Description

SEBI adjudication proceedings against Dr. Anil Arora (erstwhile CFO), Mr. Bharat Bhushan Mehta (then CFO), and Mr. Ashok Kumar Shukla (then Company Secretary) for alleged insider trading violations in Mawana Sugars Limited during September 2017 to February 2018.

Summary

SEBI has issued Adjudication Order No. Order/SM/SM/2025-26/31838-31840 under Section 15-I of SEBI Act, 1992 against three former officials of Mawana Sugars Limited (MSL) for alleged violations of SEBI (Prohibition of Insider Trading) Regulations, 2015. The investigation covered the period from September 1, 2017 to February 28, 2018, examining whether trading by certain entities in MSL scrip was based on Unpublished Price Sensitive Information (UPSI). The Adjudicating Officer was appointed to inquire into violations under Sections 15HB and 15G of SEBI Act, 1992.

Key Points

  • Noticees Identified: Dr. Anil Arora (PAN: AAEPA2685B) - erstwhile CFO, Mr. Bharat Bhushan Mehta (PAN: ABOPM0768L) - then CFO, and Mr. Ashok Kumar Shukla (PAN: BKZPS1222E) - then Company Secretary and Compliance Officer
  • Investigation Period: September 1, 2017 to February 28, 2018
  • Alleged Violations: Trading based on UPSI in violation of SEBI PIT Regulations, 2015
  • Legal Basis: Proceedings initiated under Section 15-I of SEBI Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995
  • Adjudicating Officer: Initially Shri Amar Navlani (General Manager, SEBI), later replaced by current AO on September 19, 2025
  • Show Cause Notice: Issued on September 13, 2023 (Ref: SEBI/HO/EAD-5/AN/SM/37827/1-3/2023)

Regulatory Changes

This adjudication order does not introduce new regulatory changes but reinforces existing provisions under:

  • SEBI (Prohibition of Insider Trading) Regulations, 2015
  • Section 15HB and 15G of SEBI Act, 1992 regarding penalties for insider trading violations
  • SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995

Compliance Requirements

  • For Listed Companies: Ensure robust internal controls to prevent misuse of UPSI by insiders, particularly senior management and compliance officers
  • For Designated Persons: Strict adherence to trading window restrictions and disclosure requirements under PIT Regulations
  • For Compliance Officers: Enhanced vigilance in monitoring trades by insiders and maintaining proper records of UPSI
  • Code of Conduct: Companies must enforce stringent code of conduct for prevention of insider trading
  • Training and Awareness: Regular training programs for designated persons on UPSI handling and trading restrictions

Important Dates

  • Investigation Period: September 1, 2017 to February 28, 2018
  • Initial AO Appointment: June 30, 2023
  • Show Cause Notice Issued: September 13, 2023
  • AO Transfer/Reassignment: September 19, 2025
  • Order Date: December 17, 2025

Impact Assessment

Market Impact: High-profile enforcement action against senior officials of a listed sugar company demonstrates SEBI’s zero-tolerance approach to insider trading. This order serves as a deterrent to other market participants, particularly those in fiduciary positions with access to UPSI.

Operational Impact: Listed companies, especially their CFOs, Company Secretaries, and Compliance Officers, will face increased scrutiny of their trading activities during sensitive periods. This reinforces the need for:

  • Stronger internal surveillance mechanisms
  • Clear UPSI handling protocols
  • Regular audits of insider trading compliance
  • Enhanced disclosure frameworks

Sectoral Impact: The sugar industry and companies with similar governance structures must review their insider trading prevention mechanisms. The involvement of both the erstwhile and then CFO, along with the Compliance Officer, indicates systemic compliance issues that other companies should proactively address.

Legal Precedent: This case underscores that holding senior positions (CFO, Company Secretary) with fiduciary responsibilities does not exempt individuals from strict liability under PIT Regulations. The adjudication process demonstrates SEBI’s methodical approach to investigating and penalizing UPSI-based trading violations.

Impact Justification

High-severity enforcement action involving multiple senior officials of a listed company for insider trading violations under PIT Regulations 2015. Demonstrates SEBI's strict enforcement stance on UPSI misuse. Medium impact as it affects specific company officials rather than broader market regulations.