Mumbai court orders FIR against ex-SEBI chief Madhabi Buch; SEBI to appeal

A Mumbai court on Saturday directed the Anti-Corruption Bureau (ACB) to register an FIR against ex-Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch, three of its current whole-time directors and two BSE officials in a listing fraud dating back to 1994 [Sapan Shrivastava v Madhabi Puri Buch and Ors]..The order pertained to allegations of financial fraud and regulatory violations concerning the listing of a company on the Bombay Stock Exchange in 1994.Besides Buch, special judge Shashikant Eknathrao Bangar ordered FIR against three current whole-time directors of SEBI - Ashwani Bhatia, Ananth Narayan G and Kamlesh Chandra Varshney - and two officials from the Bombay Stock Exchange (BSE) - Pramod Agarwal and Sundararaman Ramamurthy. ."Considering the gravity of allegations, applicable laws, and settled legal precedents, this Court deems it appropriate to direct an investigation under Section 156(3) CrPC...The concerned Anti-Corruption Bureau, Worli, Mumbai Region, Mumbai is directed to register an FIR under the relevant provisions of IPC, Prevention of Corruption Act, SEBI Act, and other applicable laws," the Court directed.A status report on the investigation is expected to be submitted within the next 30 days.The order was passed on an application filed by Sapan Shrivastava, a media reporter from Dombivali, who sought an investigation into the alleged irregularities surrounding the listing of a company on the Bombay Stock Exchange, facilitated by top officials from the SEBI. .The complainant claimed that the listing took place without adhering to the SEBI Act, 1992 and related regulations such as the SEBI (ICDR) Regulations, 2018 and the SEBI (LODR) Regulations, 2015. Despite multiple complaints to both SEBI and the police, the complainant alleged that no action had been taken..The inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC.Mumbai Court.The allegations raised in the complaint include accusations that SEBI officials, including former chairperson Madhabi Puri Buch and several whole-time members, failed to exercise their regulatory duties, allowing the company to list despite not meeting necessary compliance norms. The complainant also claimed that the accused engaged in market manipulation, insider trading and artificial inflation of share prices, defrauding investors and violating the Prevention of Corruption Act.The Court stated that the allegations 'prima facie' disclosed a cognizable offense and required further investigation considering the inaction by law enforcement agencies and SEBI. "The inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC," Judge Bangar said. The Court also cited the Supreme Court's 1992 Bhajan Lal case, emphasizing that an FIR must be registered if a cognisable offence is disclosed..SEBI would be initiating appropriate legal steps to challenge this order.SEBI Press Release.In response to the Court's decision, SEBI issued a press release on Sunday expressing its intent to challenge the order. "A miscellaneous application was filed before the ACB Court, Mumbai against the former chairperson of SEBI, three current whole-time members of SEBI, and two officials of the BSE...Even though these officials were not holding their respective positions at the relevant point of time, the court allowed the application without issuing any notice or granting any opportunity to SEBI to place the facts on record," the press release said. The press release also noted the complainant's history of filing frivolous applications and pointed out that many previous petitions filed by him had been dismissed with costs. SEBI emphasized its commitment to ensuring regulatory compliance. "SEBI would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters," the press release said..[Read Order].[Read Press Release]