Bombay HC stays legal action against ex-SEBI chief in fraud case

The Bombay High Court has temporarily halted a lower court's directive to initiate legal proceedings against Madhabi Puri Buch, former head of market regulator SEBI, and five others, for a period of four weeks.

This order pertains to alleged market fraud and regulatory infractions.

Justice Shivkumar Dige, presiding over a single bench, remarked that the special court's decision made on March 1 lacked a detailed examination and did not specify the roles of those accused. Consequently, the High Court has stayed the order, allowing Sapan Shrivastava, the complainant, four weeks to submit an affidavit in response to the petitions.

The ruling was in response to submissions from Ms. Buch and three full-time SEBI directors—Ashwani Bhatia, Ananth Narayan, and Kamlesh Chandra Varshney.

Additionally, Bombay Stock Exchange’s Managing Director and CEO, Ramamurthy, along with ex-chairman and Public Interest Director Pramod Agarwal, were also involved in the petition.

These individuals sought the dismissal of the special court's directive, which called on the Anti-Corruption Bureau to file charges regarding alleged fraud relating to a company listing on the BSE in 1994. This directive followed a reporter's complaint, which demanded an investigation into purported financial fraud, regulatory breaches, and corruption.

Special court judge Shashikant Eknathrao Bangar had stated there was initial evidence indicating regulatory mishaps and potential collusion, warranting an unbiased investigation. The judge emphasized the necessity of judicial intervention due to the lack of action from law enforcement and SEBI.

During an urgent hearing requested by Ms. Buch and the other directors, the High Court instructed the ACB to refrain from any action pending the hearing outcome. Solicitor-General Tushar Mehta represented the SEBI directors, arguing the lower court's order was flawed, illegal, and beyond its powers, claiming no valid case was presented.

In response, SEBI announced it would pursue appropriate legal measures to challenge the order, reinforcing its commitment to regulatory compliance. SEBI also noted the applicant's history of filing baseless litigations, which had previously resulted in dismissals and cost penalties.

The BSE criticized the reporter's allegations as baseless and intended to disrupt.