The Bombay High Court has ordered the Maharashtra Anti-Corruption Bureau (ACB) to refrain from acting on a special court’s directive to file an FIR against former SEBI chairperson Madhabi Puri Buch and five others for alleged stock market fraud and regulatory breaches until March 4. The defendants are challenging a March 1 order, claiming it is illegal and lacks a prima facie case. They argue that the complainant’s allegations of fraudulent listing in 1994 lack evidence and that the officials were not in their roles at the time. The case involves accusations of substantial financial fraud and regulatory violations.
Mumbai:
On Monday, the Bombay High Court instructed the Maharashtra Anti-Corruption Bureau (ACB) to refrain from taking action until March 4 regarding an order that mandates the filing of an FIR against former Sebi chairperson Madhabi Puri Buch and five other officials for suspected stock market fraud and regulatory infractions.
Ms. Buch, along with Bombay Stock Exchange MD Sundararaman Ramamurthy and others, petitioned the High Court on Monday to annul the March 1 directive issued by a special court in Mumbai, which ordered the ACB to register an FIR against them concerning alleged fraudulent activities in 1994 linked to the listing of a company on the BSE.
The petitions were presented to a single bench of Justice SG Dige for expedited consideration.
The bench announced it would review the petitions on Tuesday (March 4), stating orally that until that time, the state ACB, tasked with investigating the case, should not take any actions based on the special court’s order.
During the proceedings, Solicitor General Tushar Mehta represented the three current whole-time SEBI directors – Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney.
Senior counsel Amit Desai represented the Managing Director and Chief Executive Officer of the Bombay Stock Exchange, Ramamurthy, along with its former chairman and public interest director, Pramod Agarwal.
The petitions requested the annulment of the special court’s order, labeling it illegal and arbitrary.
This order stemmed from a complaint by Sapan Shrivastava, a media reporter, who sought an investigation into alleged offenses involving extensive financial fraud, regulatory breaches, and corruption by the accused.
“The order from the special court is blatantly erroneous, obviously illegal, and issued without proper authority. The court overlooked the complainant’s failure to establish a prima facie case against the applicants for not fulfilling their responsibilities as SEBI officials,” stated the petitions.
The petitions highlighted that no substantial evidence was presented by the complainant to back his allegations.
“At that time, there was no need for obtaining an NOC from Sebi for the listing of any shares on the BSE,” the petitions asserted.
No vicarious liability can be imposed on SEBI officials regarding the claimed offense, as stated by the petitions.
Furthermore, the petitions asserted that the complainant, Shrivastava, has a history of filing numerous frivolous lawsuits.
The petitions requested not only the quashing of the special court order but also a stay on its execution as interim relief.
The order lacked legal validity since the petitioners had not been served with a notice or afforded a hearing prior to the decision, the petitions underscored.
Special ACB court judge S E Bangar, in his March 1 order, observed that there was prima facie evidence indicating regulatory lapses and collusion, thus necessitating a fair and impartial investigation.
The ACB court also stated that it would oversee the investigation, requesting a status report within 30 days.
The allegations in the complaint concerned “the fraudulent listing of a company on the stock exchange in 1994, with the active involvement of regulatory authorities,” particularly the Securities and Exchange Board of India, without compliance with the SEBI Act, 1992, and related rules and regulations.
On Sunday, Sebi issued a statement affirming that it “would initiate appropriate legal measures to contest this order and remains committed to ensuring regulatory compliance across all matters.”
The market regulator noted that the application, which sought directives for the police to file an FIR and investigate alleged irregularities in the granting of listing permission to a company on the BSE back in 1994, was approved by the court “even though these officials were not in their respective positions at that time.”
The BSE, in its statement, labeled the application as “frivolous and vexatious in nature.”
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