Mumbai: In a rare show of self-reflection, India’s top market regulator acknowledged that its own investigations had at times caused undue hardship for the firms it oversees.
A recent regulatory action against investment adviser Alliance Research has exposed procedural complexities in the Securities and Exchange Board of India’s (Sebi) enforcement process, raising questions about fairness and internal coordination.
In October, a Sebi quasi-judicial authority Santosh Shukla described the case as “peculiar and unique,” noting that the initiation of three separate proceedings against Alliance created an internal “deadlock.” The regulator itself flagged lapses in its investigative process, including what it called a “non-application of mind” in one instance.
The action against Alliance Research and its proprietor, Mudassir Hasan, stemmed from a Sebi inspection covering April 2018 to February 2020. It led to an interim debarment in January 2021, later confirmed in July 2022. Allegations included unregistered advisory activities, failure to redress investor grievances, and employees not meeting eligibility criteria.
Rather than issuing a single final order, Sebi pursued three separate tracks, creating confusion within departments on “how to conclude the proceedings.” This deadlock was resolved in March 2025, with a decision to treat each track independently.
Sebi’s self-check
The quasi-judicial orders issued in October addressed both procedural and substantive issues.
The 7 October order imposed a two-month suspension on the adviser, already debarred, while the 10 October order levied a ₹6 lakh penalty for other violations, including operating without registration, failing to inform Sebi of an address change, and employing a barred person. Both orders dismissed charges related to investor grievance delays.
Legal experts see the orders as a potential benchmark for future enforcement. “Running multiple proceedings on the same facts fundamentally contradicts the principles of natural justice,” said Sonam Chandwani, managing partner at KS Legal & Associates. “It not only creates regulatory overreach but also reflects a lack of internal coordination.”
The investigation itself drew scrutiny. One delayed investor complaint was cited as a violation, even though the same client had filed two identical complaints on the same day, and one was resolved. The authority observed: “I am of the firm view that such non application of mind causes irreparable harassment by making allegations and issuing repeated SCNs (show-cause notices).”
Rohit Jain, managing partner at Singhania & Co., said the order could influence future cases. “This order could set a precedent… encouraging adjudicating officers and WTMs (whole-time members) to take a more critical view of investigation reports and not just accept them at face value.”
Sebi’s own procedural delays were also highlighted. In some cases, investor complaints took up to 195 days to be forwarded to Alliance Research, undermining timely resolution and raising questions about fairness.
Tushar Kumar, advocate at the Supreme Court of India, described the approach as constructive. “The language of empathy in this order reflects that evolution,” he said. “It shows that Sebi’s quasi-judicial approach is not only about punishment but also about ensuring that enforcement remains just and balanced.”
Chandwani added that phrases like “irreparable harassment” signal a “maturing approach where Sebi’s adjudicators are willing to weigh fairness alongside deterrence”.
