Mumbai: In a major relief to the former SEBI chairperson and five others, the Bombay High Court on Tuesday stayed the special court’s order directing the registration of an FIR against them in connection with an alleged stock market fraud and regulatory violations dating back to 1994.

The court noted that the special judge had passed the order mechanically, without examining the details or attributing any specific role to the accused.

Observation Made By Justice Shivkumar Dige

“It appears that the learned judge (special ACB judge) has passed the order mechanically, without going into the details and without attributing any specific role to the applicants. Hence, the order is stayed till the next date,” Justice Shivkumar Dige ordered.

Bombay HC Stays The Order

The HC stayed the order while hearing petitions filed by Buch, three current whole-time SEBI directors — Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney — and two BSE officials — Managing Director and Chief Executive Officer Ramamurthy, and its former chairman and public interest director, Pramod Agarwal.

On March 1, the special court had directed the Anti-Corruption Bureau to register an FIR against the six individuals.

They approached the HC on Monday, seeking to quash the special court’s order, contending that it was “unjust” and “harsh.” The officials argued that none of them held their current positions in 1994 and that the trial court ought to have recognized that “no vicarious liability can be fastened” on them.

Arguments Made By Solicitor General Of India

Solicitor General of India Tushar Mehta, appearing for the three whole-time SEBI directors, submitted that the complainant, Sapan Shrivastava, was a habitual litigant. He also pointed out that the high court had previously imposed a cost of Rs5 lakh on him for filing a frivolous petition.

Terming Shrivastava’s allegations vague, Mehta argued that no specific accusations had been leveled against the officials. He said the complainant sought a probe into an IPO from 1994, when the six officials were not holding any positions in SEBI or BSE.

“No averments, no explanations given — just a statement that SEBI has failed to discharge its duties. The complaint has been filed against officers who are in office now, for an alleged offense presumed to have taken place in 1994. How can they be held responsible?” Mehta questioned.

Arguments Made By Senior Advocate Amit Desai, Representing The Two BSE Officials

Senior advocate Amit Desai, representing the two BSE officials, said the complainant had made scandalous statements with serious ramifications for the economy, as vague allegations were being made against members of the principal capital market regulatory body.

Further, Desai argued that the special court judge had erred by not ensuring compliance with the Prevention of Corruption Act, which requires sanction for investigating public servants.

“Today’s economy largely survives on an inflow of funds. Taking this type of action (ordering the registration of an FIR) is an attack on the country’s economy. Such action against a market regulator — how frivolous can it get? Unfortunately, the judge did not realize the extent of the matter,” Desai submitted.

Moreover, Desai pointed out that the company in question had been delisted from the BSE in 2019, while the complaint was filed before the court in March 2024.

Senior advocate Sudeep Pasbola, appearing for Buch, also argued that action could not have been taken based on vague allegations made by the complainant.

The complainant, Shrivastava, sought time to file a reply to the petitions.

Justice Dige granted time for the reply and scheduled the matter for hearing after four weeks while staying the special court’s order.

Mumbai, March 3: The Securities Exchange Board of India and the Bombay Stock Exchange (BSE) on Monday moved the Bombay High Court to challenge an ACB Court order to file an FIR against former SEBI Chairperson, along with some SEBI and BSE officials.

The Bombay High Court agreed to grant an urgent hearing on SEBI and BSE’s plea against the order on March 4 while issuing directions restraining the registration of the FIR.

A single-judge bench of Justice Shivkumar Dige issued this directive after Solicitor General Tushar Mehta and senior counsel Amit Desai mentioned some petitions for urgent hearing, which were still in the process of being filed.

Justice Dige agreed to hear the petitions on Tuesday, directing the ACB not to act on the Sessions Court’s order until then.

Earlier, SEBI said in a statement that it would be initiating appropriate legal steps to challenge this order and remained committed to ensuring due regulatory compliance in all matters.

“The applicant is known to be a frivolous and habitual litigant, with previous applications being dismissed by the court, with imposition of costs in some cases,” said the capital markets regulator.

A Miscellaneous Application was filed before the ACB Court, Mumbai, against the former Chairperson of SEBI, three current Whole Time Members of SEBI and two officials of the BSE.

Even though these officials were not holding their respective positions at the relevant point of time, “the court allowed the application without issuing any notice or granting any opportunity to SEBI to place the facts on record”, according to the SEBI statement.

The BSE also opposed the order, calling the application for an FIR “frivolous and vexatious”.

“The court allowed the application without issuing any notice or granting an opportunity to present our case,” said the BSE.

Mumbai: In a relief to former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and others, the Bombay High Court on Monday directed the Anti-Corruption Bureau (ACB) not to act on the order of the special court.

Justice S.G. Dige granted relief to Buch, three current Whole Time Members of SEBI, and two officials of the BSE while hearing an appeal by them challenging the order of the special ACB court directing the agency to register a case against them in a listing fraud case.

The matter is likely to be heard on Tuesday.

Solicitor General Tushar Mehta appeared for the SEBI officials implicated in the case, while Senior Advocate Amit Desai represented the two BSE officials allegedly involved.

About The Case

The case pertains to allegations of financial fraud and regulatory violations concerning the listing of a company on the Bombay Stock Exchange in 1994.

On March 1, Special Judge Shashikant Eknathrao Bangar directed the ACB to register an FIR against Buch, the current Whole Time Members of SEBI—Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney—and two officials from the BSE—Pramod Agarwal and Sundararaman Ramamurthy. The court also called for a status report on the probe within 30 days.

The order was passed on an application by Sapan Shrivastava, a reporter from Dombivli, who alleged irregularities in granting listing permission to a company on the BSE in 1994 without complying with the provisions of the SEBI Act, 1992, the SEBI (ICDR) Regulations, 2018, and the SEBI (LODR) Regulations, 2015.

It was alleged that SEBI officials, including Buch and several Whole Time Members, failed to exercise their regulatory duties, allowing the company to list despite not meeting the necessary compliance norms. The complainant also claimed that the accused engaged in market manipulation, insider trading, and artificial inflation of share prices, thereby defrauding investors and violating the Prevention of Corruption Act.

The complaint further stated that despite multiple complaints to both SEBI and the police, no action was taken.

The special court noted that the allegations in the complaint prima facie disclosed a cognizable offense and required further investigation, considering the inaction by law enforcement agencies and SEBI.

SEBI had issued a statement asserting that it would initiate appropriate legal steps to challenge the special court’s order and remains committed to ensuring due regulatory compliance in all matters.

“Even though these officials were not holding their respective positions at the relevant point in time, the court allowed the application without issuing any notice or granting any opportunity to SEBI to place the facts on record,” SEBI stated.