Court orders filing of FIR against ex-Sebi chief, BSE Chairman, top officials

A special court established under the Prevention of Money Laundering Act on Saturday instructed the Anti-Corruption Bureau (ACB) in Mumbai to file a FIR on a complaint of stock market fraud, regulatory violations, and corruption against top Securities and Exchange Board of India (Sebi) and Bombay Stock Exchange (BSE) officials.

“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 inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC,” the court held after perusing the material on record, Indian Express reported.

The ACB was directed to register a FIR and investigate alleged offences committed by the "proposed accused," including former Sebi chairperson Madhabi Puri Buch, three Sebi full-time members, BSE Chairman Pramod Agarwal, and CEO Sundararaman Ramamurthy.

The order was based on an application filed by Sapan Shrivastava, a Dombivli resident who claimed to be a journalist and sought direction for the police to register an FIR as per section 156(3) of the Code of Criminal Procedure (CrPC) and investigate into the allegations.

The court ordered the ACB to file the FIR under the provisions of the Prevention of Corruption Act, the Sebi Act, the Indian Penal Code, and other applicable statutes.

On Saturday, Special Judge S E Bangar issued an order in response to an application alleging fraudulent stock exchange listing with the active connivance of regulatory agencies.

Shrivastava stated that on December 13, 1994, he and his family invested in shares of Cals Refineries Ltd, which was listed on the BSE India, and that he suffered significant losses. He claimed that Sebi and the BSE ignored the firm's wrongdoing, listed it illegally, and failed to protect investors' interests.

Shrivastava accused Sebi officials of facilitating market manipulation and corporate crime by permitting the company to be listed. He stated that he was prompted to contact the court after police and regulatory officials did not take action on his complaint.

The court referred to past Supreme Court judgments and observed, “Considering the gravity of allegations, applicable laws and settled legal precedents, this Court deems it appropriate to direct an investigation under Section 156(3) of CrPC.”

According to the decision, the special court will monitor the probe and request a status report within 30 days.

SEBI responded to the order by alleging that the “officials were not holding their respective positions at the relevant point of time”, adding that the court had allowed the application without allowing the regulatory body “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 would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters,” a statement released by SEBI said.