Bombay HC Suspends FIR Against Former SEBI Chairperson Madhabi Puri Buch and BSE Officials

Mumbai- In a key legal turn, the Bombay High Court has granted a stay to a special court’s order requiring the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chief Madhabi Puri Buch and a number of senior officials from the Bombay Stock Exchange (BSE). The ruling comes on an appeal filed by Buch and the officials in question, who wanted the special court’s order to be quashed.
The stay was issued by Justice Shivkumar Dige after considering the arguments presented by Solicitor General Tushar Mehta, senior lawyers Amit Desai and Sudeep Pasbola, and the complainant, journalist Sapan Shrivastava. Justice Dige said the special judge’s previous order looked “mechanical” as it had not taken a cogent understanding of the case and had not given the respondents a chance to plead their defense.

During the hearing, Solicitor General Mehta asserted that the special judge did not take into consideration crucial aspects, especially that current office bearers were not in any way concerned with the purported wrongdoing, going back to 1994—three decades back. He made a point of noting that the special court had to analyze the backdrop of allegations, considering the fact that the alleged regulatory shortcomings listed by Shrivastava referred to the rules enacted in 2002 only.

Pointing out the frivolous nature of Shrivastava’s allegations, Mehta reminded him that the Bombay High Court had earlier imposed a cost of ₹5 lakhs upon him for making frivolous petitions with the intention of extorting public officials. He labeled Shrivastava a habitual litigant whose behavior needed to be questioned.

Seventh senior counsel Desai, appearing on behalf of BSE official Pramod Agarwal, seconded these views, claiming that the complainant dishonestly misled the court with false allegations pointing fingers at SEBI. Desai highlighted the gravity of the accusations, maintaining that they amounted to an attack on the integrity of India’s financial system. He pointed out that the laws relied upon by Shrivastava were enacted years following the listing of the company, further eroding the credibility of the complaint.

Pasbola, on behalf of Madhabi Puri Buch, also argued that charges of contravention of the Securities Contract Regulation Act were baseless since the company had been listed well before any such amendments were brought into force.

The uproar arose because Shrivastava had registered a complaint to the effect that Buch, in company with some SEBI and BSE staff members, arranged the “fraudulent” listing of Cals Refineries Ltd. on the exchange without taking prompt action against the company. According to Shrivastava, he and his family suffered massive losses as a result of the suspected negligence.

On the complaint, the special court had directed the Anti-Corruption Bureau to file an FIR under different provisions of the Indian Penal Code, the Prevention of Corruption Act, and the SEBI Act, with a 30-day probe report. The judge had said that there was prima facie evidence of regulatory failures and collusion, which required judicial intervention.

In the wake of the stay by the high court, the case is to be heard for the second time on Tuesday, with the implications of the verdict possibly influencing the regulatory behavior and accountability of India’s financial market regulation.

This evolving legal drama underscores the intricacies of corporate governance and regulatory adherence to law in India’s vibrant economic environment, particularly in the context of investor protection versus the role of financial authorities.