A special Anti-Corruption Bureau (ACB) court in Mumbai on Saturday directed the ACB to register an FIR against former Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch and five others over alleged stock market fraud and regulatory violations. The order was passed by Judge Shashikant Eknathrao Bangar on a petition filed by a local journalist, who sought an investigation into the alleged offences involving large-scale financial fraud, regulatory lapses, and corruption.
Apart from Buch, the other officials named in the FIR include BSE Managing Director and Chief Executive Officer Sundararaman Ramamurthy, its then chairman and public interest director Pramod Agarwal, and SEBI’s three whole-time members—Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney.
The complaint, filed by journalist Sapan Shrivastava under the relevant section of the Code of Criminal Procedure (CrPC), sought court directions for an FIR and a thorough probe into the alleged offences.
"The allegations pertain to the fraudulent listing of a company on the stock exchange, allegedly facilitated by SEBI officials in violation of regulatory norms under the SEBI Act. The complainant contends that SEBI officials failed in their statutory duty, enabled market manipulation, and facilitated corporate fraud by allowing the listing of a company that did not meet the prescribed norms," the application stated.
It further claimed that despite multiple complaints to the police and regulatory bodies, no action had been taken, necessitating judicial intervention under Section 156(3) of the CrPC. The complainant submitted substantial material evidence, including written complaints lodged with SEBI, police records, regulatory filings, stock market reports, and audit documents, all indicating procedural lapses, market manipulation, and large-scale fraud.
The application alleged that SEBI permitted the listing of a company despite its failure to meet essential regulatory norms, including disclosure requirements and due diligence procedures. The accused allegedly engaged in round-tripping, insider trading, and price manipulation, misleading investors into believing the company was financially sound. Certain SEBI officials were accused of colluding with the company's promoters and failing to exercise regulatory oversight, which amounted to criminal misconduct under the Prevention of Corruption Act. The promoters allegedly siphoned off public funds post-listing, while SEBI failed to intervene despite multiple red flags.
"Upon reviewing the material on record, this Court finds that the allegations disclose a cognizable offence, necessitating an investigation. There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe. The inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC," the court observed.
Considering the seriousness of the allegations, the court directed the ACB, Worli, Mumbai Region, to register an FIR under relevant provisions of the Indian Penal Code (IPC), the Prevention of Corruption Act, the SEBI Act, and other applicable laws. The court further ordered that the investigation be monitored and a status report be submitted within 30 days.
