Delhi – 03/03/2025 (Financial Desk of Watan Tak)
The special Anti-Corruption Bureau (ACB) court in Mumbai has ordered the registration of a First Information Report (FIR) against ex-Securities and Exchange Board of India (SEBI) chief Madhabi Puri Buch and five other officials for alleged regulatory lapses and failures related to the listing of a company in Bombay Stock Exchange (BSE) in 1994. The SEBI said it will legally contest the ruling before the relevant judicial forum.
Allegations and the Court’s Ruling against Madhabi Puri Buch
An order by a special ACB court led by Judge Shashikant Eknathrao Bangar on February 1 found prima facie evidence that regulatory lapses and possible collusion in granting the nod for listing to Cals Refineries Ltd. The court said the allegations made a case for an independent probe and asked ACB to lodge an FIR under the IPC Act and the SEBI Act, wherever applicable.
The court’s ruling was in response to a complaint by Sapan Shrivastava, a legal reporter from Dombivli, Maharashtra, who accused various entities of large-scale financial fraud, regulatory violations, and corruption. He alleged that SEBI was not within its rights to allow a company to be listed that was not compliant with the prescribed norms, thus “aiding and abetting” the market manipulation and corporate fraud, even its three serving whole-time members – Ashwani Bhatia, Ananth Narayan G, Kamlesh Chandra Varshney, and BSE officials Pramod Agarwal and Sundararaman Ramamurthy.
Systemic Constraints: The Failure of Regulatory Oversight
The complainant alleged that SEBI officials violated their statutory responsibility by allowing the listing even though the firm did not meet critical regulatory conditions, disclosure duties, and due diligence processes as required under the SEBI Act of 1992 and relevant regulations.
The documents, filed with the court today, allege that the activities of Cals Refineries Ltd had involved manipulating the market, artificially inflating share prices, insider trading, and other activities that misled investors. The complainant alleged that the promoters had diverted public funds, and SEBI’s inaction in the face of flagrant violations warranted judicial intervention under Section 156(3) of the Criminal Procedure Code (CrPC).
Court-Ordered Investigation
The allegations, which were backed by considerable material evidence, included the following:
Regulatory filings and stock market reports indicating price manipulation
Correspondence from SEBI whistle-blowers indicating favoritism.
The court directed that an FIR be registered based on these findings and a status report on the investigation be placed before it within 30 days.
SEBI and BSE’s Response
The court’s order has been categorically opposed by SEBI, saying that it had neither received any prior notice from the court nor an opportunity to present its case. It also said that the officials named in the FIR were not in their positions at their respective companies when the listing took place in 1994.
“SEBI will be filing appropriate legal proceedings to challenge this order and continues to be committed to ensuring regulatory due process on all matters.”
BSE also described the allegations as “frivolous and vexatious,” saying that the officials named had no association with Cals Refineries Ltd. at the time of the company’s listing. “As a responsible market institution, BSE is fully committed to complying with the regulatory framework and maintaining transparency,” the stock exchange said in a statement.
Legal and Market Implications
The court’s move to probe SEBI’s role in managing stock market regulations could have far-reaching consequences for India’s financial regulatory landscape. SEBI has promised to appeal against the order, but that does little to address the search for strong and effective oversight mechanisms that can prevent fraudulent listings and maintain the integrity of Indian capital markets.
The high public interest that this case is expected to generate will ensure that developments over the next few weeks will decide the degree of accountability for SEBI and the reforms that may emerge in the markets.