Securities Law Research Project - Poorna Poovamma K.M.

GUJARAT NATIONAL LAW UNIVERSITY
HONOURS COURSE III: SECURITIES LAW
CONTINUOUS EVALUATION, MARCH 2022
RESEARCH PROJECT ON
THE EVOLUTION OF THE SEBI SETTLEMENT PROCEEDINGS REGULATIONS AND ITS

IMPACT ON THE SECURITIES MARKET
PREPARED BY: SUBMITTED TO:

NAME: POORNA POOVAMMA K.M. DR. DIVYA TYAGI
SEMESTER: VIII ASST. PROF. OF LAW, GNLU
COURSE: B.A., LL. B. (HONS.)
Page 1 of 18
TABLE OF CONTENTS
1. ACKNOWLEDGEMENT…………………………………………………………………..
3
2. BACKGROUND &
INTRODUCTION……………………………………………………...4
3. THE RECOMMENDATIONS OF THE HIGH LEVEL COMMITTEE, THE SETTLEMENT
REGULATIONS 2018 AND SUBSEQUENT
AMENDMENTS…………………………………..6
4. SETTLEMENT PROCEDURE UNDER THE SETTLEMENT REGULATIONS

2018………………………………………………..........................................................
.....10
5. AMENDMENT REGULATIONS 2022 AND ITS COMPARISON WITH THE SETTLEMENT
REGULATIONS
2018…………………………………………………………………....11
6. ANALYSIS OF THE AMENDMENT REGULATIONS 2022 AND ITS IMPACT ON THE
SECURITIES
MARKET……………………………………………………………………………….1
3
7. RECOMMENDATIONS & CONCLUSION…………………………………………………
15
8. BIBLIOGRAPHY…………………………………………………………………….......1
7
9.
Page 2 of 18
ACKNOWLEDGEMENT
I would like to thank Dr. Divya Tyagi, Assistant Professor of Law, GNLU for giving me an
opportunity to undertake this research project. I would also like to extend my gratitude to all
those who gave me valuable insight in preparing the project.
Furthermore, I am thankful to the facility of E-library provided by the university that helped
me immensely in the course of writing this paper.
Page 3 of 18
I. BACKGROUND AND INTRODUCTION
Settlement mechanism in the context of the securities market in India is simply put, the
settlement of a pending case wherein, the alleged offender reaches a settlement with the
regulator by the payment what is known as the settlement fee or settlement amount. 1 It can, in
simple words, be considered as alternate mechanism to devise an ending to pending
litigation.2
The 2007 Circular
The very first instance of a settlement mechanism in the Indian securities market was
introduced by the Securities and Exchange Board of India (“SEBI”) through issuing a
circular dated 10 April, 2007 (“2007 Circular”) which provided for the concept of consent
orders wherein the objective was to reach at a settlement between the alleged offender and
the regulator by means of consent by both the parties in order to work towards market interest
in a manner wherein both the alleged offender and the regulator would not be at a
disadvantage.3
The Settlement Regulations 2014
The 2007 Circular was amended in 2012 wherein, guidelines were issued for establishing a
mechanism for reaching settlement terms with an aim to balance and maintain the trust of the
public in the securities market while also hoping the guidelines to act as a disincentive to
probable offenders.4 However, it was only in the SEBI (Settlement of Administrative and
Civil Proceedings) Regulations, 2014 (“Settlement Regulations 2014”) that the settlement
mechanism found a comprehensive and express mention.5
The Settlement Regulations 2014 was essential in clarifying the ambiguity regarding the
legality of the settlement mechanism. 6 A now notable feature of the Settlement Regulations
2014 is that it excluded certain violations such as insider trading and fraud from the scope of
1
ENS Economic Bureau, ‘Settlement Orders: SEBI forms high-powered advisory panel’ (The Indian Express,
16 October 2021) <https://indianexpress.com/article/business/settlement-orders-sebi-forms-high-powered-
advisory-panel-7574202/> accessed 31 March 2022.
2
Gazal Rawal and Rutu Gandhi, ‘Amendments to SEBI Settlement Regime- A Snapshot’ (India Corporate
Law, 25 January 2022) <https://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-
regime-a-snapshot/#_ftn1> accessed 31 March 2022.
3
Sanjay Buch and Devanshi Nanavati, ‘Law Relating to the Securities and Exchange Board of India (Settlement
Proceedings) Regulations 2018’ (International Bar Association) <https://www.ibanet.org/article/FEA8B1A3-
BFE4-4922-9904-1976BDE8E755> accessed 31 March 2022.
4
SEBI, Consultation Paper on Review of the SEBI (Settlement Proceedings) Regulations 2018 (SEBI, 2021)
para 1.1.
5
Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations
2014, No. LAD-NRO/GN/2013-14/37/50.
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the regulations.7 The Settlement Regulations 2014 also allowed for the option for SEBI to
initiate a number of proceedings including criminal, civil, quasi-judicial, settlement,
compounding and recovery.8 The Settlement Regulations 2014 mainly aimed to make the
entire settlement process cost effective on SEBI.9
The High Level Committee Report and its aftermath
A number of loopholes and challenges were highlighted in the Settlement Regulations 2014,
such as- the lack of a settlement process for defaults of new instruments laid down in the
Finance Act 2018, the exclusion of defaults such as fraud, insider trading, open offer defaults
from the Settlement Regulations 2014, the ambiguity wherein settlement along with
composition was needed to be carried out, the lack of a definitive method to calculate profit
or loss, etc.10
This led to the need for the Settlement Regulations 2014 to be revised, and in furtherance of
the same, a High Level Committee under the Chairmanship of Justice Anil R Dave (“High
Level Committee”) which came out a Report in 2018 recommending the Settlement
Regulations 2014 to be repealed and come out with the SEBI (Settlement Proceedings)
Regulations 2018 (“Settlement Regulations 2018”).11 Post the notification of the Settlement
Regulations 2018, amendments to the same were introduced in 2020 and most recently in
2022 in order to make the settlement process more comprehensive, which will be the main
focus of this paper.12
Roadmap
6
Law, 25 January 2022) <httpsx://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-
7
8
Ambika Mehrotra, ‘SEBI Revisits the Settlement Mechanism: Repealing SEBI (Administrative and Civil
proceedings) Regulations 2014’ (Vinod Kothari & Company, 23 July 2020) <https://vinodkothari.com/wp-
content/uploads/2020/07/SEBI_Settlement-Proceedings_2018_1.pdf> accessed 31 March 2022.
9
10
SEBI, Draft Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018 to provide
for settlement of proceedings pursuant to Justice Anil R. Dave Committee Report on Settlement Mechanism
(SEBI).
11
SEBI, Draft Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018 to provide
for settlement of proceedings pursuant to Justice Anil R. Dave Committee Report on Settlement Mechanism
(SEBI) para 4.2.
12
Gazal Rawal and Rutu Gandhi, ‘Amendments to SEBI Settlement Regime- A Snapshot’ ( India Corporate
Page 5 of 18
With this evolutionary background of the settlement mechanism, this paper seeks to review
and analyse the following: a) the recommendations of the High Level Committee and the
Settlement Regulations 2018; b) the revisions brought about in the SEBI (Settlement
Proceedings) (Amendment) Regulations, 2020 (“Amendment Regulations 2020”); c)
settlement procedure under the Settlement Regulations 2018; d) the changes brought by the
SEBI (Settlement Proceedings) (Amendment) Regulations, 2022 (“Amendment Regulations
2022”) and its comparison with the previous Settlement Regulations 2018; e) the analysis of
the Amendment Regulations 2022 and its impact on the securities market; and conclusively,
the author hopes to conclude by providing recommendations and laying down the way
forward for a more effective and wholesome settlement system in the context of the Indian
securities market.
II. THE RECOMMENDATIONS OF THE HIGH LEVEL COMMITTEE, THE
SETTLEMENT REGULATIONS 2018 AND SUBSEQUENT AMENDMENTS
Recommendations of the High Level Committee
On 10 August, 2018, the High Level Committee submitted its report along with
recommendations regarding the settlement mechanism. 13 One of the main recommendations
that the Committee stressed on was the defaults which would not fall under the ambit of the
settlement proceedings; and the Committee took a principle based approach to exclude such
defaults.14
Instead of excluding certain specific defaults from under the ambit of the settlement
mechanism, the Committee recommended that SEBI be given the power to decide not to
settle any alleged default which, in the opinion of SEBI, has the potential to cause an impact
on the market and strikes at its integrity, while also considering the potential loss that may be
suffered by investors.15
Apart from the principle based exclusion, the Committee also recommended that an applicant
who is a wilful defaulter, a fugitive economic offender, or has defaulted in any penalty or
13
High Level Committee under the Chairmanship of Justice Anil R. Dave, Report on the Settlement Mechanism
(SEBI 2018).
14
(SEBI 2018).
15
(SEBI 2018).
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dues imposed under securities laws may not be allowed to settle proceedings by SEBI. 16 In
the Settlement Regulations 2014, settlement proceedings could only be initiated with respect
to violation of provisions of the SEBI Act, 1992, the Securities (Regulation) Act 1956 and the
Depositories Act 1996.17 The Committee recommended to revise this restraint and include
violations of any other law administered by SEBI to fall under the settlement mechanism. 18
Furthermore, to avoid unnecessary litigation and costs, the Committee also recommended for
SEBI to not entertain applications for settlement which had previously been rejected, and also
recommended the inclusion of mass settlement schemes within the regulatory framework. 19
Another recommendation was to include both monetary and non-monetary settlement

options, or both within the settlement mechanism, while also proffering an opportunity to a
person to assist the SEBI in its fact-finding process in exchange for confidentiality.20
On considering these recommendations, the Settlement Regulations 2018 were notified. The
next section of this paper shall entail a discussion on the provisions of the Settlement
Regulations 2018.
Settlement Regulations 2018
In furtherance of the recommendations of the High Level Committee, SEBI notified the
Settlement Regulations 2018 on 30 November, 2018, and the same came into effect from 01
January, 2019 thereby repealing the Settlement Regulations 2014.21
As per Regulation 5(2), which provides for the scope of the settlement proceedings, SEBI has
been given the discretion to not settle any specified proceeding wherein the alleged default
has the potential to- “[a)] have a market wide impact; b) cause losses to a large number of
investors; and c) affect the integrity of the market”.22 The scope of the regulations prevent the
16
(SEBI 2018).
17
Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations,
2014, No. LAD-NRO/GN/2013-14/37/50.
18
(SEBI 2018).
19
(SEBI 2018).
20
(SEBI 2018).
21
Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018, No.
SEBI/LAD-NRO/GN/ 2018/48.
22
SEBI/LAD-NRO/GN/ 2018/48, r 5(2)
Page 7 of 18
settlement of an application- a) which has already been rejected; b) the fact-finding procedure
is ongoing; or where, c) monies to be recovered under an order of securities law is due.23
Following this, the Settlement Regulations 2018 also exclude from its scope, the application
of wilful defaulters and other categories of persons as mentioned in the recommendations of
the High Level Committee.24
Rectifying the limit of the Settlement Regulations 2014 wherein SEBI was only allowed to
settle disputes which arose from the violations of any provisions of SEBI Act, 1992, the
Securities (Regulation) Act 1956 and the Depositories Act 1996, the Settlement Regulations
2018 widened the definition of “securities law” under Regulation 2(e) to include, in addition
to the aforementioned legislations, any other law, and rules and regulations thereunder which
are regulated by SEBI.25
Regulation 26 also provided for a settlement scheme wherein discretion was accorded to
SEBI to specify terms and procedure for the settlement of proceedings for any class of
persons who may be involved in any similar disputes.26
Chapter IX of the Settlement Regulations 2018 deals with ‘settlement with confidentiality’
where, an applicant who is willing to provide substantial assistance in the investigation,
inquiry, etc., regarding the violation of any of the securities law by any person will derive the
benefit of confidentiality in return.27
It is apparent from the above regulations that the recommendations of the High Level
Committee were included in the Settlement Regulations 2018. 28 The Settlement Regulations
2018 was a first of its sort as a comprehensive framework for settlement mechanism in terms
of the securities market in India, and it is apparent that the recommendations of the High
Level Committee have been crucial in constructing the framework.
23
SEBI/LAD-NRO/GN/ 2018/48, r 5(1).
24
SEBI/LAD-NRO/GN/ 2018/48, r 5(4).
25
SEBI/LAD-NRO/GN/ 2018/48, r 2(e).
26
SEBI/LAD-NRO/GN/ 2018/48, r 26.
27
28
Subhayu Sen, ‘Introduction of the SEBI (Settlement Proceedings) Regulations 2018’ (Mondaq, 06 December
2018) <https://www.mondaq.com/india/securities/762028/introduction-of-the-sebi-settlement-proceedings-
regulations-2018> accessed 31 March 2022.
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The SEBI (Settlement Proceedings) (Amendment) Regulations, 2020 (“Amendment
Regulations 2020”)
The Amendment Regulations 2020 was notified on 22 July, 2020 and came into force from
the date of notification.29 In the Amendment 2020, under Regulation 15(2)(a) the timeline for
remittance amount due to an applicant on receiving a notice for demand of settlement amount
has been increased to 30 days from the previous 15 days and the increased 30 thirty days
could also be extended by another 60 calendar days on prior application as opposed to the
previous extension of 15 calendar days that existed.30
The Amendment Regulations 2020 omitted the entire Chapter VIII dealing with settlement
notice which essentially explained in substance the charges and actions thereof which would
be taken by SEBI.31 The reasoning given by SEBI for this omission is that it was done to
make the process more time-effective and to club the now omitted settlement notice, under
Regulation 18, with the show cause notice.32
The Amendment Regulations 2020 also inserted Clause 11A under Chapter I of Schedule II
which provided the applicant with an opportunity of being heard before the Internal
Committee (“IC”) which examines the settlement of proceedings and also determines the
terms of the settlement.33
From the above, it is evident that the amendments were mainly focused on procedural aspects
of settlement in order to rationalise the settlement mechanism. 34 It sought to make procedural
29
Securities and Exchange Board of India (Settlement Proceedings) (Amendment) Regulations 2020, No.
SEBI/LAD-NRO/GN/2020/24.
30
SEBI/LAD-NRO/GN/ 2018/48, r 15(2)(a).
31
SEBI/LAD-NRO/GN/ 2018/48, Chapter VIII.
32
33
content/uploads/2020/07/SEBI_Settlement-Proceedings_2018_1.pdf> accessed 31 March 2022; Securities and
Exchange Board of India (Settlement Proceedings) Regulations 2018, r 13.
34
Page 9 of 18
aspects of the settlement hassle free and timely thus, aiming to reduce burden on both the
applicant and the regulator.
III. SETTLEMENT PROCEDURE UNDER THE SETTLEMENT REGULATIONS 2018
Before we move on to the Amendment Regulations 2022, its analysis with the previous
amendments, and the impact of the various amendments on the securities market, it becomes
necessary to know the working of the settlement mechanism or in other words, the settlement
procedure.
The settlement mechanism of SEBI is a three-pronged process. First, on an application for

settlement, the IC examines the same to decide on the validity of the application and the
settlement terms where the IC may- a) call for relevant documents, information, etc., in
relation to the alleged default; b) call for the applicant to personally appear before the IC; and
c) allow submission of revised settlement terms by the applicant within 10 days from the
meeting of the IC.35
Second, the High Powered Advisory Committee (“HPAC”) which considers and
recommends the terms of settlement,36 may either refer the application back to the IC seeking
revision of the settlement terms, or if no revision is sought, the HPAC may place the
recommendations before the Panel of the Whole Time Members (“WTM”).37
Third, the Panel of the WTM are to consider the recommendations of the HPAC and either
accept or reject the same. If the recommendations of the HPAC are rejected, reasons for
rejection are to be recorded and the application may be returned to the HPAC for re-
examination and the procedure applicable to the initial application is to be followed by the IC
and the HPAC.38 On the other hand, if the recommendations of the HPAC are accepted, the
applicant is to be issued a notice of demand within 7 days of working of the decision, and the
applicant shall- a) remit the settlement amount within 15 days of receiving the notice; b) give
35
36
37
38
SEBI/LAD-NRO/GN/ 2018/48, r 15(1), 15(3).
Page 10 of 18
a written undertaking to abide by the other settlement terms that may be provided to the
applicant.39
It is apparent from the above-explained settlement procedure that the foremost intention of
SEBI is to conclude the settlement mechanism within a strict timeframe, and also to have
strict procedure as the aim of SEBI is to curtail adverse impact on the market.40
The next section of the paper will be delving into the Amendment Regulations 2022, and its
comparison with the Settlement Regulations 2018, to trace the growth and evolution of the
settlement mechanism till this date.
IV. AMENDMENT REGULATIONS 2022 AND ITS COMPARISON WITH THE
SETTLEMENT REGULATIONS 2018
In 2021, SEBI instituted a consultative paper to review the Settlement Regulations 2018 and
consequently, the Amendment Regulations 2022 were notified and came into force from 14
January, 2022.41
Most of the key amendments that have been brought about in the Amendment Regulations
2022 deal with streamlining timeframes for various procedures. The Amendment Rules 2022
omitted Regulation 4(2) of the Settlement Regulations 2018 which provided for consideration
of settlement application by SEBI post 60 calendar days from the date of show cause notice if
there was sufficient cause along with the payment of non-refundable fees.42
Essentially, now, a settlement application under Regulation 4 is to be filed within 60 calendar

days, and delayed applications will not be accepted. 43 As the entirety of Regulation 4(2) has
been omitted, the requirement of 25% increase in the settlement amount determined as per
39
SEBI/LAD-NRO/GN/ 2018/48, r 15(2).
40
41
42
43
‘SEBI makes settlement mechanism more attractive and encourages speedy resolutions’ (Transique, 21
January 2022) <https://www.transiqueadvisors.com/sebi-makes-settlements-mechanism-more-attractive-and-
encourages-speedy-resolution/> accessed 31 March 2022.
Page 11 of 18
Schedule II of the Settlement Regulations 2018 with a delay of more than 60 days in filing
the settlement application also stands omitted.44
Regulation 13(2) which provided for a timeline of 10 days for filing revised settlement terms
post the meeting of the IC has been amended to 15 days under the Amendment Regulations
2022.45 Furthermore, delay in filing the revised settlement terms post the 15 day period has
been included as a factor for rejection of the settlement application.46
The Amendment Regulations 2020 have also brought about a stringent 30-day deadline for
applicants to remit the settlement amount on the issuance of a demand notice as opposed to
the previous extension of 60 days that was available to the applicant.47
Regarding the rejection of application under Regulation 6 of the Settlement Regulations

2018, clause (f) has been newly inserted by the Amendment Regulations 2022 wherein,
failure to comply with the conditions precedent for settlement by the applicant within the
timeframe as set by the IC would qualify as grounds for rejection of the application. 48
A concept that has been introduced through the Amendment Regulations 2022 is that of
‘name lenders’. Name lenders are those individuals who give a satisfactory submission to the
IC, HPAC or the Panel of WTMs that they were unwittingly involved in the violation of
securities law and that the individual had no knowledge of the illegal activity that they were
involved in.49 The rationale for such categorisation is to create a lower threshold of the
settlement amount to the name lenders as compared to the main offenders.50
44
45
46
47
SEBI/LAD-NRO/GN/ 2018/48, r 15(2); Gazal Rawal and Rutu Gandhi, ‘Amendments to SEBI Settlement
Regime- A Snapshot’ (India Corporate Law, 25 January 2022)
<https://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-regime-a-snapshot/
#_ftn1> accessed 31 March 2022.
48
Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018, r 6.
49
SEBI/LAD-NRO/GN/2022/62, Table X.
50
Page 12 of 18
A tad different from the previous amendments to the Settlement Regulations 2018, the
Amendment Regulations 2022 also revised the calculations under Chapter III of the
Settlement Regulations 2018 for the settlement amount, including the base amount for every
instance of default to Rs. 10 lakhs from the previous Rs. 15 lakhs.51
It is to be noted that the Amendment Regulations 2022 has cast a wider net in terms of
revisions of the provisions as compared to the Amendment Regulations 2020. An analysis of
the Settlement Regulations 2018 and the subsequent amendments thereof shall be made in the
following section.
V. ANALYSIS OF THE AMENDMENT REGULATIONS 2022 AND ITS IMPACT ON THE
SECURITIES MARKET
As mentioned above, the Amendment Regulations 2022 revised a wider segment of the
settlement procedure as compared to the previous amendment. Not only focusing on the
procedural aspect of the settlement system, the Amendment Regulations 2022 also looked
into certain substantive aspects such as revision of the settlement amount calculations,
introduction of a new category of name lenders, and increased powers of the IC.
One concern that has been reverberated a number of times since the passing of the
Amendment Regulations 2022 is with respect to the filing of settlement applications within
60 days of receiving the show cause notice. Many believe that this amendment has restrained
flexibility especially in cases of serious defaults wherein flexibility in time frame is needed as
the process involved before deciding whether to opt for settlement such as fact-finding,
exchange of information and documents can be time consuming and may have the potential
to exceed the 60-day deadline that has been prescribed.52
Another prominent concern has been with respect to the insertion of ‘name lenders’ and the
reduced threshold for them with respect to the settlement amount. The fact is that SEBI will
have to be satisfied that the individuals claiming to be name lenders are not in fact actively
engaged in the alleged default as the main offenders. The concern is that as, usually, the
51
Bhumika Indulia ‘Securities and Exchange Board of India (Settlement Proceedings) (Amendment)
Regulations, 2022’ (SCC Online Blog, 19 January 2022)
<https://www.scconline.com/blog/post/2022/01/19/securities-and-exchange-board-of-india-settlement-
proceedings-amendment-regulations-2022/> accessed 31 March 2022.
52
Page 13 of 18
merits of a case are not weighed while considering settlement applications, the determination
by SEBI as to whether individuals had or did not have the knowledge that they were involved
in illegal activity will essentially involve the consideration of the merits of the case. 53
The Amendment Regulations 2022 does not provide any guidelines as to how to go about the
determination of name lenders, nor does it shed clarity on whether merits of the case can be
considered at the stage of determining the threshold of the settlement amount.54
Apart from these few concerns, the framework for settlement mechanism by the SEBI has to
be appreciated as it strives for timely resolution of settlement matters, and also seeks to ease
the process of settlement for both SEBI as well as the applicant as the process can get quite
cumbersome.55
The comprehensive and accommodative nature of the settlement mechanism which has led to
successful settlement in various cases stand proof of the positive impact that the Settlement
Regulations 2018 and its subsequent amendments have had on securities market.56
Furthermore, what is most admirable about the Settlement Regulations 2018, as per the belief
of the author, is the scope of the regulations which excludes those alleged defaults which may
adversely affect the market from the ambit of the settlement mechanism. Ultimately it is the
trust of the public and investors in the securities market as well as the regulator that enhances
the growth of the market and the fact that the Settlement Regulations have accorded a very
high threshold to public interest plays a major role in shaping the entire settlement
mechanism.
Overall, the Settlement Regulations 2018 and the subsequent amendments have been drafted
in manner which promotes the growth of the securities market and has streamlined the
settlement mechanism. However, as the securities market is dynamic, there is always scope to
53
54
Securities and Exchange Board of India (Settlement Proceedings) (Amendment) Regulations, 2022, Securities
and Exchange Board of India (Settlement Proceedings) (Amendment) Regulations 2022, No. SEBI/LAD-
NRO/GN/2022/62.
55
56
Sanjay Buch and Devanshi Nanavati, ‘Law Relating to the Securities and Exchange Board of India
(Settlement Proceedings) Regulations 2018’ (International Bar Association)
<https://www.ibanet.org/article/FEA8B1A3-BFE4-4922-9904-1976BDE8E755> accessed 31 March 2022.
Page 14 of 18
inculcate changes and make the settlement mechanism more comprehensive, the same which
will be discussed in the following segment.
VI. RECOMMENDATIONS AND CONCLUSION
Based on the evolutionary analysis of the settlement mechanism in India, the author believes
that certain changes to the existing system would be beneficial in making the settlement
system more comprehensive.
One would be for the Amendment Regulations 2022 to provide more flexibility with respect
to the timeframe for filing an application for settlement. The stringent 60-day period, though
well-intended in the hope expeditiously settling settlement claims, may have the ill-effect of
rushing matters wherein the default involved is one of serious nature, and where the applicant
may need more time to decide whether or not to opt for settlement.
The author is also of the firm notion that the Settlement Regulations 2018 shall have to
clarify regarding the name lenders and how they will be determined by SEBI as merits of a
case are not considered during the stage of determination of the settlement amount.
Apart from these recommendations, the author believes that as of now, the Settlement
Regulations 2018 along with the various amendments that it has undergone is efficacious in
dealing with settlement claims in a timely manner. However, considering the dynamic nature
of the securities market, constant revision and amendment of the laws is what should be
maintained.
Over the course of this paper, the author has attempted to trace the evolution of the settlement
mechanism in the securities market and trace as to how the regulations have played a part in
the securities market.
The author has aimed to provide a detailed analysis of the settlement mechanism starting
from its inception in 2007, the Settlement Regulation 2014, the Report of the High Level
Committee which was instrumental in bringing about the first comprehensive set of
regulations regarding settlement mechanism i.e., the Settlement Regulations 2018, and its
subsequent amendments in 2020 and most recently in 2022.
Page 15 of 18
The author has also given a comparison between the Settlement Regulations 2018, the 2020
amendments and the recent 2022 amendments. Furthermore, the author has also analysed the
potential impact the Settlement Regulations may have on the market and investors.
Conclusively, the author has attempted to give certain recommendations which the author
believes may add to the efficient implementation of the Settlement Regulations 2018.
On a final note, the author believes that thought the settlement mechanism currently seems
wholesome, SEBI will have to maintain the same reactiveness in revising the settlement
mechanism in the future in order for the settlement mechanism to be in tandem with the ever
changing securities market.
Page 16 of 18
BIBLIOGRAPHY
Consultative Papers and Committee Reports
1. High Level Committee under the Chairmanship of Justice Anil R. Dave, Report on
the Settlement Mechanism (SEBI 2018).
2. SEBI, Consultation Paper on Review of the SEBI (Settlement Proceedings)
Regulations 2018 (SEBI, 2021) para 1.1.
3. SEBI, Draft Securities and Exchange Board of India (Settlement Proceedings)
Regulations 2018 to provide for settlement of proceedings pursuant to Justice Anil R.
Dave Committee Report on Settlement Mechanism (SEBI).
Online Sources
1. ‘SEBI makes settlement mechanism more attractive and encourages speedy

resolutions’ (Transique, 21 January 2022) <https://www.transiqueadvisors.com/sebi-
makes-settlements-mechanism-more-attractive-and-encourages-speedy-resolution/>
accessed 31 March 2022.
2. Ambika Mehrotra, ‘SEBI Revisits the Settlement Mechanism: Repealing SEBI
(Administrative and Civil proceedings) Regulations 2014’ (Vinod Kothari &
Company, 23 July 2020)
<https://vinodkothari.com/wp-content/uploads/2020/07/SEBI_Settlement-
Proceedings_2018_1.pdf> accessed 31 March 2022.
3. Bhumika Indulia ‘Securities and Exchange Board of India (Settlement Proceedings)
(Amendment) Regulations, 2022’ (SCC Online Blog, 19 January 2022)
<https://www.scconline.com/blog/post/2022/01/19/securities-and-exchange-board-of-
Page 17 of 18
india-settlement-proceedings-amendment-regulations-2022/> accessed 31 March
2022.
4. ENS Economic Bureau, ‘Settlement Orders: SEBI forms high-powered advisory
panel’ (The Indian Express, 16 October 2021)
<https://indianexpress.com/article/business/settlement-orders-sebi-forms-high-
powered-advisory-panel-7574202/> accessed 31 March 2022.
5. Gazal Rawal and Rutu Gandhi, ‘Amendments to SEBI Settlement Regime- A
Snapshot’ (India Corporate Law, 25 January 2022)
<https://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-
6. Sanjay Buch and Devanshi Nanavati, ‘Law Relating to the Securities and Exchange
Board of India (Settlement Proceedings) Regulations 2018’ (International Bar
Association) <https://www.ibanet.org/article/FEA8B1A3-BFE4-4922-9904-
1976BDE8E755> accessed 31 March 2022.
7. Subhayu Sen, ‘Introduction of the SEBI (Settlement Proceedings) Regulations 2018’
(Mondaq, 06 December 2018)
<https://www.mondaq.com/india/securities/762028/introduction-of-the-sebi-
settlement-proceedings-regulations-2018> accessed 31 March 2022.
Regulations
1. Securities and Exchange Board of India (Settlement of Administrative and Civil
Proceedings) Regulations 2014, No. No. LAD-NRO/GN/2013-14/37/50.
2. Securities and Exchange Board of India (Settlement Proceedings) (Amendment)
Regulations 2020, No. SEBI/LAD-NRO/GN/2020/24.
3. Securities and Exchange Board of India (Settlement Proceedings) (Amendment)
Regulations 2022, No. SEBI/LAD-NRO/GN/2022/62.
4. Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018,
No. SEBI/LAD-NRO/GN/ 2018/48.
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GUJARAT NATIONAL LAW UNIVERSITY

HONOURS COURSE III: SECURITIES LAW

CONTINUOUS EVALUATION, MARCH 2022

THE EVOLUTION OF THE SEBI SETTLEMENT PROCEEDINGS REGULATIONS AND ITS

PREPARED BY: SUBMITTED TO:

4. SETTLEMENT PROCEDURE UNDER THE SETTLEMENT REGULATIONS

The 2007 Circular

The Settlement Regulations 2014

The High Level Committee Report and its aftermath

II. THE RECOMMENDATIONS OF THE HIGH LEVEL COMMITTEE, THE

SETTLEMENT REGULATIONS 2018 AND SUBSEQUENT AMENDMENTS

Recommendations of the High Level Committee

Another recommendation was to include both monetary and non-monetary settlement

Settlement Regulations 2018

III. SETTLEMENT PROCEDURE UNDER THE SETTLEMENT REGULATIONS 2018

The settlement mechanism of SEBI is a three-pronged process. First, on an application for

IV. AMENDMENT REGULATIONS 2022 AND ITS COMPARISON WITH THE

SETTLEMENT REGULATIONS 2018

Essentially, now, a settlement application under Regulation 4 is to be filed within 60 calendar

Regarding the rejection of application under Regulation 6 of the Settlement Regulations

V. ANALYSIS OF THE AMENDMENT REGULATIONS 2022 AND ITS IMPACT ON THE

VI. RECOMMENDATIONS AND CONCLUSION

Consultative Papers and Committee Reports

1. ‘SEBI makes settlement mechanism more attractive and encourages speedy

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