Bombay HC Extends Stay on FIR Order Against Madhabi Puri Buch and Others for 4 Weeks

The Bombay High Court has temporarily halted the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and 5 others. This stay, which will remain in effect for at least 4 weeks, follows concerns over procedural lapses in the special court’s decision.

Special Court’s Order Under Scrutiny

On March 1, a special court designated under the Prevention of Money Laundering Act directed Maharashtra’s Anti-Corruption Bureau (ACB) to register an FIR based on a complaint filed by journalist Sapan Shrivastava. The complaint alleged that SEBI permitted the listing of New Delhi-based oil refinery, Cals Refineries, on the Bombay Stock Exchange (BSE) in 1994, despite regulatory non-compliance.

Justice SG Dige of the Bombay High Court found flaws in the special court’s ruling, stating that it appeared to have been “passed mechanically” without due consideration of the applicants’ roles. The complainant has been granted 4 weeks to file a reply.

Allegations of Fraud and Corruption

The complaint accused SEBI officials of enabling market manipulation and corporate fraud. It was alleged that certain SEBI officials accepted bribes ranging from ₹2-10 lakh to overlook regulatory breaches, causing substantial financial losses to investors. The FIR was directed against SEBI’s Buch, along with whole-time members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney. BSE Chairperson Pramod Agarwal and CEO Sundararaman Ramamurthy were also named in the complaint.

SEBI’s Defence and Legal Counterarguments

SEBI, in a statement following the special court’s order, highlighted that trading in Cals Refineries shares had been suspended in August 2017 and that Buch and the 3 whole-time members were not part of SEBI during the company’s listing.

Representing Buch, advocate Sudeep Pasbola reiterated this in the high court, while Solicitor General Tushar Mehta questioned the validity of the special court’s order. Mehta argued that Shrivastava has a history of filing frivolous complaints and had been previously fined ₹5 lakh for such cases. He also pointed out that Shrivastava had been attempting to fundraise via a website for his legal battles, alleging extortionary motives behind the complaint.

BSE’s Response to the Allegations

Senior advocate Amit Desai, representing the BSE officials, dismissed the claims as unfounded and harmful to the country’s economy. He stated that the special court’s decision to take action against the SEBI and BSE officials was unjustified and had serious repercussions.

Implications and Next Steps

With the high court’s stay in place, the complainant now has 4 weeks to respond. The case has brought renewed attention to the oversight and regulatory functions of SEBI and the broader implications of legal scrutiny in corporate governance. The outcome of this legal battle will determine the next course of action regarding the allegations of fraudulent listing and regulatory lapses.

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