Bombay HC stays order directing FIR against Madhabi Buch, others

Charges pertain to the alleged fraudulent listing of a company on the stock exchange in 1994, with the active connivance of regulatory authorities, particularly the SEBI, without compliance under the SEBI Act, 1992

The Bombay High Court on Tuesday (March 4, 2025) stayed a Mumbai sessions court order for four weeks that directed the Anti-Corruption Bureau (ACB) to register an FIR against the former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and five other SEBI and Bombay Stock Exchange (BSE) officials in an alleged stock market fraud, regulatory violations, and corruption linked to the listing of a company in 1994.

Also read: Who is Madhabi Puri Buch, the markets regulator under attack from Hindenburg?

A Single Bench Judge, Justice Shivkumar Dige observed that prima facie, the Special Court’s order on March 1, 2025, was passed mechanically without going into details or attributing any specific role to the applicants.

“Complainant [Sapan Shrivastava] seeks time to file reply. After hearing all the parties, it appears that the judge has passed the order mechanically without going to details and without attributing any role to the applicants. Hence, the order is stayed till next date. Four weeks’ time is given to the complainant in the case [Sapan Shrivastava] to file his affidavit in reply to the petitions,” the Court observed.

Solicitor General Tushar Mehta, appeared for three current whole time SEBI directors: Ashwani Bhatia, Ananth Narayan G. and Kamlesh Chandra Varshney, who have sought quashing of the order passed by the Special Court and said that the order was “illegal” and “arbitrary”.

The two-para complaint filed with regard to some IPO that was granted by the SEBI in 1994, in that all the parties are current members, Mr. Mehta contended and said that there has been complete non-application of mind in all judgments. In another judgment of this Court the same petitioner (Sapan Shrivastava) was fined ₹5 lakh for filing frivolous petition, he claimed. “There is a series of frivolous litigations he has filed where the court has made a finding that he is extorting money. Public spirited individuals must work for the public. But he is crowd funding. In the present case, the special court passed the order without hearing Ms. Bush and others. Even if it was done in 1994, it has been 30 years now. We were not there in 1994.”

Petitioner Shrivastava who appeared in person, submitted to the Court that all the allegations mentioned in his petition are based on facts and evidence. Criminal law starts operating only when the fraud comes to light, with that logic, even though the crime happened in 1994, action can still be taken today, he argued.

The charges pertain to the alleged fraudulent listing of a company, Cals Refineries Ltd., on the stock exchange in 1994, with the active connivance of regulatory authorities, particularly the SEBI, without compliance under the SEBI Act, 1992. The complainant contended that SEBI officials failed in their statutory duty, facilitated market manipulation, and enabled corporate fraud by allowing the listing of a company that did not meet the prescribed norms.

Cals Refineries was suspended from trading on the stock exchange since 2019, according to data on the BSE website.

Senior advocate Sudeep Pasbola for Ms. Buch argued that the petitioner has alleged that the SEBI is not acting against Cals Refinery whereas there are hundreds of actions taken against Cals Refinery. “There is no question of compliance for the SEBI for listing. The SEBI is a market regulator they step in when there is violation. The accused-officers stepped into their roles after 2023.”

Representing two BSE officials — Managing Director and Chief Executive Officer Sundararaman Ramamurthy and its former Chairman and Public Interest Director Pramod Agarwal, Senior advocate Amit Desai called the allegations made by the petitioner, Mr. Shrivastava, a 47-year-old legal reporter from Dombivali in Maharashtra’s Thane district, completely “baseless” and “scandalous”.

“The petitioner is saying that omission to take action against Cals Refineries amounts to corruption and for that they took ₹2 to ₹10 lakh. This petitioner has made a load of scandalous statements against the officials of pre-eminent stock exchange of India, and it is an attack on the economy.”

Mr. Desai further argued that the judgement by the Sessions Court Judge is unfortunate as the concerned judge failed to understand the significance of the matter.

“All the allegations are bald and baseless. The particular regulations alleged to be violated were brought only in 2002. The learned judge does not even realise that the provision was not there. What is the offence? Where is the cheating? Who was defrauded? The learned Judge has not said anything. This kind of vexatious litigation is to be prevented. Something as fundamental as this, shocks the market. How can such an order be passed?”

The petitioner, Mr. Shrivastava alleged that despite having approached the concerned police station and regulatory bodies on multiple occasions, no action had been taken. The SEBI permitted the listing of the accused company despite its failure to comply with essential regulatory norms, including disclosure requirements and due diligence procedures mandated under the SEBI Act, 1992, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

He also alleged that the company’s promoters had siphoned off public funds after being listed on the exchange, accusing the SEBI of failing to take preventive measures despite the emergence of multiple red flags. The accused were engaged in round-tripping, insider trading, and price manipulation, and misled investors into believing the company was financially sound.

To respond to the SEBI and BSE’s petition, he sought time to file documents in the case.

Published - March 04, 2025 12:04 pm IST