Authority: Securities and Exchange Board of India (SEBI)

Order Date: August 21, 2026

Case Overview

The proceedings were initiated against Modex International Securities Ltd (MISL/Noticee No. 1), a SEBI-registered stock broker (INZ000211434), and its whole-time directors Mr. Dharmendra Kumar Arora (Noticee No. 2) and Mr. Pavan Kumar Sachdeva (Noticee No. 3). The case originated from an NSE inspection and subsequent forensic audit covering April 1, 2017 to January 24, 2020, which revealed serious violations.

SEBI passed an ex-parte ad-interim order on April 30, 2020, restraining the Noticees from accessing securities markets and freezing their assets. A confirmatory order was issued on September 11, 2020, continuing these directions. The Show Cause Notice dated July 5, 2021 alleged multiple violations including diversion/misappropriation of client securities and funds, misrepresentation of books and accounts, and making periodic payments to clients resembling portfolio management services without registration.

Key allegations included:

  • Shortfall of client securities worth INR 95.29 crore across 288 scrips
  • Misappropriation of client securities worth INR 113.03 crore across 323 scrips
  • Misappropriation of client funds totaling INR 136.29 crore
  • Shortfall in available funds of INR 79.61 crore to meet client obligations
  • Falsification of Register of Securities through manual adjustments worth INR 116.65 crore
  • Making periodic payments of INR 16.87 crore to clients despite F&O losses

Final Outcome

SEBI found the Noticees guilty of multiple violations including:

  • Section 12(1) of SEBI Act, 1992 read with Rule 8(1)(f) and 8(3)(f) of SCR Rules, 1957
  • Regulations 3 and 14(1)(a) of SEBI (Portfolio Managers) Regulations, 1993
  • SEBI Circulars dated November 18, 1993; April 21, 2004; April 17, 2008; and September 26, 2016
  • Rule 15 of SCR Rules, 1957 read with Regulation 17 of SEBI (Stock Brokers) Regulations, 1992
  • Clauses A(1), A(2), A(3), and A(4) of Code of Conduct under Schedule II of Stock Broker Regulations
  • Section 12A of SEBI Act read with Regulations 3(d), 4(1), 4(2)(f), 4(2)(m) and 4(2)(p) of PFUTP Regulations

Directions issued:

  • NSE designated as lead exchange for settlement of client claims
  • Continued restraint from securities market until claim settlement completion
  • Assets of Noticees to be used for client repayment under NSE supervision
  • Monetary penalties imposed: INR 7,00,000 each on Modex and Mr. Pavan Kumar Sachdeva
  • Proceedings against Mr. Dharmendra Kumar Arora abated due to his death
  • Depositories and banks to unfreeze accounts only for claim settlement purposes

The order requires penalty payment within 45 days and directs all market infrastructure institutions to cooperate with NSE for investor claim settlement.

Topics: Client Fund Misappropriation, Regulatory Action, Investor Protection