Mumbai Court Orders FIR Against Ex-SEBI Chief Madhabi Puri Buch, Others Over Alleged Stock Market Fraud

Mumbai: A special court in Mumbai has directed the Anti-Corruption Bureau (ACB) to register an FIR against former Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch and five others. Apart from former SEBI chief, the court has also ordered to register a case against the Bombay Stock Exchange (BSE). The order comes after allegations of stock market fraud, regulatory violations, and corruption were made against former SEBI chairperson Madhabi Puri Buch, three SEBI whole-time members, and BSE Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy. 

The court's decision was prompted by a petition filed by a local journalist, who sought an investigation into the alleged offences committed by Madhabi Buch and others. The petition claimed that SEBI officials permitted the listing of a company that failed to meet regulatory norms, leading to market manipulation and investor losses. It also alleged collusion between SEBI and corporate entities, insider trading, and siphoning of public funds post-listing. The court held that the allegations disclose a cognizable offense, necessitating an investigation. 

Special Judge SE Bangar observed that there is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe. The court also noted that the inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) of the Code of Criminal Procedure (CrPC).

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Allegations of Fraudulent Listing and Market Manipulation

The complaint was filed by Sapan Shrivastava, a Dombivli resident who claims to be a journalist. Shrivastava alleged that he and his family had invested in shares of Cals Refineries Ltd, which was listed at BSE India, and suffered huge losses. He claimed that SEBI and BSE neglected the crimes of the firm, listed it against the law, and failed to protect the interests of investors. Shrivastava also alleged that SEBI officials facilitated market manipulation and enabled corporate fraud by allowing the listing of the company.

SEBI Response

Responding to the order, SEBI alleged that the officials were not holding their respective positions at the relevant point of time. SEBI also claimed that the court had allowed the application without allowing the regulatory body to place the facts on record. SEBI also stated that the applicant is known to be a frivolous and habitual litigant, with previous applications being dismissed by the court, with imposition of costs in some cases.

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Court Directs Status Report Within 30 Days

The court has also directed the ACB to register the FIR under relevant provisions of the Prevention of Corruption Act, the SEBI Act, the Indian Penal Code (IPC), and other applicable laws. The probe will be monitored by the special court, and a status report should be submitted to it within 30 days.