New Delhi, Jan 10 (PTI) Markets regulator Sebi on Friday came out with a procedure for seeking a waiver or reduction of interest concerning recovery proceedings initiated by it for failure to pay penalty.

Under this, Sebi said the applicant's requests for waiver/reduction is required to be submitted to the relevant recovery officer, with documentation supporting the fulfilment of three criteria from Section 220(2A) of the Income Tax Act, 1961.

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Section 220(2A) allows the waiver or reduction of this interest under specific conditions.

The criteria include payment of such an amount causing genuine hardship to the applicant; default was due to circumstances beyond the applicant's control and the applicant has cooperated in any related inquiry.

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In its circular, Sebi said applications are allowed only if the notice of demand has already been served and the principal amount due is fully paid.

The Sebi's recovery officer will forward the application to the competent authority, which will take a decision within 12 months.

Further, pending applications at the time of this circular's issuance will also be addressed within 12 months.

If the application is rejected partially or fully, the applicant should be given a chance to be heard.

The Sebi and related laws (Sebi Act, SCRA, and Depositories Act) allow recovery of outstanding dues as per certain provisions of the Income Tax Act, 1961. These provisions apply to Sebi's recovery process with necessary modifications.

Section 220(2) of the Income Tax Act empowers Sebi's recovery officer to recover outstanding amounts, along with interest and Section 220(2A), allows the waiver or reduction of this interest under specific conditions.

The regulator has delegated this power to a panel of executive directors for interest amounts under Rs 2 crore and to a panel of whole-time members for amounts above the threshold.

Further, waiver or reduction is not allowed if interest is for failure to pay Sebi's fees by intermediaries and interest is related to amounts ordered for disgorgement or refund under Sebi Act provisions.

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