Description

SEBI adjudication order against directors of Aconite Commotrade Private Limited for alleged manipulation through non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015.

Summary

SEBI has issued an adjudication order against Mr. Amar Nath Das (PAN: AMNPD2486Q) and Mr. Rajesh Kumar Agarwal (PAN: AFFPA4486E), directors of Aconite Commotrade Private Limited (ACPL), for alleged violations of PFUTP Regulations. The proceedings were initiated after SEBI investigation revealed large-scale reversal of trades in illiquid stock options at BSE during April 1, 2014 to September 30, 2015. Despite ACPL being struck-off from RoC records, SEBI invoked Section 248(7) of Companies Act 2013 to hold directors personally liable for the company’s alleged market manipulation activities.

Key Points

  • Investigation covered trading period from April 1, 2014 to September 30, 2015 in stock options segment at BSE
  • Total of 2,91,744 trades comprising 81.40% of all trades in stock options segment during the investigation period were allegedly non-genuine
  • ACPL was identified as one of multiple entities executing reversal trades creating artificial volume
  • Initial adjudication order against ACPL dated September 30, 2021 was disposed of due to company being struck-off from RoC
  • SEBI re-initiated proceedings against directors under Section 248(7) of Companies Act 2013
  • Mr. N Hariharan appointed as Adjudicating Officer on August 17, 2022
  • Alleged violations include Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations
  • Trades alleged to be manipulative, deceptive and creating false or misleading appearance of trading

Regulatory Changes

No new regulatory changes. The order applies existing PFUTP Regulations and reinforces the principle that directors remain liable for company violations even after company dissolution as per Section 248(7) of Companies Act 2013.

Compliance Requirements

  • Directors and officers exercising powers of management remain personally liable for violations committed during their tenure even if the company is subsequently dissolved
  • Market participants must ensure trades in illiquid stock options are genuine and not intended to create artificial volumes
  • Reversal trades that create false appearance of trading activity constitute violations of PFUTP Regulations
  • Entities and their directors can face enforcement action for manipulative trading practices in stock options segment

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Initial Order against ACPL: September 30, 2021
  • Adjudicating Officer Appointment: August 17, 2022
  • Current Order Date: January 2026 (document reference)

Impact Assessment

Market Impact: The order addresses historical manipulation in the illiquid stock options segment at BSE where over 81% of trades during the investigation period were allegedly non-genuine. This demonstrates SEBI’s focus on maintaining market integrity in options trading.

Legal Precedent: The case establishes that company dissolution does not shield directors from liability for violations committed during their tenure. SEBI can pursue enforcement actions against directors personally under Section 248(7) of Companies Act 2013.

Regulatory Signal: Strong deterrent message to directors that they cannot escape liability through company dissolution. Reinforces accountability of management for fraudulent trading practices and market manipulation.

Operational Impact: Market participants and directors should be aware that liability for PFUTP violations extends beyond company existence and follows individuals who were exercising powers of management during the violation period.

Impact Justification

Enforcement action against individual directors for historical manipulation in illiquid stock options segment, demonstrating SEBI's continued pursuit of violations even after company dissolution under Section 248(7) of Companies Act 2013.