SEBI completes Rs 5.36 lakh recovery in front-running probe penalty case

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has recorded that it recovered a penalty in full from Navnit Gadoya, one of three people it penalised in April for not cooperating with an investigation into alleged front running in Rajesh Exports Ltd shares. A Completion of Recovery Certificate dated 12 November 2026, issued in Recovery Certificate (RC) No. 9286 of 2026, states that SEBI received the "entire outstanding dues of Rs. 5,36,000/-", which includes interest and costs.

The recovery certificate itself was drawn on 19 August 2026 for a sum of Rs 5,26,000 plus further interest, costs and charges. It was issued for non-payment of a penalty imposed by SEBI's Adjudicating Officer under Order No. Order/AK/DS/2026-27/32398-32400 dated 29 April 2026, in the matter titled "Front Running by Navnit Gadoya, Chiranggi Irish Shah and Surbhi Aggarwal".

With the dues received, the Recovery Officer declared the recovery completed under sub-section (1) of Section 28A of the SEBI Act, 1992, read with the relevant provisions of the Income-tax Act, 1961. The notice was signed in Mumbai by the Deputy General Manager and Recovery Officer of SEBI's Recovery and Refund Department.

An important distinction runs through this matter. The April adjudication order penalised the three people for failing to furnish information to SEBI's investigators, not for front running itself. The front-running trades remain allegations set out in SEBI's show-cause notice. According to the order, two of the three told SEBI during the investigation that they had no relationship with the other people being examined.

How the Scheme Worked

According to the adjudication order, SEBI investigated suspected front running in Rajesh Exports Ltd shares on the National Stock Exchange during an investigation period running from 1 January 2023 to 31 October 2023. Front running means trading ahead of a large pending order from another client, to profit from the price move that order is expected to cause.

The show-cause notice summarised in the order alleged 38 front-running instances in the equity segment, in which the three people were said to have traded ahead of orders placed by "Big Clients" and made a profit of Rs 1.99 crore. Per the order, one large client placed orders by telephone with a broker's dealer, while another, described as a Mauritius-based foreign portfolio investor, gave instructions through a chat application provided by its broker. The three people under examination are said to have placed their own orders through internet-based trading facilities with a different broker.

The order records that SEBI's investigators observed links between the three through "frequent call records, bank transactions, and identical Mac ID/IP addresses". It also records the investigation's analysis of their day trading: collectively, across 38 scrips, a net profit of Rs 6,07,87,599.80 during the period, of which Rs 4,06,17,184 came from day trading in Rajesh Exports. In 30 of the alleged front-running instances, the order says, they collectively earned Rs 1.39 crore, or 22.98 per cent of their net day-trading profit.

The chronology of the non-cooperation finding is set out in detail. SEBI emailed the three on 31 December 2024 and sent reminders on 31 January 2025. Summonses followed on 21 February 2025 and 5 March 2025, with a further summons on 4 April 2025. In Mr Gadoya's case, the order says a broker delivered physical copies of the summonses to his address on 11 April 2025, but no response was received. He replied on 3 December 2025, which the Adjudicating Officer found was "not reasonable" as it came more than nine months late, after the investigation had concluded.

For the other two, the order found that each initially submitted information that SEBI considered incorrect, denying any connection with the others, and then either did not answer or gave a vague reply when asked to clarify. SEBI appointed the Adjudicating Officer on 1 December 2025 and issued a show-cause notice on 30 December 2025. None of the three replied or appeared for a hearing, so the matter proceeded ex parte. On 29 April 2026 the officer imposed a penalty of Rs 5 lakh on each of them, payable within 45 days.

The Law Invoked

The adjudication order found a violation of Section 11C(3) of the SEBI Act, 1992. This provision allows SEBI's Investigating Authority to require any intermediary, or any person associated with the securities market, to furnish information, books, registers or documents relevant to an investigation. Failing to provide them, or providing incorrect information, is a breach.

The penalty was imposed under Section 15A(a) of the SEBI Act, which applies to anyone who fails to furnish a required document, return or report, or who furnishes false, incorrect or incomplete information. As quoted in the order, the penalty is not less than Rs 1 lakh and may extend to Rs 1 lakh for each day the failure continues, up to Rs 1 crore. In fixing the amount, the officer considered the factors in Section 15J, such as disproportionate gain, investor loss and repetition, and noted that no quantifiable gain or investor loss from the defaults themselves had been established. The proceedings were held under Section 15-I of the Act and the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

The recovery was carried out under Section 28A of the SEBI Act, which gives SEBI's Recovery Officer powers to recover unpaid penalties using Income-tax Act procedures. These include attaching bank accounts and property.

What Happens Next

For Mr Gadoya, the recovery certificate is now closed. The completion notice concerns only RC No. 9286 of 2026 and says nothing about the penalties imposed on the other two people in the same order. Any recovery action against them would appear as separate certificates in SEBI's recovery listings.

Orders of SEBI's Adjudicating Officers can, as a standard route, be challenged before the Securities Appellate Tribunal, and from there before the Supreme Court. The records reviewed for this report do not mention any appeal against the 29 April 2026 order.

The underlying front-running allegations stand apart from this penalty. The April order decided only whether the three failed to cooperate with investigators; it made no finding on whether they front-ran the large clients' trades. Those trading allegations remain untested claims from SEBI's show-cause notice unless and until a separate order addresses them. Due process applies to them in full.

What It Means

The case shows that SEBI treats non-cooperation as a separate, enforceable breach. A summons from SEBI's investigators is not optional. Ignoring it, answering many months late or giving answers the regulator considers incorrect can lead to a penalty on its own, even before any finding on the underlying trading. It also shows the recovery machinery at work: an unpaid penalty turned into a recovery certificate within about four months of the order, and the full amount with interest was collected within three months after that.

For ordinary investors, front running is a reminder that large orders can be exploited by anyone with early sight of them. If you place big trades through a dealer or relationship manager, ask your broker how order information is protected, and prefer placing orders yourself through the broker's own platform, where you get an electronic record of the time the order was placed. Check that your broker is registered by using the intermediary search on the SEBI website, and report any suspicion of misuse through SEBI's SCORES complaints portal.

Investors should also be careful with tips to "buy before a big client does". Trading on that kind of information can expose the person trading to SEBI action as well.

FAQ

Does this mean the people named are guilty of front running?

No. The adjudication order penalised the three only for failing to furnish information to SEBI's investigators under Section 11C(3). The front-running trades described in the show-cause notice are allegations, and the order made no finding on them. Two of the three denied to SEBI any connection with the others. Any further proceedings on the trading allegations would have to follow due process.

What exactly did SEBI do on 12 November 2026?

SEBI's Recovery Officer issued a Completion of Recovery Certificate in RC No. 9286 of 2026. It records that the full dues of Rs 5,36,000, including interest and costs, were received from Navnit Gadoya. The recovery proceedings in that certificate are therefore closed under Section 28A of the SEBI Act.

Why was the penalty Rs 5 lakh when the alleged profit was Rs 1.99 crore?

The penalty was for non-cooperation, not for front running. Under Section 15A(a), the amount is linked to the failure to furnish information. The Adjudicating Officer noted that no quantifiable gain or investor loss resulting from that default had been established. The Rs 1.99 crore figure is an allegation from the show-cause notice about the trades themselves.

Can the order be appealed?

As a standard route, orders of SEBI's Adjudicating Officers can be appealed before the Securities Appellate Tribunal, and further before the Supreme Court. The documents reviewed for this report do not mention any appeal. The recovery in Mr Gadoya's case has been completed.

How can I protect my own large orders from front running?

Place orders yourself through your broker's trading platform where possible, so you have a timestamped electronic record. Confirm that your broker is registered by using SEBI's intermediary search, and review your contract notes for unusual execution prices. If you suspect misuse, complain to the broker first and then on SEBI's SCORES portal.

Where can I read the official documents?

The completion notice is on SEBI's website under Enforcement, Recovery Proceedings. The adjudication order dated 29 April 2026 is published under Enforcement, Orders, Orders of AO. Both are linked below.

This report is based on SEBI's official Completion of Recovery Certificate No. 9286 of 2026 dated 12 November 2026 and the underlying SEBI adjudication order dated 29 April 2026.