SEBI's Regulatory Actions Against Seya Industries: Implications of IBC in Insolvency

SEBI Comes Down Hard on Seya Industries’ Promoters: A Case Study in Accountability Amid Insolvency

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When it comes to enforcing market integrity, SEBI rarely hesitates to draw a hard line. The case involving the promoters of Seya Industries is a prime example of that. In a move that’s bound to stir discussions across boardrooms and legal circles alike, the regulator imposed ₹56 crore in penalties on Ashok Ghanshyamdas Rajani (CMD) and Amrit Ashok Rajani (CFO) on May 2, 2023, holding them squarely responsible for siphoning off company funds—even as the firm was navigating its corporate insolvency proceedings.

A Penalty That Sends a Message

Both Ashok and Amrit Rajani have been slapped with ₹28 crore each in fines, after SEBI concluded they had diverted over ₹80 crore of company money into privately held firms in which they and their close relatives held significant control and ownership. That’s not just poor governance—it’s deliberate and systemic financial misconduct.

While Seya Industries is currently undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), SEBI made it clear: this enforcement is not about the company—it’s about the individuals who ran it.

“The moratorium applies to the company, not to the people who committed the fraud,” SEBI’s order effectively stated.

IBC’s Moratorium Doesn’t Offer a Free Pass

The central issue here is whether SEBI can act against company directors and promoters when the firm itself is under insolvency protection. Section 14 of the IBC does impose a moratorium on proceedings against the company. But SEBI clarified its position: the moratorium doesn’t shield individuals from being held personally liable under securities law.

Notably, the creditors and company had already reached a settlement before the insolvency petition was formally admitted by the National Company Law Tribunal (NCLT). At that point, Ashok and Amrit Rajani still controlled the company. SEBI considered this context critical—the fraudulent activity occurred while they were still at the helm.

Attempted Legal Shield—and SEBI’s Pushback

Amrit Rajani, acting through legal counsel, tried to invoke Section 96 of the IBC, which deals with interim moratoriums once a petition is filed. His argument: the interim moratorium should halt SEBI’s action.

SEBI disagreed—and drew a sharp legal distinction. According to the regulator, penalties imposed after the filing of a case aren’t covered under the “existing debts” shield of Section 96. Those are future liabilities, and the law doesn’t extend protection that far.

“Any penalty imposed in the extant proceedings would be in the nature of a future liability,” SEBI clarified, cutting through any ambiguity.

Following the Money—and the Fraud

The investigation didn’t just point to vague mismanagement. It outlined a clear, deliberate effort to siphon funds from Seya into closely held private companies. These entities were not only linked to the Rajani family but co-managed by relatives. SEBI found that these transactions lacked transparency and were actively concealed from shareholders and regulators.

Given the scale and brazenness of the operation, SEBI invoked maximum penalties permitted under the securities laws.

What This Means for Everyone Watching

This case isn’t just about Seya Industries—it’s about regulatory authority, promoter accountability, and the limits of IBC protection.

SEBI has made it clear: promoters and directors won’t find safe harbour behind the company’s insolvency.
The IBC’s moratorium is not a blanket amnesty. It protects the company, not the people responsible for fraud or misrepresentation.
Governance standards must rise. Directors, CFOs, and MDs cannot claim ignorance or hide behind legal technicalities once wrongdoing is unearthed.

Final Thoughts

The enforcement against Ashok and Amrit Rajani might not grab headlines like a massive IPO or merger, but for market participants, it should ring louder than most. SEBI has drawn a clear line: you can restructure a company—but you can’t restructure accountability.