• Sara Jain

Scope of Moratorium under Sec. 14: As determined by Securities Appellate Tribunal in Dewan Housing

Updated: Apr 15

Dewan Housing Finance Corporation Ltd. v. SEBI

Securities Appellate Tribunal, Mumbai

Appeal No. 206 of 2020

Author's critical analysis:

The issue considered by the Securities Appellate Tribunal in this matter is clearly related to the interpretation of Section 14 of the IBC, 2016. Given that the adjudicating authorities with respect to matters related to insolvency law are the NCLT and NCLAT (in accordance with Section 60 and 61), a question of the validity of jurisdiction of SEBI and SAT arises.


The Securities and Exchange Board of India (SEBI) imposed a penalty on the appellant under Section 15A(b) and 15HB of the SEBI Act, 1992. Under the same order, it provided for the penalty to be paid within 45 days from the receipt of the order failing which recovery proceedings would be initiated against the appellant.


  1. The appellant is a housing finance company undergoing corporate insolvency resolution process. The moratorium under Section 14 came into force on November 29, 2019.

  2. However a month later, on December 24, 2019, SEBI issued a show cause notice to the appellant demanding an explanation as to why a penalty should not be imposed on it for non-compliance of SEBI (Issue and Listing of Debenture Securities) Regulations, 2008 read with provisions of Companies (Share Capital and Debenture) Rules, 2014 and SEBI LODR Regulations.

  3. The appellant replied to the show cause notice stating that no proceedings could be initiated against it during the moratorium period in accordance with Section 14 of the IBC, 2016.

  4. Nevertheless, a penalty was imposed by SEBI observing that Section 14 could not prevent it from determining the appellant's liability. In other words, it stated that Section 14 would be applicable only to the enforcement and/or recovery of the determined liability and NOT on proceedings entered into for determining the liability.


Whether proceedings for determining liability for an offence can be initiated during the moratorium period under Section 14?


  1. On analysis of Section 14 and various precedents, the Securities Appellate Tribunal held that SEBI did not have any jurisdiction to institute any proceedings against the appellant during the moratorium period.

  2. It further opined that the word 'proceedings' under Section 14(1) had to be given an expansive meaning, and thus, the institution of any proceedings was prohibited during the moratorium period.

  3. Relying on the unambiguous language adopted in Section 14, it was held that the show cause notice, SEBI order, and penalty imposed therein were to be quashed.

113 views0 comments