SEBI Settlement ≠ Immunity from Stock Exchange Action: SAT Reaffirms in Hindustan Foods Ltd. Case

The Securities Appellate Tribunal (SAT), Mumbai, in its order dated 13.08.2026, has once again settled an important compliance question: does settling with SEBI shield a listed company from a separate fine by the stock exchange for the same violation?

The Facts:

 🔹 Hindustan Foods Ltd. failed to meet the minimum Independent Director requirement under Reg. 17(1)(b) of LODR Regulations (at least 50% Board strength) for periods between 27.08.2018 and 08.11.2022.

 🔹 The Company settled the matter with SEBI in Oct 2023, paying ₹24.32 lakhs under Section 15JB of the SEBI Act.

 🔹 Separately, BSE imposed an SOP fine of ₹52.21 lakhs for the identical default under SEBI's Circular dated 22.01.2020.

 🔹 The Company challenged BSE's fine before SAT, arguing res judicata and double jeopardy since SEBI had already settled the issue.

SAT's Ruling:

🔹The Tribunal dismissed the appeal, holding that Regulation 98 of LODR expressly makes an entity liable for stock exchange action "in addition to" liability under securities laws. Critically, the SEBI settlement order itself carried an express caveat — it was "without prejudice" to action by stock exchanges. Relying on its earlier ruling in Alien Developers Pvt. Ltd. (15.10.2025), SAT reiterated that SEBI and stock exchange compliance frameworks operate in "different spheres."

Key Takeaway for Boards & Compliance Officers:

🔹SEBI settlements do NOT automatically extinguish exchange-level penalties. Companies must factor in dual exposure — regulatory AND exchange — when evaluating LODR non-compliances, especially around Board composition norms.

🔗 Read the full SAT order: https://lnkd.in/de3_X_Mq

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