SEBI disposes of illiquid stock options case against dissolved firm

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has disposed of an adjudication proceeding in its long-running illiquid stock options matter, closing the case against Bansal Integrated Services Private Limited (PAN AACCB3482E) without imposing any penalty. The order, numbered Order/MS/KS/2026-27/32545 and dated 31 July 2026, was passed at Mumbai by adjudicating officer Medha Sonparote under Section 15-I of the SEBI Act, 1992, read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

The proceeding formed one strand of a very large SEBI investigation into trading in illiquid stock options on the Bombay Stock Exchange (BSE). Per the order, SEBI had observed "large scale reversal of trades in stock options" on the exchange, which it said created artificial volume, and it examined the trading of certain entities for the period 1 April 2014 to 30 September 2015. The regulator recorded that a total of 2,91,744 trades - about 81.40% of all trades in the BSE stock options segment during that window - were non-genuine, and that Bansal Integrated Services was among the entities alleged to have executed such reversal trades.

Crucially, SEBI did not reach any finding of wrongdoing against the company in this order. The adjudicating officer disposed of the case without going into its merits, because the company had been struck off the register of the Registrar of Companies and stood dissolved. As the order puts it, "it would not be appropriate to determine liability against a company which no longer exists." The show cause notice was discharged. Because the noticee company no longer exists and its correspondence was returned undelivered, no public response to the allegations is on record.

How the Scheme Worked

The mechanism at the centre of SEBI's wider illiquid stock options investigation, as the order describes it, is the reversal trade. According to the order, SEBI observed large-scale reversal of trades in the BSE stock options segment that led to the "creation of artificial volume". In a reversal trade, a party buys an options contract and then sells the same contract - often within a short interval - reversing the position so that the trade serves no genuine economic purpose beyond generating volume and a pre-arranged profit or loss between the counterparties.

Options on individual stocks were the chosen instrument precisely because many contracts were illiquid, with few real buyers or sellers, which made it easier for matched pairs of entities to transact among themselves and create a false or misleading appearance of trading. The order records that the resulting non-genuine trades produced artificial volumes and were therefore alleged to be "manipulative, deceptive in nature". SEBI characterised Bansal Integrated Services as one of the entities said to have indulged in these reversal trades during the investigation period.

The procedural history set out in the order is detailed. Following its investigation, SEBI issued a show cause notice dated 3 August 2022, served by SPAD and email, asking the company to explain why an inquiry and penalty should not follow. The notice also flagged the SEBI Settlement Scheme, 2022, under Regulation 26 of the SEBI (Settlement Proceedings) Regulations, 2018, giving the company an opportunity to settle. No response was received and the company did not avail itself of the scheme.

SEBI then issued a Post SCN Intimation dated 6 March 2024, drawing attention to a further settlement window, the SEBI Settlement Scheme, 2024, applicable from 11 March 2024 to 10 May 2024 and later extended to 10 June 2024 by a public notice dated 8 May 2024. That intimation, sent to the company's last known address, was returned undelivered. On checking the Ministry of Corporate Affairs records, the adjudicating officer found that the company had been struck off, which brought the proceeding to its close.

The Law Invoked

The allegations in the show cause notice were framed under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, commonly called the PFUTP Regulations. The order cites Regulations 3(a), (b), (c) and (d), which prohibit dealing in securities by fraudulent or manipulative means, and Regulations 4(1) and 4(2)(a), which bar manipulative and deceptive trading and the creation of a false or misleading appearance of trading in the market.

The penalty sought was under Section 15HA of the SEBI Act, 1992, the provision that allows a penalty for engaging in fraudulent and unfair trade practices. The adjudicating officer's power to hold the inquiry and decide the matter flows from Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, 1995.

The decisive provision, however, came from company law. The order reproduces Section 250 of the Companies Act, 2013, which sets out the effect of a company being notified as dissolved under Section 248: once dissolved, the company ceases to operate and its certificate of incorporation is deemed cancelled, except for realising amounts due and discharging liabilities. Relying on this and on the Delhi High Court's ruling in Commissioner of Income Tax vs. Vived Marketing Services (P) Ltd. (ITA No. 273/2009, dated 17 September 2009), the officer concluded that liability could not be fixed on an entity that no longer exists in the eyes of law.

What Happens Next

Because the proceeding was disposed of without a penalty, there is nothing to recover and no direction to enforce at this stage. The order is explicit, though, that closure is not necessarily permanent: should the company "stand revived or restored at any stage", SEBI may take a fresh decision to initiate proceedings. Struck-off companies can be restored to the register through the National Company Law Tribunal within the statutory period, so the file is closed rather than extinguished.

As a matter of standard procedure, an adjudication order that does impose a penalty can be challenged before the Securities Appellate Tribunal (SAT), and thereafter on a question of law before the Supreme Court. Here there is no adverse civil consequence for the noticee to appeal, since the show cause notice was discharged without any finding of violation. It is worth restating that the characterisations in the show cause notice remained allegations that were never tested on their merits in this order; SEBI made no determination that the company had in fact manipulated the market.

What It Means

For ordinary investors, the order is a window into two things: the scale of the illiquid stock options episode, and a real limit on regulatory enforcement. SEBI's own numbers - 2,91,744 non-genuine trades, more than four-fifths of BSE stock options activity in the investigation period - show how a thinly traded market segment can be used to generate volume that has nothing to do with genuine price discovery. Reversal trades of this kind have often been examined for their use in booking artificial profits or losses, and SEBI has pursued hundreds of entities in this single matter over several years.

The limitation is equally instructive. When a corporate noticee is struck off before proceedings conclude, a monetary penalty may become legally impossible to impose, because there is no longer a person in law to bear it. This is one reason regulators increasingly pursue the individuals behind entities as well as the entities themselves. It is not a comment on any person's conduct here; the order simply reflects that a dissolved company cannot be penalised.

The practical takeaway is about verification, not fear. Retail investors can confirm whether a broker, research analyst or investment adviser is registered with SEBI through the intermediary lookups on the SEBI website, and can raise grievances on the SCORES platform. Unusual volume in an otherwise illiquid contract is a signal to be cautious rather than to chase, and this order is a reminder of why exchanges and the regulator watch such patterns closely.

FAQ

What exactly did SEBI order?

SEBI's adjudicating officer disposed of the adjudication proceeding against Bansal Integrated Services Private Limited in the illiquid stock options matter and discharged the show cause notice dated 3 August 2022 without imposing any penalty, because the company had been struck off and stood dissolved. The order is dated 31 July 2026.

Did SEBI find the company guilty of manipulation?

No, SEBI made no such finding. The show cause notice contained allegations, not findings. The adjudicating officer expressly disposed of the case "without going into the merits", so SEBI reached no conclusion that the company had manipulated the market. Under law, allegations are tested through due process; here that process was not completed because the noticee no longer exists.

Can the order be appealed?

An adjudication order imposing a penalty can be appealed to the Securities Appellate Tribunal, usually within 45 days, and then to the Supreme Court on a question of law. In this case there is no penalty or adverse finding to appeal, as the notice was discharged. SEBI has noted it may act afresh if the company is later revived or restored.

What are illiquid stock options and reversal trades?

Illiquid stock options are options contracts on individual shares that trade rarely, with few genuine buyers or sellers. A reversal trade is where a party buys and then sells the same contract in quick succession, undoing its position. Per SEBI's order, such trades were non-genuine and created artificial volume and a false appearance of trading.

How can I check if my broker or adviser is registered with SEBI?

Use the registered-intermediary search tools on the SEBI website to confirm that a broker, research analyst, investment adviser or portfolio manager holds a valid SEBI registration. Complaints against registered intermediaries can be filed on SEBI's SCORES platform. Verifying registration before investing is the simplest protection against unregistered operators.

Where can I read the official order?

The full adjudication order is published on SEBI's enforcement orders page and sets out the reference number, the investigation period, the provisions invoked and the reasons for disposal. The link appears in the source note below.

This report is based on the official SEBI adjudication order dated 31 July 2026 (Order/MS/KS/2026-27/32545) passed by SEBI's adjudicating officer in the matter of trading in illiquid stock options on the BSE.