Mumbai: High Court Halts ACB Action Against Former SEBI, BSE Officials in Fraud Case

Mumbai, 3rd March 2025: The Bombay High Court on Monday instructed the Maharashtra Anti-Corruption Bureau (ACB) to refrain from acting on a Mumbai Sessions Court order directing the registration of an FIR against former officials of the Securities and Exchange Board of India (SEBI) and the Bombay Stock Exchange (BSE) in a case related to market manipulation and corporate fraud. The directive will remain in effect until Tuesday.

Justice Shivkumar Dige, presiding over a single-judge bench, issued the order after Solicitor General Tushar Mehta and senior advocate Amit Desai sought an urgent hearing for petitions that were being filed on Monday morning.

Representing various SEBI and BSE officials, Mehta and Desai contended that the Sessions Court’s directive lacked legal validity as the accused individuals had not been notified before the order was passed.

Acknowledging their arguments, Justice Dige agreed to hear the matter on Tuesday and instructed the ACB to hold off on implementing the Sessions Court’s decision until then.

Petitions have been individually filed before the High Court by former SEBI Chairperson Madhabi Puri Buch, Whole-Time Members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney, along with BSE Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy.

The Sessions Court’s order stemmed from a complaint lodged by Thane-based journalist Sapan Shrivastava, who alleged widespread financial fraud and regulatory violations in the listing of a company on the stock exchange. According to the complainant, SEBI officials neglected their statutory responsibilities, enabled market manipulation, and allowed the listing of a company that failed to meet regulatory requirements.

The complaint further accused SEBI officials of colluding with corporate entities, engaging in insider trading, and facilitating the misappropriation of public funds after the company’s listing.

After reviewing the complaint, Special Judge SE Bangar observed that there was prima facie evidence of misconduct and ordered the ACB, Mumbai, to register an FIR under relevant sections of the Indian Penal Code, the Prevention of Corruption Act, and the SEBI Act.

“The allegations indicate a cognizable offense, warranting a transparent and impartial investigation,” the court stated. The judge also emphasized, “There is initial evidence of regulatory failures and collusion, making a thorough probe necessary. The inaction of SEBI and law enforcement calls for judicial oversight.”

In response, SEBI dismissed the complaint as baseless, labeling the complainant a habitual litigant whose previous cases had often been rejected by courts, with penalties imposed in some instances.

SEBI further clarified that the officials named in the Sessions Court’s directive were not in their respective positions when the alleged violations occurred.

Similarly, BSE released a statement explaining that the case revolved around Cals Refineries Ltd., a company listed on the exchange in 1994. It asserted that the accused officials had no involvement in the company’s listing and described the complaint as frivolous and misleading.