SEBI issues recovery notice in Rajesh Exports front-running case

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has issued a Notice of Demand dated 27 July 2026, under Recovery Certificate No. 9252 of 2026, against Chiranggi Irish Shah (PAN CACPS1824G) to recover an unpaid penalty of Rs 5,00,000. The demand enforces a monetary penalty first imposed by SEBI Adjudication Order No. Order/AK/DS/2026-27/32398-32400 dated 29 April 2026, passed by Adjudicating Officer Amit Kapoor. The same order imposed identical penalties of Rs 5 lakh each on Navnit Gadoya (PAN AQNPG4727F) and Surbhi Aggarwal (PAN BNIPA1542D).

One point deserves to be stated plainly at the outset, because it is easy to misread. The penalty being recovered was not imposed for front-running. SEBI's adjudication order held only that the three named persons had failed to furnish information sought by its Investigating Authority, in breach of Section 11C(3) of the SEBI Act, 1992. The underlying investigation was examining alleged front-running of large investors' trades in the shares of Rajesh Exports Ltd, but that allegation was set out in the show-cause notice and has not been adjudicated in this order. The order is appealable to the Securities Appellate Tribunal (SAT).

The recovery notice is a standard next step. Under the order, the penalty was payable within 45 days; the order recorded that failure to pay could trigger recovery proceedings under Section 28A of the SEBI Act, including attachment and sale of movable and immovable property. Recovery Certificate No. 9252 of 2026 is that Section 28A action against one of the three persons.

On the record, the named parties contested the regulator's case during the investigation. Per the order, Ms Shah denied any relationship with the other two persons, and Ms Aggarwal likewise denied a relationship; none of the three appeared at the hearing, and the matter was decided ex-parte on the material available.

How the Scheme Worked

The account that follows is the allegation as SEBI's show-cause notice frames it, summarised in the order. It has not been separately adjudicated, and the reader should hold it as an allegation.

According to the order, SEBI investigated the matter over the period 1 January 2023 to 31 October 2023. It observed 38 alleged front-running instances in the equity segment of the National Stock Exchange, in which the three persons were said to have front-run the trades of large investors, described in the order as "Big Clients", in the shares of Rajesh Exports Ltd, allegedly making a profit of Rs 1.99 crore. Front-running, in plain terms, is trading ahead of a large order that one knows is coming: an entity buys first, lets the big order push the price up, and sells into that move.

The order describes the alleged mechanics in some detail. The three persons are said to have traded through the broker LFC Securities Pvt. Ltd using internet-based trading. The large investors placed their orders through other brokers: one, referred to as Mr Sandeep, placed orders in Rajesh Exports through Ventura Securities Ltd, where a dealer was said to key in the trades; another, a Mauritius-based foreign portfolio investor, is said to have given instructions through a Microsoft Teams chat application provided by its broker, MIB Securities India Pvt. Ltd. SEBI observed that the three persons had placed their orders on the same scrip days as the large investors.

The order records the connections SEBI says tied the three together: frequent call records, bank transactions, and identical MAC ID and IP addresses used to place orders, with a common directorship at Weiz Mann Securities Pvt. Ltd also noted for one person. On the wider trading pattern, the order states that the three, "who were connected to each other", collectively day-traded 38 unique scrips and earned a net profit of about Rs 6.08 crore during the period, of which Rs 4.06 crore came from day trading in Rajesh Exports.

The procedural history is set out in the order. A show-cause notice was issued on 30 December 2025; the Adjudicating Officer had been appointed on 1 December 2025. The order records that none of the three replied to the notice or appeared at the hearing, and that repeated summonses and emails seeking information went unanswered, were answered late, or, per the order, drew "incorrect information". It was this conduct, the failure to furnish information to the Investigating Authority, that the order adjudged.

The Law Invoked

The order cites the exact provisions it rests on. The charge that was established is a breach of Section 11C(3) of the SEBI Act, which empowers the Investigating Authority to require any intermediary or person associated with the securities market to furnish information or produce documents relevant to an investigation. The corresponding penalty was imposed under Section 15A(a) of the SEBI Act, which applies where a person fails to furnish information, or furnishes false, incorrect or incomplete information, and provides for a penalty of not less than Rs 1 lakh, extending to Rs 1 lakh for each day of default, subject to a maximum of Rs 1 crore.

The adjudication itself was conducted under Section 15-I of the SEBI Act read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995. In fixing the amount, the order applied the factors in Section 15J of the SEBI Act, namely disproportionate gain, loss to investors, and the repetitive nature of the default. The recovery now under way is grounded in Section 28A, which lets SEBI recover unpaid amounts as if they were arrears of tax. The order also relies on the Supreme Court's judgement in SEBI vs Bhavesh Pabari on the reasoning behind penalty.

What Happens Next

The adjudication order is appealable. A person aggrieved by a SEBI adjudication order may appeal to the Securities Appellate Tribunal under Section 15T of the SEBI Act within the prescribed period, and thereafter to the Supreme Court on a question of law. There is no indication in the record whether any appeal has been filed.

On recovery, Section 28A gives the SEBI Recovery Officer powers similar to a tax authority: attachment and sale of movable and immovable property, attachment of bank accounts, and, in appropriate cases, arrest. Recovery Certificate No. 9252 of 2026 sets that machinery in motion for the Rs 5 lakh penalty against Ms Shah, along with any interest.

Separately, the front-running allegation described in the show-cause notice remains just that, an allegation. Any finding on it would require a distinct proceeding, with its own notice, hearing and appealable order. Nothing in the 29 April 2026 order records a finding of front-running against the three persons; it penalised only their failure to cooperate.

What It Means

For an ordinary investor, this matter is a useful window into how SEBI's market surveillance works and why cooperation with it is not optional. The regulator reconstructs suspected front-running from order-and-trade data, call records, bank trails and device fingerprints such as shared IP and MAC addresses. The order shows how central the requested information is: SEBI penalised the failure to furnish it precisely because that silence, per the order, hampered its investigation into whether the trades were connected to the large investors.

The practical takeaway is about verification and process. Front-running erodes the fair price a normal buyer or seller gets, which is why it is policed. If you deal through a broker or research service, you can confirm its registration on SEBI's public "Intermediaries" search and cross-check any SEBI registration number before acting on a tip. Be wary of anyone promising sure-fire gains from advance knowledge of large trades; that is the exact conduct regulators pursue. And the register of enforcement is public: SEBI's orders and recovery notices are published on its website, so an entity's regulatory history can be checked before you commit money.

FAQ

Does this order mean the three named persons are guilty of front-running?

No. The order dated 29 April 2026 penalised them under Section 11C(3) of the SEBI Act for failing to furnish information to SEBI's investigators, not for front-running. The front-running described in the show-cause notice is an allegation that has not been adjudicated in this order. Any such finding would need a separate, appealable proceeding, and the parties would retain their appeal rights. More broadly, an allegation is not a finding of guilt: those named are presumed innocent until proven guilty, and due process continues.

What exactly did SEBI order?

SEBI imposed a penalty of Rs 5,00,000 each on Navnit Gadoya, Chiranggi Irish Shah and Surbhi Aggarwal under Section 15A(a) of the SEBI Act for not cooperating with its investigation. When the amount was not paid within 45 days, SEBI issued a recovery notice, Recovery Certificate No. 9252 of 2026 dated 27 July 2026, to recover the sum from Ms Shah.

Can the order be appealed?

Yes. A SEBI adjudication order can be appealed to the Securities Appellate Tribunal under Section 15T of the SEBI Act, and onward to the Supreme Court on a question of law. The record does not indicate whether an appeal has been filed in this matter.

What is front-running, in simple terms?

Front-running is trading ahead of a large order that one knows is coming. An entity buys the shares first, lets the big order move the price, and then sells into that move for a profit. It is treated as market abuse because it takes advantage of confidential information about others' impending trades.

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

Use the "Intermediaries", registered "Investment Adviser" and "Research Analyst" search tools on the SEBI website, and match the SEBI registration number the intermediary quotes. If an entity cannot show a valid registration, or its details do not match, treat that as a warning sign.

Where can I read the official order?

The recovery notice and the underlying adjudication order are published on SEBI's enforcement pages at sebi.gov.in, linked in the source note below.

This report is based on the official SEBI Notice of Demand dated 27 July 2026 under RC No. 9252 of 2026 and the underlying SEBI adjudication order dated 29 April 2026. It was surfaced through SEBI's enforcement feed.