A special court has ordered an FIR against former SEBI chairperson Madhabi Puri Buch and others over alleged stock market fraud. SEBI denies wrongdoing and plans legal action.
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A special court under the Prevention of Money Laundering Act has told the Anti-Corruption Bureau (ACB) in Mumbai to register an FIR based on a complaint about stock market fraud and rule-breaking.
The complaint was against former Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch and five others.
“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 held on Saturday after perusing the material on record.
The complaint asked the ACB to file an FIR and investigate the accused, including Buch, three SEBI whole-time members, Bombay Stock Exchange (BSE) Chairman Pramod Agarwal, and CEO Sundararaman Ramamurthy. The court ordered the ACB to register the FIR under the Prevention of Corruption Act, the SEBI Act, the Indian Penal Code, and other related laws.
Special Judge S.E. Bangar passed this order after hearing an application from Sapan Shrivastava, a journalist from Dombivli. He alleged that a company was fraudulently listed on the stock exchange with help from regulatory officials.
Shrivastava said that he and his family bought shares of Cals Refineries Ltd on December 13, 1994. The company was listed on BSE India, but he suffered big losses. He accused SEBI and BSE of ignoring the company’s wrongdoings, illegally listing it, and failing to protect investors.
He further alleged that SEBI officials allowed market manipulation and corporate fraud by permitting the company’s listing. He approached the court because the police and regulatory authorities did not act on his complaint.
The court referred to past Supreme Court judgments and stated,
“Considering the gravity of the allegations, applicable laws and settled legal precedents, this court deems it appropriate to direct an investigation under Section 156(3) of CrPC.”
The court also said that the special court should monitor the investigation and get a status report within 30 days.
On Sunday, SEBI responded with a press release, saying that Shrivastava’s complaint was against Buch, three current whole-time members (WTMs), and two BSE officials. SEBI clarified that Cals Refineries Ltd was allowed listing in 1994, but trading in its shares was stopped in August 2017 and remains suspended.
SEBI also stated that Buch and the three WTMs were not in their positions when these events took place. The special court gave its order without giving SEBI a chance to present facts.
“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. The applicant is known to be a frivolous and habitual litigant, with previous applications being dismissed by the court, with imposition of costs in some cases.”
SEBI said
SEBI said that it would take “appropriate legal steps” to challenge the order.
“Sebi remains committed to ensuring due regulatory compliance in all matters.”
-It said
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