Stock market 'fraud': Court orders FIR against ex-SEBI chief Madhabi Puri Buch, 5 others

The court said it will monitor the probe, and sought a status report (of the case) within 30 days.

Bengaluru: A Mumbai Court has directed the Anti-Corruption Bureau (ACB) to file an FIR against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch, Bombay Stock Exchange’s Managing Director and Chief Executive Officer Sundararaman Ramamurthy, and four other officials in connection with alleged regulatory violations and stock market fraud.

As per the Special Court’s order - dated March 1, the day after Buch demitted office - accessed by DH, this is regarding allegations of a ‘fraudulent listing’ of an unnamed company ‘that did not meet the prescribed norms’. The complainant, journalist Sapan Srivastava, has alleged that the accused persons engaged in round-tripping, insider trading, and price manipulation, misleading investors into believing the company was financially sound.

“Upon reviewing the material on record, this court finds the allegations disclose a cognizable offense, necessitating an investigation. There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe,” the order stated.

The court, chaired by the special ACB judge, Shashikant Eknathrao Bangar, directed the ACB Worli, Mumbai Region, to register an FIR under the relevant provisions of IPC, Prevention of Corruption Act, SEBI Act, and other applicable laws. “The investigation shall be monitored by this Court. A status report shall be submitted within 30 days,” the order stated.

The inaction by law enforcement and the SEBI necessitates judicial intervention under the provisions of the CrPC (Criminal Procedure Code), it added. The other officials against whom the FIR is to be filed include SEBI then public interest director Pramod Agarwal and SEBI's three whole time members Ashwani Bhatia, Ananth Narayan G and Kamlesh Chandra Varshney.

SEBI said it "would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters". It is not yet known if the accused persons will challenge the order in a higher court.

"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," it said in a statement.

The complainant, Shrivastava, had sought an investigation into the alleged offences committed by the proposed accused, involving largescale financial fraud, regulatory violations and corruption.

The complainant claimed that the SEBI officials failed in their statutory duty, facilitated market manipulation, and enabled corporate fraud by allowing the listing of a company that did not meet the prescribed norms.

Despite approaching the police station and regulatory bodies concerned on multiple occasions, no action has been taken by them, the complainant said.

The latest order adds to the troubles for Buch, who was the first woman and the first person from the private sector to head SEBI. That Buch was to be given only one term was first reported by DH in October.

The government decided to not extend Puri’s tenure due to the reputational damage caused to the equity markets regulator by the allegations made against her by Hindenburg Research, and a letter last year by SEBI employees to the Finance Ministry stating that the work culture at the federal regulator had turned toxic under her leadership.