SAT Quashes SEBI Penalties After IBC Resolution Approval

SAT Bars SEBI Penalties Post-IBC Resolution

In a series of orders dated September 29, 2026, the Securities Appellate Tribunal (SAT), Mumbai, quashed SEBI penalties ranging from Rs. 2 lakh to Rs. 46 lakh imposed on corporate debtors after approval of resolution plans under the Insolvency and Bankruptcy Code (IBC). The Tribunal invoked Sections 31 and 32A of the IBC, which provide for the extinguishment of pre-resolution liabilities and grant limited immunity from regulatory action against the corporate debtor post-approval. SAT reasoned that once a resolution plan is approved by the NCLT, the corporate debtor is shielded from penalties for past violations by entities such as SEBI, as the resolution process results in a fresh start.

Orders in matters concerning Bhushan Power & Steel, DCHL, and other unnamed entities uniformly applied the Monnet Ispat precedent, affirming that post-resolution penalties undermine the object of IBC, which is to facilitate revival of stressed assets. However, SAT clarified that penalties may still be levied against directors, promoters, or management personnel who were personally involved in the violations, even if the corporate entity is absolved. The distinction is crucial: while the company is protected under Section 32A, individuals are not.

For legal practitioners, this line of rulings reinforces the importance of distinguishing liability between corporate entities and office bearers in SEBI enforcement proceedings. It also signals a robust interpretation of IBC’s remedial provisions by SAT, which may influence future regulatory approaches. Advisers in insolvency and securities law should assess exposure of promoters and directors separately, as SEBI may shift focus to individual accountability when corporate liability is extinguished.