After a special court directed the ACB to file an FIR on the top officials of Sebi and BSE, both the financial institutions have refuted the allegations of fraud against them, calling the complaint 'frivolous' and 'vexatious'
A special court has directed the Anti-Corruption Bureau (ACB), Mumbai to file an FIR against former Sebi chairperson Madhabi Puri Buch, three current whole-time members of the market regulator and two BSE officials over allegations of stock market fraud, regulatory violations, and corruption related to the listing of a company in 1994. The order from the special court comes just a day after Buch's tenure as Sebi chief came to an end on February 28.
In a detailed order on March 1, the court, designated under the Prevention of Money Laundering Act, said: "The allegations disclose a cognizable offense, necessitating an investigation. There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe. The inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC."
The court issued the order based on an application filed by Sapan Shrivastava, 47, a resident of Dombivli who claims to be a journalist. The application accused regulatory authorities of being actively involved in the fraudulent listing of a company on the stock exchange.
How Sebi And BSE Responded
Both Sebi and BSE, however, have refuted the allegations and said they will take “appropriate legal steps to challenge this order.”
BSE has called the application by the Dombivili resident “frivolous and vexatious in nature.” Sebi said, “The applicant is known to be a frivolous and habitual litigant, with previous applications being dismissed by the Court, with the imposition of costs in some cases.
“The Honourable Court has allowed the application without issuing any notice or granting any opportunity to BSE to place the facts on record,” BSE said.
“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,” the market regulator argued.
The complaint names Madhabi Puri Buch, along with Sebi’s current whole-time members Ashwani Bhatia, Ananth Narayan G., and Kamlesh Chandra Varshney, as well as BSE officials Pramod Agarwal and Sundararaman Ramamurthy. The complainant has called for an FIR to be registered and an investigation into allegations of widespread financial fraud, regulatory violations, and corruption.
The charges relate to the alleged fraudulent listing of Cals Refineries Ltd. on the stock exchange in 1994, with the supposed active involvement of regulatory authorities, especially Sebi. The complainant claims that the listing took place without compliance with the SEBI Act of 1992, and that SEBI officials failed in their duties by allowing market manipulation and corporate fraud to occur, permitting a company to be listed that didn’t meet the necessary regulations.
The complainant told the court that despite repeatedly approaching the relevant police station and regulatory bodies, no action had been taken so far.
“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 submitted.
He also claimed that the company's promoters had diverted public funds after it was listed on the exchange. The complainant accused Sebi of not taking action despite several warning signs. He said the accused were involved in activities like round-tripping, insider trading, and manipulating stock prices while misleading investors into thinking the company was financially stable.
The company's shares were suspended from trading in August 2017, according to the BSE website.