Court Directs FIR Against Former Sebi Chairperson Madhabi Buch and Five Others for Alleged Fraud

A special court has instructed the Anti-Corruption Bureau (ACB) to file an FIR against former SEBI chairperson Madhabi Puri Buch and five others over alleged stock market fraud. The court, led by Judge Shashikant Eknathrao Bangar, found initial evidence of regulatory failures and collusion, necessitating a fair investigation. The court will oversee the probe and has requested a status report within 30 days.

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The individuals named in the FIR include BSE’s Managing Director and CEO Sundararaman Ramamurthy, former chairman Pramod Agarwal, and SEBI's whole-time members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney. These officials are accused of involvement in fraudulent activities related to the stock market.

Allegations of Regulatory Violations

The allegations involve the improper listing of a company on the Bombay Stock Exchange in 1994. The complainant, Sapan Shrivastava, a media reporter, claims that SEBI officials failed their duties by allowing this listing without adhering to necessary regulations. This allegedly facilitated market manipulation and corporate fraud.

Shrivastava provided documents showing procedural lapses in the IPO process, leading to irregular company listings. He submitted regulatory filings and reports indicating artificial share price inflation and market manipulation. Whistleblower correspondence suggested undue favouritism towards the accused company.

SEBI's Response to Court Order

In response to the court's decision, SEBI stated it would pursue appropriate legal actions to challenge the order. SEBI emphasised its commitment to regulatory compliance in all matters. They noted that the application was allowed despite the officials not holding their positions at the time of the alleged violations.

The Bombay Stock Exchange also criticised the application as frivolous and vexatious. They stated that they would take necessary legal steps in response. BSE reiterated its dedication to maintaining regulatory compliance and transparency.

Judicial Intervention Required

The court order highlighted that law enforcement agencies' inaction necessitated judicial intervention under the Criminal Procedure Code provisions. The complainant had repeatedly approached police and regulatory bodies without receiving any action on his complaints.

The court directed ACB Worli, Mumbai Region, to register an FIR under relevant laws, including the IPC, Prevention of Corruption Act, SEBI Act, and others. This decision followed a review of submitted materials indicating large-scale financial fraud and public deception.

Details of Alleged Fraud

The complainant accused those involved of engaging in round-tripping, insider trading, and price manipulation. These actions allegedly misled investors into believing the company was financially stable when it was not. Financial reports and audit documents were presented as evidence of these fraudulent activities.

Despite previous applications being dismissed with costs imposed on Shrivastava for being a habitual litigant, this recent application was accepted by the court without notifying SEBI or allowing them to present their case.

Madhabi Puri Buch recently completed her three-year tenure as India's first woman SEBI chief. This development comes amid ongoing scrutiny over regulatory practices within India's financial markets.