Bombay High Court Stays Order Directing FIR Against Former SEBI Chairperson, Others

The Bombay High Court on Tuesday stayed a special court order directing the registration of a First Information Report against former SEBI Chairperson Madhabi Puri Buch and other SEBI and Bombay Stock Exchange officials in connection with an alleged listing fraud case.

High Court Grants Relief

Justice S.G. Dige, presiding as a single judge, granted interim relief after Buch and two others challenged the special court’s directive. The High Court observed that the lower court had issued its order without a detailed examination of the facts or attributing any specific role to Buch and the other accused officials.

“Complainant seeks time to file reply. After hearing all the parties, it appears that judge has passed order mechanically without going to details and without attributing any role to the applicants. Hence, order is stayed,” the High Court noted.

Case Background

The special court had instructed the Anti-Corruption Bureau (ACB) to register an FIR against Buch and five others concerning alleged irregularities in the 1994 listing of a company on the Bombay Stock Exchange (BSE). Those named in the order included SEBI’s whole-time members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney, as well as BSE officials Pramod Agarwal and Sundararaman Ramamurthy. Buch, Bhatia, and Agarwal subsequently approached the High Court seeking relief.

The special court’s directive was issued on March 1 by Judge Shashikant Eknathrao Bangar in response to a complaint filed under Section 156(3) of the Criminal Procedure Code (CrPC) by journalist Sapan Shrivastava from Dombivli. Shrivastava alleged that SEBI officials had colluded to facilitate the 1994 listing of a company without ensuring regulatory compliance, leading to market manipulation, insider trading, and artificial inflation of share prices. The complaint also accused the officials of failing to enforce key provisions of the SEBI Act, 1992, and subsequent regulations, amounting to a violation of the Prevention of Corruption Act.

Judge Bangar, in his order, noted that the allegations “prima facie” disclosed a cognizable offence requiring further investigation and directed the ACB to file an FIR and submit a status report within 30 days.

Arguments Before The Court

Solicitor General Tushar Mehta, appearing for the SEBI officials, argued that the complainant had a history of filing frivolous cases and had been fined by courts for similar actions in the past. He contended that the case pertained to an IPO granted in 1994 and that the present SEBI officials were not even in office at that time.

“In a nutshell, a two-paragraph complaint has been filed regarding some IPO granted by SEBI in 1994. The order reflects a complete non-application of mind. The petitioner has previously been fined ₹5 lakh for filing frivolous petitions,” Mehta argued.

Senior Advocate Amit Desai, representing BSE officials, contended that the allegations were baseless, scandalous, and an unwarranted attack on the credibility of the stock exchange. He pointed out that the regulation purportedly violated—Section 17 of the Securities Contracts (Regulation) Act (SCRA)—was only introduced in 2002, long after the alleged wrongdoing in 1994.

Desai also argued that Shrivastava had created a “charade” of complaints by sending letters to various officials to establish grounds for judicial intervention under Section 156(3) CrPC. He further pointed out that under the Maharashtra amendment to the CrPC, government sanction is required before prosecuting public officials for acts done in the discharge of their official duties—a requirement that was overlooked by the special court.

Senior Advocate Sudeep Pasbola, appearing for Buch, refuted allegations that SEBI had failed to act against Cals Refinery, arguing that numerous regulatory actions had been taken against the company over the years. He emphasized that SEBI’s role is to regulate markets, not directly approve listings.

Complainant’s Arguments & Court’s Decision

Shrivastava, appearing in person, maintained that his allegations were fact-based and contended that criminal liability arises when a fraud comes to light, regardless of when it occurred. He argued that since SEBI had not granted a No Objection Certificate (NOC) or approval to Cals Refinery in 1994, action could still be pursued today.

The High Court, however, found merit in the arguments presented by Buch and other petitioners. Recognizing the procedural and substantive deficiencies in the special court’s order, it granted time for Shrivastava to file a reply but stayed the order directing the FIR in the interim.

The matter remains pending for further adjudication.

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