Stock Manipulation: SEBI Fines Decipher Labs Promoters Rs95 Lakh, Orders Rs10.2 Crore Disgorgement

Moneylife Digital Team 04 August 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has barred Decipher Labs Ltd (formerly Combat Drugs Ltd) from the securities market for one year, after finding it guilty of issuing misleading corporate announcements and facilitating insider trading.

The market regulator has also imposed hefty penalties and market access bans on two senior executives. Decipher Labs’ executive director and promoter Janakiram Ajjarapu was fined Rs60 lakh, debarred for three years and ordered to disgorge unlawful gains of Rs7.90 crore. Director Sushant Mohan Lal was fined Rs35 lakh, barred for three years, and directed to disgorge Rs2.30 crore.

In his order, N Murugan, SEBI’s chief general manager (CGM), said the case involved “fraudulent individuals manipulating vulnerable investors into trading at inflated prices, causing financial losses.” He added that senior management “abused their positions, disregarded legal obligations, and engaged in fraudulent, manipulative, and unfair practices,” showing “blatant disregard for trust, integrity, and corporate governance principles.”

The violations relate to trading in Decipher Labs shares between 12 November 2021 and 11 January 2022, during which the company’s promoter shareholding fell from 45.94% to 39.01%.

On 1 December 2021, Decipher Labs announced a planned expansion into advanced IT services. Days later, Mr Ajjarapu appeared in a YouTube interview that generated significant investor excitement, sending the stock price soaring.

However, SEBI found no credible evidence to support the claimed expansion. The company’s revenue had actually declined, contradicting its own narrative. No concrete steps or regulatory filings backed the announcement.

Within weeks of the price surge, Mr Ajjarapu and Mr Lal sold over 16% of their holdings in late December 2021 — without obtaining proper pre-clearance as required under SEBI’s Prohibition of Insider Trading (PIT) Regulations. The regulator noted that pre-clearance requests were incomplete and submitted when the compliance officer was hospitalised.

SEBI observed that false and exaggerated claims about Decipher Labs — including purported investments from Facebook and Tata — were circulated on YouTube and social media. The company failed to issue clarifications or distance itself from the misleading content, fuelling market speculation.

The regulator concluded that Mr Ajjarapu and Mr Lal acted in concert: issuing a misleading announcement, allowing market hype to build, then offloading shares at inflated prices. Following their trades, the stock price plunged by 36%, and retail investor participation collapsed from nearly 40,000 investors to far lower levels.

Internal penalties imposed by the company, Rs5 lakh on Mr Ajjarapu and Rs2 lakh on Mr Lal, were dismissed by SEBI as token fines lacking legal basis.

Decipher Labs’s company secretary (CS) Kumar Raghavan was found to have failed in his duty to ensure accurate and board-approved disclosures. While he claimed he was hospitalised and acted on promoter instructions, SEBI says he did not conduct adequate due diligence before issuing the corporate announcement. Given his health condition and lack of direct involvement in the trades, he received only a warning.

SEBI held that Mr Ajjarapu and Mr Lal deliberately violated multiple provisions under the SEBI Act, the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, and the Listing Obligations and Disclosure Requirements (LODR) and PIT Regulations. Their defence of ignorance was rejected, as both were senior signatories to the company’s own code of conduct.

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