Court Orders FIR on Fraud Complaint Against Former Sebi Chief, BSE Chairman, Top Officials
FIR Filed Against Former Sebi Chief, BSE Chairman, and Top Officials for Alleged Stock Market Fraud and Regulatory Violations
In a significant development, a Special Court designated under the Prevention of Money Laundering Act has directed the Anti-Corruption Bureau (ACB), Mumbai, to register an FIR based on a complaint alleging stock market fraud and regulatory violations against former Securities Exchange Board of India (Sebi) chairperson Madhabi Puri Buch and five others. This marked a major breakthrough in the long-pending probe, which had been dragging on for years.
Background to the FIR
The complaint was filed by Sapan Shrivastava, a Dombivli resident who claimed to be a journalist. He alleged that he and his family had invested in shares of Cals Refineries Ltd on December 13, 1994, which was listed on the Bombay Stock Exchange (BSE) India. Shrivastava claimed that SEBI and BSE neglected the crimes of the firm, listed it against the law, and failed to protect the interests of investors. He alleged that Sebi officials facilitated market manipulation and enabled corporate fraud by allowing the listing of the company.
Court Orders Investigation
The court, while perusing the material on record, held that the allegations disclose a cognizable offence, necessitating an investigation. It observed that 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) of the Code of Criminal Procedure (CrPC).
Complaint Against Sebi and BSE Officials
The complaint alleged that Sebi, under Buch’s chairmanship, had facilitated the listing of Cals Refineries Ltd, which was a failed company, resulting in huge losses to investors. It also accused BSE Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy of being complicit in the alleged fraud.
Sebi’s Response
In response to the court’s order, Sebi issued a press release, stating that Shrivastava’s application was filed against Buch, three present whole-time members (WTMs) and two BSE officials. Cals Refineries was granted listing permission in 1994 and was suspended from trading in August 2017 and remains suspended to this date. Sebi, however, questioned the court’s order, stating that Buch or the three WTMs were not holding their respective offices at the relevant time and that the court allowed the application without giving the regulatory body an opportunity to present its case.
Future Course of Action
The court has directed the ACB to register the FIR under relevant provisions of the Prevention of Corruption Act, the SEBI Act, the Indian Penal Code, and other applicable laws. The probe should be monitored by the special court, and a status report should be submitted to it within 30 days. The court’s order has invited sharp reactions from Sebi, which has threatened to challenge the order.
Conclusion
The court’s direction to register an FIR against former Sebi chief, BSE Chairman, and top officials is a significant development in the long-fought battle against stock market fraud and regulatory violations. The order underscores the importance of effective enforcement and accountability in the securities market. As the probe unfolds, it will be interesting to see how the investigation proceeds and whether the court’s order will pave the way for a fair and impartial probe into the alleged fraud. Meanwhile, the case has sent shockwaves across the financial community, raising concerns about the role of regulatory bodies in ensuring investor protection and transparency in the securities market.
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