different spheres.” However, SAT also took note of the peculiar facts in Alien Developers, where the appellant had furnished a bank guarantee and accepted fines without demur before changing its stand. SAT expressly applied that principle to the present case, further noting that the Company had voluntarily accepted the settlement order with full knowledge of the preserved rights of the stock exchange.
The present decision reinforces the distinction between SEBI’s regulatory and enforcement functions and the supervisory role of stock exchanges in monitoring listed entity compliance. Where the applicable regulatory framework separately preserves actions by stock exchanges, SEBI’s settlement of a matter does not exhaust the regulatory consequences of the underlying non-compliance.
Implications for Listed Entities
The decision has practical significance for listed entities considering or entering into settlement proceedings with SEBI.
First, a settlement with SEBI should not automatically be regarded as extinguishing exposure to a stock exchange fine. Where the underlying contravention is also one for which the LODR Regulations contemplate action by the stock exchange, separate exposure may remain.
Secondly, the precise terms of the settlement order assume particular significance in determining the scope and effect of the settlement. An express “without prejudice” reservation in favor of the recognized stock exchanges was a material feature of the present case. Listed entities considering settlement should therefore carefully assess which proceedings and regulatory actions are expressly covered by the proposed settlement and which are preserved.
Thirdly, the decision underscores the need to distinguish between the settlement amount payable to SEBI and any fine that may subsequently be imposed by a stock exchange. The two are not necessarily treated as substitutable merely because they arise from the same underlying non-compliance. They represent distinct regulatory consequences arising from distinct legal frameworks.
Fourthly, listed entities should assess stock exchange exposure at the outset of settlement discussions, rather than treating the conclusion of the SEBI settlement process as conclusively resolving all consequences of the underlying default. The present decision provides a clear warning against assuming that settlement with SEBI necessarily brings parallel stock exchange proceedings to an end.
Conclusion
SAT’s decision in Hindustan Foods establishes, on the facts before it, that a listed entity cannot rely on its settlement with SEBI to resist a separate stock exchange fine where the LODR Regulations expressly permit such action and the settlement order itself preserves the stock exchange’s ability to act.
The decision is therefore best understood not as permitting unrestricted duplicate punishment, but as recognizing the distinct statutory and regulatory functions performed by SEBI and recognized stock exchanges within the securities market framework. For listed entities, the practical lesson is that the scope of a settlement must be assessed by reference to its precise terms, the specific defaults covered and the parallel regulatory consequences that the applicable securities laws and SEBI circulars preserve.
1 SAT order dated August 13, 2026 in Appeal No. 178 of 2024
2 Incorporated under Chapter VII of “Master Circular for compliance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities” last updated on January 30, 2026.
3 SAT order dated October 15, 2025 in Appeal No. 232 of 2024.
4 Incorporated under Chapter VII of “Master Circular for compliance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities” last updated on January 30, 2026.
5 Id.
This insight has been authored by Swapneil B. Akut (Partner), Abhishek Singh (Counsel) and Anushka Rungta (Associate). They can be reached on sakut@snrlaw.in, abhisheksingh@snrlaw.in and arungta@snrlaw.in, respectively, for any questions. This insight is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.
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