Balancing Power and Accountability: An Evaluation of SEBI's Adjudication of Insider Trading

by Natasha Aggarwal, Amol Kulkarni, Bhavin Patel, Sonam Patel, and Renuka Sane.

Insider trading is considered to undermine the fairness of the market and erode investor confidence. The Securities and Exchange Board of India (SEBI) has, in recent years, increased its focus on, and intensified its enforcement of, insider trading cases. Expanding enforcement actions should prompt a deeper examination of how effectively SEBI is performing this function vis-a-vis the "rule of law". Adherence to the rule of law by the regulator promotes transparency, creates a stable and predictable environment for businesses and individuals and builds public trust in the regulatory system. Regulatory actions need to be evaluated on benchmarks grounded in legal theory and the extant legal framework.

In a new working paper, Balancing Power and Accountability: An Evaluation of SEBI's adjudication of Insider Trading, we evaluate SEBI's orders on insider trading cases over a 15-year period (2009 - 23) as well as the performance on these orders in appeal before the Securities Appellate Tribunal (SAT). We develop an evaluation framework based on elements of the rule of law applicable to regulatory adjudication, with 56 indicators for SEBI orders, and 82 indicators for orders of the Securities Appellate Tribunal (SAT).

This paper addresses three critical questions:

• What do SEBI's enforcement actions look like, and how have they evolved over the years?

  SEBI's annual reports provide some broad data about the total number of enforcement actions undertaken in a year, but do not provide details of the type of enforcement actions taken for each type of violation, the particular legal or regulatory provision alleged to have been violated, or the impact of successful enforcement actions in reducing instances of insider trading.

  Our dataset comprises 320 SEBI orders - 255 orders are by Adjudicating Officers (AOs) and 65 are by Whole-Time Members (WTMs). Each order can contain cases against multiple entities - we call them alleged violators. The 320 orders contain a total of 912 alleged violators. SEBI officers have imposed sanctions on 565 of the 912 alleged violators (62% of the alleged violators). AOs and WTMs have imposed penalties in 336 cases and 82 cases respectively. The median penalty amount for AOs is about Rs. 7.8 lakh, and for WTMs is about Rs. 15 lakh. Only WTMs, and not AOs, have the power to impose debarment and disgorgement. We observed that they have imposed disgorgement in 144 cases, and debarment in 192 cases. The average disgorgement amount is Rs. 46 crore, while the median is only Rs. 1 crore. The average period of debarment is 3 years, and a median of 1 year.

  Our paper illustrates the number of insider trading orders issued between 2010 and 2022. This shows that a spike in orders on insider trading from 2017, and then again in 2019. There has been a slight drop in the number of WTM orders in 2022. This is consistent with statements in the SEBI annual reports, which suggest that insider trading has been high on the regulator's agenda.

• Are SEBI's orders consistent with the requirements of procedural and substantive rule of law requirements?

  The procedural rule of law measures are based on administrative law and natural justice principles, and deal with how SEBI has been performing in terms of procedural fairness while adjudicating insider trading matters. One aspect of procedural fairness is that the orders should include certain basic information. We find several shortcomings in providing factual information on basic rule-of-law indicators. First, several orders do not mention basic facts about the case such as the date of show cause notice (7%), period of investigation (17%), period of UPSI (27%), and a description of UPSI (20%). Second, orders do not cite precedent. We find that about 87% of orders do not cite any previous AO or WTM order. Finally, the orders do not specify the full details of the sanctions imposed. In 12% of cases where disgorgement was ordered, the time period for payment was not specified. Similarly, for both penalties and disgorgement, interest rate was not specified in a large number of cases.

  The substantive rule of law measures are based on the law relating to insider trading. These dive a bit deeper than the procedural requirements, and examine whether the orders satisfy the requirements of applicable law and regulation. For example, a key component of a good order on insider trading should be that SEBI has been able to clearly demonstrate that the violator is an insider. We find that SEBI has identified a clear insider relationship in only 335 (60%) of its orders. In the remaining 230 orders, it has described a connection in 152 (66%) orders. Describing a connection is not as clear as specifying the connection. If we were to give SEBI the benefit of the doubt and consider it as an acceptable description, even then, in 14% of the cases SEBI has failed to provide any explanation on how a person is an insider

• How do SEBI's insider trading orders stand up to challenge before the Securities Appellate Tribunal (SAT)?

  Our analysis resulted in a set of 119 cases in the SEBI and SAT datasets. These cases result in 183 appeals (32%) out of the total 565 cases with sanction. Out of these, 97 (53%) were allowed, partly allowed, or remanded, while 86 (47%) were dismissed. This suggests that once appealed there is a 50% chance that the SEBI order will not hold in appeal.

  We find that the higher the sanction, the higher the proportion of appeals. 38% of AO cases and 17% of WTM cases with a penalty amount higher than Rs. 10 lakhs resulted in an appeal, relative to 22% of AO cases and 5% of WTM cases below Rs. 10 lakh. This is more pronounced in the case of debarment and disgorgement, where appeals are present for more than half the cases with higher sanctions. We also find that it is less likely that an AO or WTM case with penalty above Rs. 10 lakh or debarment for more than one year will be modified in appeal. 79% of WTM cases involving higher disgorgement amounts and all WTM cases involving a penalty below Rs. 10 lakh were modified in appeal.

Regulatory enforcement actions are necessary to ensure that those who violate the law face consequences, and may also have a deterrent effect on others. However, there are adverse consequences if these actions emerge from a flawed process, or if the actions taken are arbitrary or disproportionate. SEBI is ahead of other Indian regulators such as the Reserve Bank of India in at least publishing its orders. An appeal rate of between 30-38%, and a win rate of 50% at the SAT could be further improved by investments in order writing, and by re-evaluating the regulations on insider trading.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Announcements

Socratic dialogues on cities, cooperation

Polekon is organizing socratic dialogues on 'The functional order of cities' and 'The architecture of cooperation'.

Also, a new cohort of political economy of development - a 4-week workshop on economic development - is starting April 5th.

About socratic dialogues

Socratic dialogues are guided conversations where participants explore ideas, develop habits of critical thinking and practice effective habits of communication.

This is a unique kind of conversation where asking "why?" isn't confrontational but rather opens a path to deeper understanding. Through sustained, structured dialogue, participants develop not just knowledge but the habits of mind essential for clear thinking - careful listening, precise speaking, examining assumptions, and tracing the roots of their opinions.

The functional order of cities

Cities shape our daily lives in profound ways, yet the principles that make them vibrant or lifeless, safe or dangerous, remain poorly understood. This program brings together two of the most insightful critics of urban planning and state simplification - Jane Jacobs and James C. Scott - to explore what makes cities work, why certain forms of planning fail, and how we might better balance the needs for both spontaneous vitality and planning in our cities.

Time: 5pm - 7pm
Dates: Sundays, April 12, 19, 26 and May 3, 2025
Learn more

The architecture of cooperation

There's a tendency to attribute all that is orderly to laws and legislations that must have made it so, and similarly attribute all that is disorderly to their absence or weak enforcement. But the machinery that enables the deep cooperation that is the defining characteristic of modern life has multiple gears; it is a mistake to attribute ubiquitous honesty to the single lever of state power.

We'll explore the architecture of cooperation - the hierarchy of instincts, norms and formal institutions that support cooperation in our modern world.

Time: 5pm - 7pm
Dates: Sundays, April 13, 20, 27, May 4 and 11, 2025
Learn more

Political economy of development

The workshop blends theory and history to provide a framework for thinking about India's economic development. It starts with the basics of economic growth, examines India's development path, and contrasts it with Taiwan, one of the rare success stories of the 20th century.

The full course outline is available on the course platform. Learn more about the workshop here.

Announcements

Call for Proposals: VizChitra 2025

A Space to Connect and Create with Data

27th-28th June 2025, Bangalore

Data visualization practitioners in India are spread across different communities. VizChitra 2025 aims to bring them together through a first-of-its-kind conference. The goal is to build a community of diverse, interdisciplinary individuals working across the visualization spectrum and facilitate learning and connections between people from different industries and disciplines who share a common interest in the power of data and storytelling.

VizChitra's Mission

• Consider & Curate: Build a rhythm of curated events to spread the practice of data visualization.
• Cultivate & Care: Nurture a fertile space for learning & sharing of data visualization skills.
• Create & Collaborate: Express and co-create to push the boundaries of data visualization.

Conference Details

Conference Day

Date: 27th June 2025
Venue: Bangalore International Centre (BIC), Domlur
Format: In-Person & Live Stream

Workshop Day

Date: 28th June 2025
Venue: Across Bangalore, Karnataka
Format: In-Person Only

Who should attend?

Individuals from diverse disciplines engaged in data visualization, including:

• Communication & Design Roles: Journalism, Non-profits & Think Tanks, Media, Design Teams (UX, UI, Interfaces).
• Functional Roles: Business Intelligence, Data & Analytics, Marketing Comms, Planning.
• Domain-Specific Vis Roles: Public Policy & Planning, Sports Analytics, Healthcare Analytics, Legal, Fintech.
• Researchers & Academia Roles: Information Visualization, Human-Computer Interaction, Scientific Communication.
• Tool Builders & Creators: Data viz tool makers, Dashboard designers, Analytics & AI tools.

Submission Themes

1. Explain & Learn

• Process & practices of dataviz
• Storytelling & structuring narratives
• Aesthetics & design principles
• Accessibility, ethics & inclusion in dataviz
• Unique works by Indian practitioners

2. Explore & Play

• Dashboard & interaction principles
• Domain-specific data visualizations
• Collaboration & conversational interfaces
• Scalable data exploration processes
• State of data in India (availability, collection, etc)

3. Imagine & Innovate

• Usage of AI & technology in data visualization workflows
• Emerging mediums e.g. 3D, AR/VR
• Beyond viz e.g. sonification, physicalization
• Experiential viz e.g. data art, installations

Session Formats

• Standard Talk (30 min: 25 min presentation + 5 min Q&A) - Deep dives into complex topics with insights and personal learnings.
• Lightning Talk (15 min: 12 min presentation + 3 min Q&A) - Quick, impactful presentations on novel concepts or solutions.
• Unconference / Birds of a Feather (BOF) Session (45 min) - Community-driven discussions on shared interests and challenges.
• Hands-on Workshop (Half-day: 3 hours / Quarter-day: 1.5 hours) - Immersive learning experiences with direct guidance.
• VizChitra (Alternative) Session - Have an idea that doesn't fit the above formats? Pitch it to us!

Submission Guidelines

Submission guidelines: https://hasgeek.com/VizChitra/2025/sub

The call for submissions closes on 15th April 2025, 11:59 PM. Selections will be made on a rolling basis.

Join us in shaping the future of data storytelling in India: https://vizchitra.com/

Pumped storage plants in India: assessing policies and progress

by Upasa Borah, Chitrakshi Jain and Renuka Sane.

The transition to renewable energy faces challenges related to intermittency and variability in energy availability. Energy storage systems (ESS) play a crucial role in addressing these issues by storing excess renewable energy (RE) during periods of low demand and releasing it during peak hours. This enhances the scalability of renewable energy systems worldwide, reducing reliance on fossil fuels and supporting the integration of renewables into the grid. ESS technologies enable the conversion of electricity into other forms of energy for storage and later use. Among these, pumped storage plants (PSPs) remain one of the oldest and most widely relied upon solutions. These are adaptations of conventional hydropower plants.

India has set a target to achieve 50% cumulative installed capacity from non-fossil fuel-based energy resources and to reduce the emissions intensity of its GDP by 45% by 2030. India has also seen policy changes in ESS over the last few years. Legal recognition to ESS was granted in 2022, and new policy guidelines for PSPs were notified in 2023. The Central Electricity Authority (CEA) has estimated the storage capacity requirements, which will enable greater integration of renewable energy sources. These include 26.69 GW of pumped storage capacity and 47 GW of battery energy storage system (BESS) capacity by 2031-32. Among the two commercially viable technologies, BESS and PSPs, the latter present several advantages. Batteries are restricted by their storage capacity and their lifespan, and will have to be replaced frequently. PSPs, on the other hand, have the longest service life of 50 to 150 years and can store and generate energy on a much larger scale.

Given the importance of ESS and PSPs for India's energy transition, our recent paper titled "Pumped Storage Plants in India: Assessing Policies and Progress" presents the evolution of policy on PSPs and their performance in India.

The paper addresses the following questions:

• Where do PSPs feature in the overall storage policy?
• How many PSPs are under various stages of development? How many are eventually being completed?
• Are the policy measures encouraging the private sector to participate in the development of PSPs?
• Is the stated requirement of adding 26.69 GW of PSPs storage capacity by 2032 likely to be completed in the current context?
• What lessons from our experience of executing hydropower projects are relevant for the development of PSPs?

To study these questions, it builds a dataset of PSP projects from the information published by the Central Electricity Authority (CEA) and the CapEx dataset maintained by the Centre for Monitoring Indian Economy (CMIE).

Our analysis finds that the policy environment has become conducive to the development of energy storage systems in general and PSPs in particular. The participation of the private sector in the development of PSPs has increased considerably since 2018. Out of the 130 GW capacity that is under various stages of planning, 102 GW is being developed by the private sector. However, the ratio of projects which receive concurrence and are eventually completed remains low. Of the 91 projects in the dataset, 17 are under implementation, and six have been completed. The completed projects account for 3.3 GW of storage capacity. The low ratio of PSPs that are completed, combined with the experience of delay in executing hydropower projects, implies that the requirements of storage capacity addition from PSPs by 2026-27 and 2031-32 will be met only if the capacity under planning is realised and the projects are completed within six years.

The authors are researchers at the TrustBridge Rule of Law Foundation.

A guide to writing good regulatory orders

by Natasha Aggarwal, Bhavin Patel and Karan Singh.

India has several regulators that are vested with quasi-judicial powers and that play a pivotal role in economic governance. In exercising their quasi-judicial functions, regulatory orders must: (i) demonstrate compliance with the principles of natural justice, (ii) establish legitimacy by showing how they are taken strictly in accordance with, and to the extent authorised by the governing law, and (iii) be accountable, by ensuring that all the information an appellate authority may require for its evaluation of the regulatory action is clearly documented.

Regulatory orders significantly impact market participants and public trust. In particular, four sets of stakeholders are impacted by regulatory orders: (i) parties involved in the enforcement proceedings, (ii) the regulator itself, (iii) appellate and review fora, and (iv) the market and the general public. However, deficiencies in reasoning, structure, and clarity in quasi-judicial orders often undermine regulatory legitimacy and efficiency, leading to diminished stakeholder confidence. Moreover, arbitrary orders that do not demonstrate application of mind can be challenged or overturned or remanded in appeal. Such challenges, overturns, and remands lengthen the enforcement process and increase costs for all those involved. They also take away from the certainty of regulatory orders and affect the predictability of the law. Regulatory certainty and predictability are important requirements of the rule of law and are critical for the smooth functioning of markets.

The need for regulatory orders to be well-reasoned is recognised in Indian law. In a recent paper, titled "A guide to writing good regulatory orders", we propose a method of structuring regulatory orders that would aid readability, strengthen the logical flow of arguments, and enhance the accessibility and transparency of regulatory orders. In particular, we identify four sets of requirements for better order writing: informational, structural, substantive, and stylistic. Broadly, the information requirements relate to identificatory and citatory information that should appear in orders, and to information that helps establish that procedural requirements have been complied with, such as dates of Show Cause Notices. Structural requirements relate to the logical arrangement of the contents of orders in a manner that aids reading and comprehension, and which strengthens regulatory arguments. The substantive requirements help establish that all the requirements of the substantive law applicable to the matter discussed in the order have been addressed. Finally, our suggestions on stylistic requirements include the use of plain language and writing styles that are accessible and comprehensible to all affected persons.

We propose to conduct further studies on how the suggestions in this paper may be implemented through tools and technologies that could augment regulatory capacity for order writing.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Evaluating India's Customs Authority for Advance Rulings (CAAR) and charting a path for reform

by Vijay Singh Chauhan, Prashant Narang, and Monika Yadav.

Advance rulings are critical for trade facilitation - they offer clarity on tariff classifications, customs duties, and valuation, enabling importers and exporters to navigate complex regulatory environments with confidence.

India's journey with advance rulings began in 1999 with the establishment of the Authority for Advance Rulings (AAR), which handled both direct and indirect tax matters. However, the AAR faced severe criticism for its procedural inefficiencies and delays. As one senior customs consultant quoted in the paper noted, "We had cases pending for 4-5 years, forcing many businesses to abandon their plans entirely." The centralised structure, with its single Delhi office, created substantial logistical challenges for businesses across India.

In response to these shortcomings, the Customs Authority for Advance Rulings (CAAR) was introduced in 2018 under Chapter VB of the Customs Act, transforming India's framework from a judicial model to a quasi-judicial one led by senior customs officers. This reform aimed to leverage domain-specific expertise and decentralise operations with benches in Delhi and Mumbai.

However, has CAAR succeeded in delivering timely and consistent rulings, and how does its performance measure up against international benchmarks?

In our recent paper, “Decoding CAAR: Insights, Challenges, and Pathways for Reforms”, we critically assess CAAR's performance between January 2021 and August 2024. Our mixed-methods analysis combining stakeholder interviews with quantitative evaluation of 414 advance rulings uncovers systemic inefficiencies impeding CAAR's effectiveness, notably delays beyond the statutory 90-day timeframe and inconsistencies from limited nationwide applicability.

Despite improvements over its predecessor (AAR), CAAR remains burdened by procedural bottlenecks - chiefly, dependence on port commissioners for technical inputs, uneven workload distribution, and outdated manual processes. Drawing comparisons with jurisdictions like the U.S., Canada, and Australia, we propose actionable reforms: establishing dedicated in-house technical expertise, adopting AI-driven case management systems, and ensuring the nationwide and indefinite applicability of rulings.

By identifying critical gaps and presenting pathways for reform, our research seeks to align CAAR with global standards -essential for strengthening India's role as a reliable global trade partner.

Measuring CAAR's performance: The 90-Day challenge

A central finding of the research is that CAAR struggles to meet its statutory obligation to issue rulings within 90 days. The analysis of rulings issued between January 2021 and August 2024 reveals that only 46.2% of decisions were delivered within this mandated timeframe. This compliance rate varies dramatically among officers, with one achieving 86.1% compliance while another managed just 2.2%.

The primary bottleneck identified is CAAR's dependence on port commissioners for technical inputs. Although regulations allow commissioners just two weeks to provide comments, these responses are often delayed, extending the ruling process by months. As one CAAR presiding officer acknowledged in an interview, delays frequently occur when "comments from jurisdictional commissioners are not received on time," leaving officers with "no option but to delay further".

Some CAAR officers have developed informal practices to mitigate these delays, including sending reminders, making personal phone calls, and issuing demi-official letters. However, these efforts reflect systemic inefficiencies rather than sustainable solutions. The research also highlights the CAAR's reluctance to issue ex parte rulings (without port commissioner input), despite having the authority to do so under Regulation 8(8) of the CAAR Regulations, 2021.

Port-specific applicability: A self-imposed limitation

Another significant limitation is the port-specific applicability of rulings. Unlike systems in the United States, Canada, and Australia- where advance rulings apply nationwide - CAAR rulings are binding only at the specific port where they're issued. This creates inconsistent enforcement across India's customs jurisdictions, forcing businesses that import through multiple ports to seek separate rulings for identical goods.

One respondent articulated this frustration: "Rulings should be consistent across all ports. My classification should not fall under X at one port and Y at another". This limitation not only increases administrative burdens but also undermines the predictability that advance rulings are designed to provide.

The temporal restriction of rulings to a three-year validity period further compounds these challenges. Globally, countries adopt more flexible approaches - Australia's rulings remain valid for five years, while those in Canada and the U.S. have indefinite validity unless there are changes in law or circumstances. As one participant noted, "Unless there is a change in the product or technology, limiting advance rulings to three years seems unnecessary".

Workload imbalance: The Mumbai-Delhi divide

The research reveals significant disparities in workload distribution between CAAR's two benches. The Mumbai bench handles substantially more cases (256) than Delhi (158), with Maharashtra alone accounting for approximately 37.11% of Mumbai's workload. This concentration of cases in Mumbai is followed by Tamil Nadu (31 rulings, 12.11%) and Karnataka (27 rulings, 10.55%), with these three states collectively accounting for about 59.77% of Mumbai's workload.

In contrast, Delhi's jurisdiction shows a different distribution pattern, with Delhi (NCT) itself accounting for 54 rulings (34.18%), followed by Haryana (23 rulings, 14.56%) and Uttar Pradesh (9 rulings, 5.70%). These regions together contribute approximately 54.43% of Delhi's total caseload. The Mumbai bench also faces the additional challenge of 75 orders lacking specified applicant addresses, which further complicates case management.

While both benches experience procedural bottlenecks - such as delays in receiving feedback from jurisdictional commissioners - the Mumbai bench appears disproportionately burdened, given its coverage of the economically significant regions of Western and Southern India. The paper acknowledges this workload imbalance but, rather than recommending additional benches, focuses on process-oriented solutions discussed below.

A path forward: Recommendations for reform

The paper proposes several actionable reforms to enhance CAAR's efficiency and alignment with global best practices:

1. Transition to a Technical Unit Model - Establish in-house technical expertise through dedicated classification specialists and valuation analysts, modeled after systems in Australia, Canada, and the U.S. Pilot at one bench first, with performance measured through turnaround times and stakeholder feedback.
2. Digital Process Optimisation - Implement AI-driven case management using Large Language Models (LLMs) to auto-generate case briefs and identify classification issues. Develop long-term AI solutions integrating HS codes, trade agreements, and global tariff jurisprudence.
3. Nationwide Applicability of Rulings - Amend Section 28J(1)(c) of Customs Act to mandate uniform enforcement across all Indian ports, eliminating jurisdiction-specific inconsistencies.
4. Extending Ruling Validity - Introduce auto-renewal mechanism maintaining rulings' validity unless material facts or trade laws change, reducing business compliance burdens.
5. Enhanced Transparency and Accountability - Create real-time performance dashboard tracking case disposal rates, 90-day compliance, appeal rates, and ruling consistency while maintaining necessary confidentiality.

Implications for India's trade ecosystem

The study's findings have significant implications for India's position in global trade networks. While CAAR represents progress compared to its predecessor, systemic inefficiencies continue to hinder its full potential. Addressing these challenges is crucial not only for domestic traders but also for strengthening India's reputation as a reliable trade partner internationally.

The research highlights an encouraging statistic: more than two-thirds of CAAR rulings align with the applicant's proposed position. This suggests that when the system functions effectively, it provides valuable certainty to businesses. However, the procedural bottlenecks identified in the study prevent this benefit from being fully realised.

As global trade regulations evolve and become increasingly complex, ensuring that CAAR remains agile and responsive is critical to sustaining India's economic growth. The reforms proposed in this paper offer a roadmap for enhancing the efficiency and relevance of advance rulings within India's broader trade facilitation framework.

Conclusion

This process audit of India's Customs Authority for Advance Rulings (CAAR) provides a rigorous assessment of its strengths and limitations. The study effectively documents progress since transitioning from AAR while identifying persistent operational inefficiencies, particularly the 90-day timeline compliance challenge, port-specific applicability constraints, and the technical expertise gap compared to global benchmarks.

For policymakers and trade stakeholders, this research offers a clear roadmap to transform CAAR. The evidence-based recommendations target critical friction points in CAAR's workflow: establishing in-house technical expertise to reduce dependence on port commissioners, implementing AI-driven case management, expanding nationwide ruling applicability, and extending validity periods. These practical reforms align with international best practices observed in jurisdictions like the United States, Canada, and Australia.

Here is the link to the paper.

Vijay Singh Chauhan is a Executive Director at Deloitte Touche Tohmatsu India LLP, Prashant Narang and Monika Yadav are researchers at the TrustBridge Rule of Law Foundation.

Author: Akshay Jaitly

Akshay Jaitly is Co founder Trilegal and Co founder Trustbridge Rule of Law Foundation.

On this blog:

• Electricity reforms in the economic strategy of Tamil Nadu, 7 March 2025.
• Improving electricity regulation in Tamil Nadu, 9 February 2025.
• Offshore wind in Tamil Nadu: from potential to reality, 13 January 2024.
• The difficulties of asset monetisation in the transmission sector, 9 January 2024.
• Reducing challenges to arbitration awards: lessons from court data, 26 October 2023.
• Threats to legal certainty in government contracting by electricity distribution companies, 10 June 2022.
• Implications of free transmission of renewable energy, 19 April 2022.
• Energy transition investment in India and in the world, 30 March 2022.
• The lowest hanging fruit on the coconut tree: India's climate transition through the price system in the power sector, 19 November 2021.