On Saturday, a Special Court directed the Anti-Corruption Bureau (ACB) to register a First Information Report (FIR) against former SEBI chairperson Madhabi Puri Buch & five others in connection with allegations relating to financial fraud, regulatory violations & corruption.

The order, delivered by a special ACB court, came a day after Buch completed her tenure as chairperson of market regulator, the Securities & Exchange Board of India (SEBI).

It was delivered on a complaint filed by Thane-based journalist Sapan Shrivastava, who alleged that SEBI had permitted the listing of a company on the Bombay Stock Exchange (BSE) even though it failed to meet regulatory conditions under the SEBI Act, 1992. The allegedly fraudulent listing had taken place in 1994, with the active connivance of regulatory authorities, particularly SEBI, according to the complaint. This facilitated market manipulation & enabled corporate fraud, it stated, adding that this highlighted the failure of SEBI officials in carrying out their statutory duty,

The complainant has submitted documents that reveal alleged procedural lapses & non-compliance in the IPO process, leading to an irregular listing of the company in question. He further highlighted regulatory filings & stock market reports, indicating artificial inflation of share prices & market manipulation. Shrivastava claimed to have approached the police & regulatory bodies on several occasions but no action was taken.

Besides Buch, the complaint has named SEBI whole-time members Ashwani Bhatia, Ananth Narayan G, & Kamlesh Chandra Varshney; & BSE chairperson Pramod Agarwal & CEO Sundararaman Ramamurthy. They have been accused of engaging in round-tripping, insider trading & price manipulation, misleading investors into believing the company was financially sound. “The company’s promoters siphoned off public funds post-listing, & SEBI failed to take preventive measures despite multiple red flags,” the complaint stated.

Upon reviewing the material on record, special ACB Judge Shashikant Eknathrao Bangar directed the ACB to register an FIR under relevant provisions of the Indian Penal Code, Prevention of Corruption Act, SEBI Act & other applicable laws, to be monitored by the court. The judge has directed a status report to be submitted within 30 days.

Judge Bangar observed that the allegations disclosed a cognisable offence, necessitating an investigation. “There is prima facie evidence of regulatory lapses & collusion, requiring a fair & impartial probe,” he added. He further noted that the inaction by law enforcement & SEBI necessitates judicial intervention under the provision of the Criminal Procedure Code.

The court relied on a Supreme Court precedent & established that if a complaint discloses a cognisable offence, registration of an FIR is mandatory, & failure to do so amounts to a violation of statutory duty.

Reacting to these developments, SEBI issued a statement on Sunday, stating that it would be initiating appropriate legal steps to challenge the order of the special 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.

“The applicant is known to be a frivolous & habitual litigant, with previous applications being dismissed by the court, with imposition of costs in some cases. SEBI would be initiating appropriate legal steps to challenge this order & remains committed to ensuring due regulatory compliance in all matters,” according to the statement.

This is not the first time, Buch, India’s first female SEBI chief, has been under fire. Last year, she was accused by the now-defunct US-based short-seller Hindenburg of alleged conflict of interest due to undisclosed investments in offshore entities linked to the Adani Group. Buch has denied the allegations, saying the investments had been made before she was appointed as SEBI chief & she had made the necessary disclosures. 

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