Description

SEBI adjudication order imposing penalties on Mukund Dubey and Nitesh Singh, former directors of dissolved company Ankitkaran Properties Private Limited, for executing non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015.

Summary

SEBI issued an adjudication order against Mr. Mukund Dubey (PAN: BEFPD3168A) and Mr. Nitesh Singh (PAN: DQEPS3993H), directors of the now-dissolved Ankitkaran Properties Private Limited (APPL), for their alleged role in executing non-genuine reversal trades in illiquid stock options at BSE. The original proceedings against APPL were disposed of after the company was struck off and dissolved, but SEBI invoked Section 248(7) of the Companies Act, 2013 to continue enforcement action against the directors personally.

Key Points

  • SEBI investigated large-scale reversal trades in the stock options segment of BSE covering the period April 1, 2014 to September 30, 2015
  • A total of 2,91,744 trades — representing 81.40% of all trades in BSE’s stock options segment during the investigation period — were found to be allegedly non-genuine
  • These trades artificially inflated trading volumes, creating a false or misleading appearance of market activity
  • APPL was identified as one of the entities involved in executing such reversal trades
  • After APPL was struck off the RoC register and dissolved, SEBI initiated fresh proceedings against its directors under Section 248(7) of the Companies Act, 2013
  • The Adjudicating Officer Mr. N Hariharan was appointed on August 17, 2022 to conduct the inquiry
  • Noticees are alleged to have violated Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations)

Regulatory Changes

No new regulatory changes are introduced. This order applies existing provisions:

  • Section 15-I of the SEBI Act, 1992
  • Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995
  • Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of PFUTP Regulations, 2003
  • Section 248(7) of the Companies Act, 2013 — enabling continued enforcement of liabilities against directors of a dissolved company

Compliance Requirements

  • Directors and officers of companies must ensure all trades executed on behalf of their entities are genuine and do not create artificial volumes or misleading market appearances
  • Dissolution of a company does not extinguish personal liability of directors for regulatory violations committed while in office
  • Entities and individuals involved in stock options trading must avoid reversal trades and other manipulative strategies prohibited under PFUTP Regulations

Important Dates

  • April 1, 2014 – September 30, 2015: Investigation period for illiquid stock options trading at BSE
  • October 28, 2021: Original adjudication order passed against APPL (disposed of due to company dissolution)
  • August 17, 2022: Appointment of Adjudicating Officer Mr. N Hariharan for proceedings against individual directors
  • April 2026: Issuance of this adjudication order (Order/AK/DS/2026-27/32357-32358)

Impact Assessment

This order has moderate market impact as it pertains to historical manipulation in the illiquid stock options segment rather than ongoing market operations. However, it carries significant enforcement precedent value: SEBI’s use of Section 248(7) of the Companies Act signals that dissolved companies cannot shield their directors from regulatory penalties. This may deter directors from using company dissolution as a strategy to escape SEBI enforcement. The order reinforces SEBI’s commitment to market integrity in the derivatives segment and its willingness to pursue individuals even years after the conduct occurred.

Impact Justification

Enforcement action against individuals for historical market manipulation in illiquid stock options segment; significant as it establishes precedent for pursuing directors of dissolved companies under Section 248(7) of Companies Act, 2013.