SEBI Imposes Rs 56 Crore Penalty on Seya Industries Promoters
In a recent order, the Securities and Exchange Board of India (SEBI) has levied one of the heaviest penalties in its history, amounting to Rs 56 crore, on two promoters of Seya Industries. Ashok Ghanshyamdas Rajani and Amrit Ashok Rajani, the Chairman and Managing Director (CMD) and Chief Financial Officer (CFO) of the company, have been directed to each pay Rs 28 crore. SEBI has also instructed the CFO to return over Rs 80 crore that was siphoned off from the company. The penalty follows SEBI’s decision to proceed with regulatory action despite the company’s ongoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC).
Highlights:
SEBI imposed Rs 56 crore penalty on two promoters of Seya Industries.
Rs 80 crore was ordered to be returned by the CFO for siphoned funds.
The penalty was levied despite the company being under CIRP.
Regulatory Action Amidst Insolvency Proceedings
In a complex case that intertwined insolvency proceedings with regulatory enforcement, the noticees in the case attempted to use the moratorium on legal action granted under Section 14 of the IBC to avoid SEBI’s penalties. The interim order by SEBI, issued on March 20, 2023, had been challenged by the Rajani brothers, who cited Section 14 of the IBC, which places a moratorium on the initiation of legal proceedings during the CIRP.
The SEBI order, issued on May 2, 2025, clarified that the moratorium applies only to the company itself (Seya Industries) and does not extend to its directors and promoters. SEBI pointed out that the IBC moratorium prevents legal action only against the company and not its management, meaning that Ashok Rajani and Amrit Rajani could still face penalties for fraudulent activities despite the insolvency proceedings.
Highlights:
IBC moratorium applies only to the company under CIRP, not its directors.
SEBI’s regulatory actions against individual directors and promoters remain valid.
The Rajani brothers used IBC clauses to challenge the penalty order.
The Role of Settlement Discussions in the Case
One unique aspect of this case is that although Seya Industries had entered the CIRP process, the parties involved—Seya Industries and its creditor—had already started discussing a settlement before the National Company Law Tribunal (NCLT) officially admitted the company into insolvency proceedings. These discussions led to the withdrawal and dismissal of the petition before the insolvency process fully took effect. This situation was deemed peculiar by SEBI’s Whole-time Member, Ananth Narayan, who noted that pre-admission settlements did not necessarily protect the company or its directors from ongoing regulatory scrutiny.
Despite these settlements, SEBI’s enforcement proceeded, as it found evidence of fraudulent activity perpetrated by the promoters, notably the diversion of funds from the company to privately-held entities owned by the Rajani family.
Highlights:
Pre-admission settlement discussions did not halt SEBI’s action.
SEBI continued proceedings due to evidence of fraudulent activity.
The case highlights the interplay between insolvency and regulatory oversight.
Directors’ Liability Under SEBI Regulations
The heart of the matter lies in SEBI’s clarification regarding the liability of directors and promoters of a company undergoing CIRP. In the order, SEBI emphasized that directors remain liable for violations of securities laws, including penalties, regardless of the company’s insolvency status. SEBI specifically pointed to the actions of Ashok Rajani and Amrit Rajani in siphoning funds to privately-held companies in which they had personal stakes. These actions were deemed to be orchestrated by the promoters, with the help of their associates.
The regulator noted that such activities could not be protected by the moratorium provided under the IBC, which is designed to give companies a temporary reprieve from creditors during the insolvency process but does not extend to protecting fraudulent activities by company officials.
Highlights:
Directors and promoters remain liable for fraud even under insolvency proceedings.
SEBI held the Rajani brothers accountable for fund diversion to related entities.
The moratorium under IBC does not shield individuals involved in fraudulent practices.
Penalties and Future Liabilities
Another key aspect discussed in the SEBI order was the distinction between past and future liabilities under the IBC moratorium. SEBI explained that the penalty imposed on the directors is considered a future liability, which means it is not subject to the interim moratorium under Section 96 of the IBC. This distinction is important because it establishes that future penalties or actions related to misconduct can still be pursued by regulators, even when the company is under insolvency proceedings.
SEBI’s order firmly established that penalties and legal actions related to the perpetration of fraud can proceed irrespective of the IBC moratorium applied to the company.
Highlights:
Penalties for future liabilities can still be imposed during insolvency proceedings.
The interim moratorium under IBC applies only to existing debts, not future penalties.
SEBI proceeded with the penalty against the directors, acknowledging the fraudulent actions.
