Court Directs FIR Against Former SEBI Chief, BSE Chairman, and Top Officials Over Fraud Allegations

Special Court Orders ACB to Investigate Stock Market Fraud and Regulatory Violations

A special court under the Prevention of Money Laundering Act (PMLA) has directed the Anti-Corruption Bureau (ACB), Mumbai, to register an FIR against top officials of the Securities and Exchange Board of India (SEBI) and the Bombay Stock Exchange (BSE) over allegations of fraud, regulatory lapses, and corruption in the stock market.

“The allegations reveal a cognizable offense that requires investigation. There is prima facie evidence of regulatory failures and collusion, necessitating an impartial and thorough probe. Due to the inaction of law enforcement and SEBI, judicial intervention under Section 156(3) of CrPC is warranted,” the court stated after reviewing the available evidence.

The complaint seeks an FIR against former SEBI Chairperson Madhabi Puri Buch, three full-time SEBI members, BSE Chairman Pramod Agarwal, and CEO Sundararaman Ramamurthy. The directive was issued in response to an application filed by Sapan Srivastava, a journalist from Dombivli, who alleged financial misconduct and sought an investigation under CrPC Section 156(3). The court instructed the ACB to file an FIR under the Prevention of Corruption Act, SEBI Act, IPC, and other relevant laws.

The case revolves around allegations that regulatory officials facilitated the fraudulent listing of a company on the stock exchange. Srivastava claimed that he and his family had invested in shares of Kails Refineries Ltd., listed on BSE India on December 13, 1994, resulting in heavy financial losses. He accused SEBI and BSE of ignoring violations and failing to protect investors’ interests. The complaint alleges that SEBI officials enabled corporate fraud by allowing the company’s listing and manipulating the market. Srivastava stated that he was compelled to approach the court after police and regulatory authorities failed to act on his complaint.

Citing past Supreme Court rulings, the court emphasized, “Given the seriousness of the allegations, applicable laws, and legal precedents, this court finds it appropriate to order an investigation under CrPC Section 156(3).”

According to the order, the special court will monitor the investigation, and a status report must be submitted within 30 days.

SEBI Challenges Court Order

In response to the court’s directive, SEBI argued that the officials named in the complaint were not in their respective positions at the relevant time. The regulatory body also criticized the court’s decision, claiming it was made without allowing SEBI to present its facts.

“The applicant is known for filing frivolous and habitual litigation, and previous applications have been dismissed, sometimes with penalties. SEBI will take appropriate legal steps to challenge this order and remains committed to ensuring proper regulatory compliance in all matters,” SEBI stated in an official response.