Stock market frauds: Mumbai Court orders FIR against ex-SEBI chief Madhabi Puri Buch, 5 others

Ex-Sebi boss Madhabi Buch under scanner as court orders FIR in alleged market fraud case

Two days after her exit – a special court here has directed the Anti-Corruption Bureau (ACB) to register an FIR against former SEBI chairperson Madhabi Puri Buch and five other officials in connection with alleged stock market fraud and regulatory violations. “There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe,” the special ACB court judge, Shashikant Eknathrao Bangar, said in the order passed on Saturday. The court said it will monitor the probe, and sought a status report (of the case) within 30 days.

The court order also noted that the allegations disclose a cognisable offence, necessitating an investigation. The inaction by law enforcement (agencies) and the Securities and Exchange Board of India (SEBI) necessitates judicial intervention under the provisions of the CrPC (Criminal Procedure Code), it added.

Apart from Madhabi Puri Buch, the following persons will also be named in the FIR: SEBI’s Whole Time Members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney, along with BSE Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy.

The complainant, a journalist – Sapan Shrivastava – had sought an investigation into the alleged offences committed by the proposed accused, involving large-scale financial fraud, regulatory violations and corruption. The allegations pertain to the fraudulent listing of a company on the stock exchange with the active connivance of regulatory authorities, particularly the SEBI, without compliance under the SEBI Act, 1992 and rules and regulations thereunder.

The complainant claimed that the 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. Despite approaching the police station and regulatory bodies concerned on multiple occasions, no action has been taken by them, the complainant said.

The court, after considering the material on record, directed the ACB Worli, Mumbai Region, to register an FIR under relevant provisions of the IPC, Prevention of Corruption Act, SEBI Act, and other applicable laws. India’s first woman SEBI chief Buch, who faced conflict of interest allegations by the US-based short-seller Hindenburg and also political heat thereafter, completed her three-year tenure on Friday.

Although, Buch in her tenure made significant strides in areas like faster settlements in equities, enhanced FPI disclosures and increasing mutual fund penetration through Rs.250 SIP, the last year of her tenure saw heightened controversy, when she battled a series of allegations by Hindenburg and the Congress party, while simultaneously dealing with in-house employee protests against “toxic work culture”.

In August last year, Buch faced pressure to resign after the Hindenburg Research accused her of having a conflict of interest that prevented a thorough examination of manipulation and fraud claims at the Adani Group. Hindenburg accused Madhabi Puri Buch and her husband Dhaval Buch of investing in offshore entities that were allegedly part of a fund structure in which Vinod Adani — the elder brother of Adani group founder chairman Gautam Adani — also had investments.

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