Section 15G of the Securities and Exchange Board of India Act, 1992 is the monetary engine that gives the prohibition on insider trading its bite. The conduct it punishes — dealing in securities while in possession of unpublished price-sensitive information, communicating that information, or counselling and procuring another to deal — is defined and elaborated in the SEBI (Prohibition of Insider Trading) Regulations, 2015, but the rupee consequence flows from the parent statute. After the Securities Laws (Amendment) Act, 2014, the penalty is no longer a discretionary trifle: it cannot be less than ten lakh rupees and may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher. This chapter dissects the provision clause by clause, traces its dramatic legislative escalation, and threads through the leading authorities — from Hindustan Lever and Rakesh Agrawal to the Supreme Court's recent recalibration in Abhijit Rajan and Balram Garg — that determine when, and how heavily, the section is triggered.
Where Section 15G sits in the SEBI scheme
Section 15G is housed in Chapter VIA of the SEBI Act, 1992, the cluster of provisions (Sections 15A to 15HB) creating civil monetary penalties for distinct categories of securities-market default. It does not itself define insider trading; rather it imports the conduct prohibited under the insider-trading regime and attaches a money penalty to it. The substantive prohibition — the meaning of an insider, connected person and unpublished price-sensitive information, the bar on trading while in possession of UPSI, and the prohibition on communication or procurement of UPSI — lives in the SEBI (Prohibition of Insider Trading) Regulations, 2015, which replaced the 1992 Regulations.
The reader must grasp the layered architecture from the outset. Insider trading invites three potentially overlapping consequences: a civil penalty under Section 15G adjudicated by an Adjudicating Officer under Section 15-I; remedial and preventive directions under Sections 11, 11B and 11(4), including disgorgement of ill-gotten gains and debarment from the market; and criminal prosecution under Section 24, where contravention can attract imprisonment up to ten years or a fine up to twenty-five crore rupees, or both. Section 15G is therefore only one limb of a tripartite enforcement structure, and an authority's choice between adjudication, direction and prosecution is a recurring theme in the case law.
The bare text of Section 15G
The provision, as it stands after the Securities Laws (Amendment) Act, 2014, reads: "Penalty for insider trading. 15G. If any insider who,— (i) either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price-sensitive information; or (ii) communicates any unpublished price-sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law; or (iii) counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price-sensitive information, shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher."
Three structural features deserve emphasis. First, the chargeable person is an insider — a defined term in the regulations — and not the world at large. Second, the section enumerates three independent forms of conduct (dealing, communicating, and counselling or procuring), so that liability can attach without the insider himself trading a single share. Third, the penalty band is a floor-and-ceiling structure with a profit-multiple override, a design that the 2014 amendment introduced to ensure that the sanction can never be a mere cost of doing business.
The three limbs of liability
Clause (i) targets the classic case: the insider who deals in securities on the basis of UPSI, whether for himself or as a front for another. Clause (ii) reaches the tipper — the person who communicates UPSI to anyone, regardless of whether the recipient asked for it — subject only to the carve-out for communication "required in the ordinary course of business or under any law." Clause (iii) captures the counsellor and procurer, the person who, without trading or strictly tipping, advises or arranges for another to deal on the basis of UPSI.
This tripartite structure mirrors the prohibitions in the 2015 Regulations and was foreshadowed in the early jurisprudence. In Hindustan Lever Ltd. v. SEBI (1998), decided by the Securities Appellate Authority, HLL had purchased eight lakh shares of Brooke Bond Lipton India Ltd. from the Unit Trust of India barely a fortnight before the public announcement of the HLL–BBLIL merger. The Appellate Authority accepted that HLL, with directors common to both companies and a common Unilever parent, possessed information that went beyond mere self-generated knowledge and thus fell within the mischief of dealing while in possession of price-sensitive information — though it modified SEBI's directions on the criminal-prosecution front. The case remains the foundational Indian authority on what counts as an "insider" dealing for the purpose of the penalty regime.
From five thousand rupees to twenty-five crore: the legislative escalation
The penalty under Section 15G has been transformed beyond recognition. As originally enacted, the section exposed an insider to a penalty "not exceeding five thousand rupees" — a figure that, even in the early 1990s, treated insider trading as a minor regulatory lapse. The SEBI (Amendment) Act, 2002 (with effect from 29 October 2002) substituted this with a penalty which could extend to twenty-five crore rupees or three times the amount of profits made, whichever was higher, but without any statutory floor.
The decisive change came with the Securities Laws (Amendment) Act, 2014 (Act 27 of 2014, with effect from 8 September 2014), which inserted the words "which shall not be less than ten lakh rupees but which may extend to." For the first time a mandatory minimum of ten lakh rupees was prescribed, removing the Adjudicating Officer's discretion to impose a token sum. The same 2014 amendment also expanded SEBI's investigative and search-and-seizure arsenal, signalling a legislative intent to treat insider trading as a serious market offence. For the broader story of how the regulatory regime itself matured, see the evolution from the 1992 Regulations.
Decoding the penalty band: floor, ceiling and the profit multiple
The post-2014 band has three moving parts. The floor is a fixed ten lakh rupees. The ceiling is the higher of two figures: a fixed twenty-five crore rupees, or three times the amount of profits made out of insider trading. The profit-multiple is significant because it scales the maximum to the gravity of the gain: where an insider's profits exceed roughly eight crore thirty-three lakh rupees, the "three times profits" limb exceeds the twenty-five crore cap and becomes the operative ceiling.
A persistent point of confusion is the meaning of "profits made out of insider trading." SEBI has generally computed this as the gain realised, or the loss avoided, by reference to the price differential around the publication of the UPSI. The penalty must be distinguished from disgorgement: the penalty is a punitive civil sanction credited to the Consolidated Fund of India under Section 15JA, whereas disgorgement under Sections 11 and 11B is a restitutionary measure stripping the wrongdoer of unjust enrichment. In Dushyant N. Dalal v. SEBI (2017), the Supreme Court confirmed that disgorgement is an equitable, remedial power distinct from penalty, and that SEBI may levy interest on disgorged amounts — underscoring that a wrongdoer can face both disgorgement and a Section 15G penalty for the same conduct without offending any bar on double jeopardy, since the two serve different ends.
Who imposes the penalty: adjudication under Section 15-I
Section 15G does not operate on its own. The penalty is imposed by an Adjudicating Officer appointed under Section 15-I, who holds an inquiry after giving the noticee a reasonable opportunity of being heard, and who may, if satisfied that the person has committed the default, impose "such penalty as he thinks fit in accordance with the provisions of" the relevant penalty section. The 2017 amendment to Section 15-I, introduced through the Finance Act, 2017, empowered SEBI to review and enhance a penalty it considers erroneous, subject to a hearing and a three-month time bar (or disposal of any appeal under Section 15T, whichever is earlier).
An order of the Adjudicating Officer is appealable to the Securities Appellate Tribunal under Section 15T, and a further appeal lies to the Supreme Court under Section 15Z on a question of law. This appellate ladder explains why so much of the substantive law on insider-trading penalties is found not in adjudication orders but in SAT and Supreme Court decisions that test whether the ingredients of the default were ever made out.
Section 15J: the factors that shape the quantum
The quantum of penalty is governed by Section 15J, which directs the Adjudicating Officer, "while adjudging quantum of penalty under section 15-I," to have due regard to: (a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as a result of the default; and (c) the repetitive nature of the default.
The interaction between Section 15J and the mandatory minimum in Section 15G was the central question in Adjudicating Officer, SEBI v. Bhavesh Pabari (decided 28 February 2019). A three-judge bench of the Supreme Court overruled the earlier two-judge decision in SEBI v. Roofit Industries Ltd. (2015), which had read the post-2002 penalty provisions as leaving no discretion once a default was established. The Court in Bhavesh Pabari held that the factors in clauses (a) to (c) of Section 15J are merely illustrative and not exhaustive, so that the Adjudicating Officer retains genuine discretion to calibrate the penalty to the circumstances of the case, even where a statutory floor exists. The decision restored Section 15J to its intended role as a guide to proportionality rather than a dead letter, and remains the leading authority on how the quantum under Section 15G is to be fixed.
The critical phrase: dealing 'on the basis of' UPSI
Clauses (i) and (iii) of Section 15G are triggered only where the dealing is "on the basis of" unpublished price-sensitive information. This phrase has generated the most contested jurisprudence, because it raises the question whether mere possession of UPSI at the time of trading is enough, or whether the prosecution must show that the UPSI actually motivated the trade.
The 2015 Regulations resolved much of this debate prospectively by adopting a possession-based test with enumerated defences (the trade is presumed to be "on the basis of" UPSI if the insider was in possession of it), reversing the earlier inducement-centric formulation. The mechanics of that presumption and its rebuttal — including pre-cleared trading plans — are dealt with in the dedicated chapter on trading while in possession of UPSI. But because the leading Supreme Court authority arose under the 1992 Regulations, the older "motive" debate continues to shape how penalty proceedings are argued.
Abhijit Rajan and the role of motive
In SEBI v. Abhijit Rajan (Civil Appeal No. 1791 of 2020, decided 19 September 2022), the Supreme Court confronted the motive question squarely. Abhijit Rajan was the Chairman and Managing Director of Gammon Infrastructure Projects Ltd. (GIPL). After GIPL's board decided on 9 August 2013 to terminate two shareholders' agreements — information disclosed to the exchanges only on 30 August 2013 — Rajan sold a large block of GIPL shares on 22 August 2013, in the intervening window. SEBI held this to be insider trading under the 1992 Regulations and directed disgorgement; the Securities Appellate Tribunal set the order aside, and SEBI appealed.
The Supreme Court dismissed SEBI's appeal. It reasoned that the terminated contracts were, on the facts, financially burdensome to GIPL, so that their termination was likely to be price-positive; an insider selling ahead of price-positive news was not acting to make an unfair gain. The Court held that while the actual quantum of gain or loss is immaterial to the charge, "the motive for making a gain is essential," and that a person who enters into a transaction that is surely likely to result in a loss to himself cannot be said to be indulging in insider trading. Because Rajan's sale was to rescue the parent company from a financial crisis rather than to encash UPSI, the ingredients were not satisfied and no penalty could follow. Abhijit Rajan is now the principal authority cited by noticees resisting Section 15G penalties on the ground that the impugned trade lacked any profit motive.
Balram Garg and the burden of proof on connected persons
The companion development on the evidentiary side is Balram Garg v. SEBI (2022 INSC 441, decided April 2022). SEBI alleged that Balram Garg, Managing Director of PC Jeweller Ltd., had passed UPSI to relatives who then traded, and SAT had upheld findings of insider trading built largely on the closeness of the family relationship and the timing of trades.
The Supreme Court reversed, holding that a charge of insider trading cannot be sustained on the basis of "preponderance of probabilities" drawn from circumstantial material such as familial proximity alone. SEBI must prove, with cogent evidence, both that the alleged tippee was a "connected person" or an insider and that UPSI was in fact communicated. The Court accepted that the relatives in question were neither financially dependent on nor consulted Garg, and so did not qualify as connected persons or immediate relatives under the regulations. Balram Garg thus raises the evidentiary bar for Section 15G proceedings premised on communication or procurement under clauses (ii) and (iii), and is frequently read alongside Abhijit Rajan as marking a more demanding standard for sustaining insider-trading penalties.
The corporate-purpose and bona fide defences
Even before the 2015 Regulations codified specific defences, the tribunals recognised that not every trade by an insider in possession of UPSI deserves a penalty. In Rakesh Agarwal v. SEBI (2004) 1 CompLJ 193, the Securities Appellate Tribunal considered the conduct of the Managing Director of ABS Industries Ltd., who had arranged purchases of ABS shares through his brother-in-law ahead of the public announcement of Bayer AG's acquisition of a controlling stake. SAT accepted that Agarwal had acted to facilitate the Bayer deal — which was vital to the company's survival — and that any personal gain was incidental to a legitimate corporate purpose. The Tribunal held that acting in the genuine interest of the company could be a defence, though it tempered the relief in light of the technical breach.
A parallel illustration is SEBI v. Samir C. Arora, where SEBI had alleged that the fund manager dealt in Digital GlobalSoft shares while in possession of UPSI; SAT in 2004 set aside SEBI's order, finding the insider-trading allegation unproven and the trades explicable on public information and analyst views. Together these cases show that the existence of UPSI and a contemporaneous trade do not automatically attract a Section 15G penalty — the surrounding purpose, the adequacy of evidence, and the availability of a recognised defence all bear on liability. The codified defences under the 2015 Regulations, examined in the chapter on trading while in possession of UPSI, have since narrowed but not eliminated this inquiry.
Penalty, disgorgement and prosecution: choosing the weapon
Because insider trading can simultaneously attract a Section 15G penalty, disgorgement and debarment under Sections 11 and 11B, and criminal prosecution under Section 24, the same set of facts may travel through more than one forum. The penalty under Section 15G is a civil sanction adjudicated on the civil standard, whereas a Section 24 prosecution before a Special Court requires proof beyond reasonable doubt. Dushyant N. Dalal v. SEBI (2017) clarified that disgorgement is restitutionary and may carry interest, and is conceptually separate from the punitive penalty; the two can coexist.
For aspirants, the examiner's favourite trap is to conflate these remedies. A clean answer distinguishes the punitive money penalty (Section 15G, floor and ceiling, credited to the Consolidated Fund under Section 15JA), the restitutionary disgorgement and market debarment (Sections 11/11B), and the criminal sanction (Section 24, imprisonment and fine). Note too that defaults in mandatory initial and continual disclosures are not penalised under Section 15G at all but under Section 15A, a frequently confused distinction.
Settlement under Section 15JB and the consent mechanism
A noticee facing a Section 15G penalty is not confined to contesting the charge. Section 15JB, read with SEBI's settlement regulations, permits the settlement of administrative and civil proceedings on payment of a settlement amount and, where applicable, without admission or denial of guilt. In practice a substantial share of insider-trading matters is resolved through this consent route rather than through a contested adjudication order, which is why reported decisions on quantum under Section 15G are fewer than the volume of SEBI's enforcement activity might suggest.
Settlement does not, however, oust the statutory framework: the settlement terms are negotiated against the backdrop of the floor of ten lakh rupees and the profit-multiple ceiling, and a failure to comply with settlement terms revives the proceedings. The interplay between the deterrent penalty band and the settlement window is central to understanding how Section 15G actually operates in the market.
Exam takeaways and common errors
For judiciary and CLAT-PG candidates, master five points. First, the current penalty band — minimum ten lakh, maximum the higher of twenty-five crore or three times the profits — and that it is a product of the 2002 and 2014 amendments. Second, the three limbs (dealing, communicating, counselling or procuring), and that liability under clauses (ii) and (iii) does not require the insider to trade. Third, the role of Section 15J after Bhavesh Pabari: its factors are illustrative, and the Adjudicating Officer retains discretion. Fourth, the motive and evidentiary refinements in Abhijit Rajan and Balram Garg. Fifth, the distinction between penalty, disgorgement and prosecution.
Common errors to avoid: confusing Section 15G with Section 15A (disclosure defaults) or 15HA (fraudulent and unfair trade practices); stating the maximum as a flat twenty-five crore without the profit multiple; and assuming that possession of UPSI plus a trade automatically yields a penalty, when the case law on motive, defences and burden of proof shows otherwise. Cross-reference these points with the foundational chapters on key definitions and the hub at SEBI PIT notes to see how the penalty fits the larger regulatory design.
Frequently asked questions
What is the minimum and maximum penalty under Section 15G of the SEBI Act?
After the Securities Laws (Amendment) Act, 2014, the penalty cannot be less than ten lakh rupees and may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher. The minimum floor was introduced in 2014; before that, since the 2002 amendment, there was a ceiling but no statutory minimum.
Does Section 15G define insider trading?
No. Section 15G only attaches a civil monetary penalty to insider trading. The substantive prohibition, and terms such as insider, connected person and unpublished price-sensitive information, are defined in the SEBI (Prohibition of Insider Trading) Regulations, 2015. Section 15G simply punishes an insider who deals on the basis of UPSI, communicates UPSI, or counsels or procures another to deal.
Is motive necessary to attract a penalty under Section 15G?
Under the 1992 Regulations, the Supreme Court in SEBI v. Abhijit Rajan (2022) held that while the actual gain or loss is immaterial, the motive to make an unfair gain is essential, so a person who trades in a way surely likely to cause himself a loss is not an insider trader. The 2015 Regulations adopt a possession-based test with defences, but Abhijit Rajan remains influential in penalty proceedings.
How is the quantum of a Section 15G penalty decided?
The Adjudicating Officer fixes the quantum under Section 15-I, having regard to the Section 15J factors: the disproportionate gain or unfair advantage, the loss caused to investors, and the repetitive nature of the default. In Adjudicating Officer, SEBI v. Bhavesh Pabari (2019), the Supreme Court held these factors are illustrative and not exhaustive, overruling Roofit Industries and restoring genuine discretion to the officer.
What is the difference between a Section 15G penalty and disgorgement?
A Section 15G penalty is a punitive civil sanction credited to the Consolidated Fund of India under Section 15JA. Disgorgement, ordered under Sections 11 and 11B, is a restitutionary remedy that strips the wrongdoer of unjust enrichment and may carry interest, as confirmed in Dushyant N. Dalal v. SEBI (2017). The two are conceptually distinct and can be imposed for the same conduct.
Can a person be penalised under Section 15G without actually trading?
Yes. Clause (ii) penalises an insider who communicates UPSI to any person, and clause (iii) penalises one who counsels or procures another to deal on the basis of UPSI. Neither limb requires the insider to trade. However, after Balram Garg v. SEBI (2022), SEBI must prove communication and connected-person status with cogent evidence, not mere circumstantial inference from family proximity.