Short delivery, when a seller fails to deliver the shares to the buyer by the agreed settlement date, can have significant consequences for sellers in the stock market. Here's a detailed look at how short delivery impacts sellers:

1.     Penalty Charges: Sellers who fail to deliver the promised shares face financial penalties imposed by the exchange. These penalties are intended to discourage such failures and compensate for the inconvenience caused to the buyer. The penalty amount varies depending on the market regulations but is generally a percentage of the transaction value.

2.     Potential Legal Actions: Sellers who do not address the penalty or settle the close-out sums may face legal consequences. This could include legal proceedings initiated by the exchange or regulatory authorities to recover the dues. Non-compliance can lead to further financial losses and damage to the seller's reputation in the market.

Example Scenario:

·        Short Delivery: A seller agrees to sell 100 shares of Company XYZ but fails to deliver them by the T+2 settlement date.

·        Penalty Charges: The exchange imposes a penalty on the seller, for instance, 1% of the transaction value. If the transaction value is ₹10,000, the penalty would be ₹100.

·        Auction and Close-Out: The exchange conducts an auction to buy the undelivered shares on T+2 day. If the shares are bought at a higher price (e.g., ₹110 per share instead of the original ₹100), the seller must cover this price difference.

·        Legal Actions: If the seller does not pay the penalty or the price difference, the exchange may initiate legal proceedings to recover the amount. This could lead to additional legal costs and potential sanctions.