Author: Praduman Mishra

This project explores the concept of disgorgement and its utilisation by the Securities and Exchange Board of India (“SEBI”). The research and analysis done through this research project reveals that SEBI’s rationale for employing disgorgement is based on its ‘equitable’ and ‘remedial’ authority, aiming to recover ill-gotten gains from wrongdoers and restore the situation to its original state. However, this differs from disgorgement practices elsewhere, which aim to strip wrongdoers of their gains without necessarily restoring the status quo.

The author observes that SEBI’s disgorgement orders do not consistently align with its stated justification, as none of the orders of the SEBI, till now, actually return the wrongdoer to their original position. Moreover, disgorgement decisions are made at the discretion of whole-time members (“WTMs”), who hold executive authority within the government. This exercise of public power without clear legislative or judicial boundaries raises significant concerns regarding regulatory governance.

Complicating matters further is the destination of disgorgement proceeds, which are directed to the Investor Protection and Education Fund controlled by the SEBI, unlike penalties that contribute to the Consolidated Fund of India. The findings suggest that SEBI needs to reassess how it conceptualises disgorgement, its underlying objectives, and the procedures governing its application. This analysis of disgorgement has implications beyond India and is pertinent to similar discussions in other jurisdictions, including the United States.