SEBI attaches assets in DU Digital scrip manipulation case

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has moved to attach the bank accounts and assets of several individuals it has held responsible for manipulating the shares of DU Digital Technologies Limited (now DU Digital Global Limited), a company listed on the SME platform. In a set of notices of attachment dated 22 July 2026, issued under Recovery Certificate Nos. 9176 to 9181 of 2026, the regulator named defaulters including Rathod Mahendrkumar (RC No. 9181), Sanjay Savjibhai Parmar (RC No. 9180), Madhu Kumari Bairwa (RC No. 9178), Vidhi Nikunj Shah (RC No. 9177) and Nikunj Sureshchandra Shah (RC No. 9176), all "in the matter of trading activities of certain entities in the scrip of DU Digital Technologies Limited".

The attachment action enforces an earlier order. On 31 December 2025, SEBI's quasi-judicial authority N. Murugan passed a final order (reference QJA/MN/IVD/ID7/31947/2025-26) against a group of connected entities, directing them to disgorge unlawful gains of Rs.98,78,054.45 with interest at 12% a year, imposing monetary penalties totalling roughly Rs.1.85 crore, and barring them from the securities market for periods ranging from one year to 30 months. When those sums were not paid within the 45 days the order allowed, SEBI's recovery division began recovery proceedings, of which the July attachment notices are the latest step.

SEBI's recovery machinery lets it collect unpaid dues as if they were arrears of land revenue, including by attaching bank accounts, demat holdings and other property of the defaulters. The parties contested the case at the show-cause stage; the order records that several noticees did not appear before the investigating authority, while the sole stockbroker named, Sun Flower Broking Private Limited, denied the allegation against it and was cleared.

How the Scheme Worked

According to the order, SEBI began investigating DU Digital after its shares, listed on the SME platform of the NSE on 26 August 2021, rose 1,392.5% over the investigation period of 26 August 2021 to 31 March 2023, touching a high of Rs.296.05 on 11 November 2022 before closing the period at Rs.179.10. SEBI divided the period into four "patches"; it found no manipulative pattern in the first, but concluded that a group of connected entities drove artificial price and volume gains through the next three.

The order says the 26 connected entities were linked by common mobile numbers, a common Mac-id, a common IP address and frequent fund flows between them, and that they "acted as a 'group'". Their method, per the order, combined synchronised trades, circular trades and orders placed just above the last traded price (LTP). SEBI found the connected entities contributed 45.61%, 37.94% and 39.50% of the total market positive LTP across patches 2, 3 and 4 respectively - in effect, repeatedly nudging the quoted price higher.

The order also points to the group's grip on the first trade of the day, which sets an early reference price. In patch 3, SEBI found, 44 of the 47 first trades placed by connected entities as buyers were with other members of the same group - 93.61% - and in patch 4 all 21 such first trades were among themselves. On the new high price analysis, the entities contributed 30.29%, 22.52% and 100% of the market's new highs across the three patches.

Volume was inflated too, the order says. Synchronised trades among the connected entities made up as much as 24.40% of total market volume in patch 3, while circular trades between them accounted for 47.72% of total market volume across the 26 trading days on which such trades occurred. SEBI characterised the conduct as "a calculated, repetitive, and coordinated scheme" that created a false impression of demand. The regulator dropped proceedings against one noticee, Babubhai Somabhai Rathod, after a death certificate showed he had died on 23 February 2023, before the proceedings began.

The Law Invoked

SEBI held that the liable entities had violated Section 12A of the SEBI Act, 1992 read with Regulations 3(a), (b), (c) and (d) and 4(1) and 4(2)(a), (b), (d), (e), (g) and (n) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. Section 12A prohibits the use of manipulative or deceptive devices in dealing in securities; Regulations 3 and 4 of the PFUTP Regulations prohibit manipulative and deceptive practices and specifically catch trades that create a false or misleading appearance of trading and manipulate the price of a security.

For those violations, the order imposes penalties under Section 15HA of the SEBI Act - the penalty for fraudulent and unfair trade practices, which the order notes is "not less than five lakh rupees" and may extend to Rs.25 crore or three times the profit made, whichever is higher. The order additionally invokes Section 15A(a), for failure to furnish information sought by the investigating authority, against three noticees, and Section 15HB, the residual penalty provision, against several others.

The directions themselves were issued under SEBI's powers in Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the Act, read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995. The disgorged money, once recovered, is to be credited to the Investor Protection and Education Fund referred to in Section 11(5) of the Act.

What Happens Next

A SEBI order of this kind is a regulator's finding in its own quasi-judicial proceedings, not a criminal conviction by a court, and it is appealable. Any of the named parties may challenge the 31 December 2025 order before the Securities Appellate Tribunal (SAT), and from there, on a question of law, before the Supreme Court. Until such an appeal succeeds, the order stands and is enforceable.

The July 2026 attachment notices are part of that enforcement. Because the disgorgement and penalty amounts were not paid within the 45-day window the order set, SEBI issued recovery certificates and began attaching the defaulters' assets. Attached amounts can be recovered from bank accounts, demat holdings and other property, and the market debarments run for their stated periods from the date of the order. Recovery of the disgorgement is separate from the debarment; a defaulter who pays does not shorten the ban, and a debarred party who appeals does not automatically halt recovery unless the tribunal stays it.

What It Means

For ordinary investors, the DU Digital case is a reminder that eye-catching gains on thinly traded SME-platform stocks can be manufactured rather than real. The order describes a textbook pattern: a small, connected group trading largely among itself, setting the day's opening price, placing orders fractionally above the last traded price and matching trades to create the look of demand, while wider retail buyers are drawn in at inflated levels.

There are practical checks. SME stocks trade in far lower volumes than main-board shares, and a price that multiplies in a matter of months on a modest float deserves scepticism rather than a fear of missing out. Investors can verify that an intermediary is registered using the "Intermediaries" search on SEBI's website, and can read enforcement orders to see which entities and brokers a regulator has flagged.

It is also worth being clear about what an attachment achieves. It does not return money to investors who bought at manipulated prices; it recovers unlawful gains for a public fund and bars those held liable from the market. The stronger protection is to avoid the trade in the first place.

FAQ

What exactly did SEBI order?

In a final order dated 31 December 2025, SEBI held a group of connected entities liable for manipulating DU Digital's share price, directed disgorgement of about Rs.98.78 lakh with 12% interest, imposed penalties totalling roughly Rs.1.85 crore, and barred them from the securities market for one year to 30 months. The July 2026 notices attach assets to recover those unpaid sums.

Does the SEBI order mean the people named are criminals?

No. A SEBI order is a market regulator's finding in its own quasi-judicial proceedings, not a criminal conviction by a court. It is appealable to the Securities Appellate Tribunal, and the named parties retain that right. SEBI cleared the one broker named, Sun Flower Broking, finding the charge against it "not proved".

Can the order be appealed?

Yes. Any aggrieved party may appeal a SEBI order to the Securities Appellate Tribunal within the limitation period, and may pursue a further appeal to the Supreme Court on a question of law. Until an appellate authority stays or sets aside the order, it remains in force and SEBI can continue recovery.

What is a notice of attachment?

It is a step in SEBI's recovery process. When a person does not pay the amounts a SEBI order directs, the regulator issues a recovery certificate and can attach bank accounts, demat holdings and other property to recover the dues, much as tax arrears are recovered.

How can I check if my broker or scheme is registered?

Use the "Intermediaries" search on the SEBI website (www.sebi.gov.in) and the stock exchanges' registers to confirm a broker's registration, and check company filings and enforcement orders for any regulatory action. Be especially cautious with low-volume SME-platform stocks showing very large, rapid price rises.

Where can I read the official order?

SEBI publishes its actions under Enforcement on www.sebi.gov.in. The DU Digital final order dated 31 December 2025 and the July 2026 recovery and attachment notices are available there.

This report is based on SEBI's notice of attachment dated 22 July 2026 under RC No. 9181 of 2026 and the underlying SEBI final order dated 31 December 2025 in the DU Digital Technologies matter, both published on the regulator's website.