MUMBAI: A special Anti-Corruption Bureau (ACB) court in Mumbai on Saturday directed the agency to file a first information report (FIR) against former Securities and Exchange Board of India (Sebi) chief Madhabi Puri Buch and five other public service officials, including three current whole time members of Sebi and two officials of the BSE.
The order is for a probe into alleged irregularities in granting listing permission to a company on the Bombay Stock Exchange (BSE) in 1994 and alleged failure to exercise regulatory oversight. The complainant invoked various IPC offences and the Prevention of Corruption Act for suspected offences of criminal misconduct by public servants and illegal gratification.
The February 1 order by Special Judge S E Bangar said, “There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe.”
Sebi, in a statement on Sunday, said it would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters.
The court order was in response to a private complaint filed by one Sapan Shrivastava. He said he is a media person and was seeking directions for the registration of an FIR and probe against Buch, 60, and others. The others include Ashwani Bhatia, Ananth Narayan, Kamlesh Varshney—all three whole time members of Sebi, and Pramd Agarwal, Chairman and Public Interest Director (BSE), and Sundararaman Ramamurthy, MD and CEO, BSE.
The court said it would monitor the investigation.
On Sunday, Sebi also stated, “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.” Sebi statement claimed that the complainant was a “habitual litigant” and his “previous applications were dismissed by the court, with imposition of costs in some cases.”
The application before the court sought probe into “alleged offences committed by the proposed accused involving large-scale financial fraud, regulatory violations, and corruption.” The court noted that the allegations pertain to the fraudulent listing of a company on the stock exchange with the active connivance of regulatory authorities, particularly Sebi, without compliance under the Sebi Act, 1992, and rules and regulations thereunder.
The complainant alleged that Sebi officials failed in their statutory duty, facilitated market manipulation, and enabled corporate fraud by allowing the listing of a company that did not meet the prescribed norms.
Shrivastava, a Dombivali resident, arguing in person, said despite approaching the police station and regulatory bodies “on multiple occasions no action has been taken, necessitating judicial intervention under Section 156(3) CrPC (criminal procedure code).” The section empowers the court to direct police to take action if a cognizable offence is made out.
The order noted that the “allegations disclose a cognizable offence, necessitating an investigation.”
The court said the complaint alleged “procedural lapses and noncompliance in the IPO process, leading to an irregular listing of the company” and cited documents, also “placed on record,” “Regulatory filings and stock market reports indicating artificial inflation of share prices and market manipulation.”
The special court analysed the law and referred to the Supreme Court ruling of 2015, which set out that a private application must be supported by an affidavit ensuring due diligence and the “Magistrate must be satisfied that a prima facie case exists before directing an investigation.” The court, on reviewing the material before it, also observed that the “inaction by law enforcement and Sebi necessitates judicial intervention.”
The Judge said, “Considering the gravity of allegations, applicable laws, and settled legal precedents, this court deems it appropriate to direct an investigation under Section 156(3) CrPC.”
The court said thus, “The concerned Anti Corruption Bureau, Worli, Mumbai Region, Mumbai is directed to register an FIR under the relevant provisions of IPC, Prevention of Corruption Act, Sebi Act, and other applicable laws.”
