SEBI Court Keeps Sandesara Prosecution Alive Even After Supreme Court Settlement
In a development that has drawn attention from legal and market circles alike, a Special SEBI court in Mumbai has refused to close the pending prosecution against Chetan Sandesara and others, even though related matters were previously settled before the Supreme Court. The order clarifies that regulatory proceedings initiated by the Securities and Exchange Board of India (SEBI) can continue independently unless specifically quashed by the apex court.
The ruling has revived focus on how separate regulatory and criminal proceedings can move on parallel tracks. For investors and market participants, such developments are closely watched because they underline the seriousness of compliance and disclosure norms in India’s capital markets. Even when certain investigations are settled, regulatory scrutiny can persist if the regulator’s case stands on independent legal grounds.
The decision signals that settlement in one forum does not automatically translate into closure across all legal or regulatory channels, especially in matters involving securities law and investor protection.
Court Says Supreme Court Orders Did Not Cover SEBI Prosecution
Special SEBI court Judge R.M. Jadhav dismissed applications filed by Chetan Sandesara and co-accused Rajbhushan Omprakash Dixit, who had sought closure of the SEBI case. Their argument relied heavily on Supreme Court orders from November 2025 and December 2025, which quashed multiple investigations involving agencies like the CBI, ED and SFIO after settlement terms were fulfilled.
The accused argued that the apex court had acknowledged full compliance, including payments exceeding Rs 5,100 crore, and had effectively ended all related litigation.
As recorded in the order, the Sandesara side argued:
“Supreme Court has expressly held that ‘quietus has been put to all investigations and litigation’, and has further directed that all investigating agencies shall communicate the decision regarding closure of all proceedings.”
They also claimed that the SEBI proceedings were inseparably linked to the same Global Depository Receipt (GDR) investigations and therefore could not survive on their own.
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SEBI Argues Its GDR Probe Stands on Independent Legal Footing
SEBI strongly opposed the plea, stating that it was not a party before the Supreme Court and that the apex court orders did not specifically refer to or quash SEBI’s complaint. The regulator maintained that its prosecution related to alleged non-compliance with SEBI summons issued during its independent investigation into GDR issuances involving several companies, including Sterling Biotech.
SEBI’s legal stance was clear:
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It investigated seven Indian companies over GDR issuances
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Its probe concluded before SFIO entered the picture
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Prosecution was filed as early as March 1, 2018
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No writ before the Supreme Court dealt with SEBI’s actions
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There was no specific prayer to quash SEBI’s case
SEBI submitted:
“There is no reference of the SEBI complaint in the order passed by Hon’ble Supreme Court. Since SEBI was not heard and the order does not give reference to the SEBI case, the present prosecution cannot be assumed to be quashed.”
This argument emphasized regulatory autonomy and due process.
Judge Underscores Need for Explicit Supreme Court Direction
The Special SEBI court ultimately agreed with the regulator’s view. Judge R.M. Jadhav observed that the Supreme Court orders could not be stretched to cover proceedings that were not explicitly mentioned.
He stated:
“It cannot be construed that the SEBI proceeding is involved in the order of Hon’ble Apex Court… There must be therefore an explicit direction. The trial Court cannot invent or import a so-called doctrine of consequential quashing.”
The court stressed that closure of CBI, ED or SFIO proceedings occurred only because of express Supreme Court directions. In the absence of such clarity for SEBI’s case, the trial court could not assume automatic closure.
With both applications rejected, SEBI is now free to continue its prosecution under its regulatory framework.
Here’s What Happened Today and Why Traders Reacted
While the case does not directly involve listed price-sensitive results, it reinforced the theme of tight regulatory oversight in Indian markets. Traders and investors often track such legal developments because they shape the broader compliance environment.
Traders reacted cautiously because:
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It signals SEBI’s strict stance on compliance
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Regulatory risk remains a key market factor
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Legal overhangs can affect sentiment in related stocks
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It reinforces accountability in capital markets
Even in the absence of immediate price action, such news influences how market participants assess governance standards.
What Impact Could This Have on Markets and Investors?
For the broader market, the ruling strengthens the perception that India’s regulatory framework is assertive and independent. This can be a double-edged sword—while it raises compliance costs for companies, it also improves long-term investor confidence.
Potential positives for investors:
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Stronger regulatory credibility
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Improved market transparency
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Better minority shareholder protection
Points of caution:
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Legal risks can create uncertainty
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Prolonged litigation may affect related entities
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Compliance lapses can attract strict action
For institutional investors, robust regulation is often seen as a positive signal for market integrity.
Regulatory Accountability Emerges as a Key Market Theme
The SEBI court’s decision highlights a broader message: regulatory accountability in Indian markets is tightening, and settlements elsewhere do not guarantee immunity from securities law enforcement. As India’s capital markets deepen and attract global capital, regulatory clarity and enforcement are becoming central to investor confidence.
For market participants, the takeaway is clear—compliance, disclosures and regulatory engagement are not optional. They are fundamental pillars of sustainable market participation.
In the evolving landscape of Indian equities, governance and regulation are increasingly shaping investment decisions alongside earnings and growth. And this case serves as a reminder that the regulator’s lens remains firmly focused on market integrity.
