Bombay HC Halts FIR Against Former SEBI Chief Madhabi Puri Buch and Others

On Monday, the Bombay High Court (HC) directed the state’s Anti-Corruption Bureau (ACB) to refrain from acting on a special court’s order that sought the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch. The order also included three whole-time SEBI members and two officials from BSE (formerly the Bombay Stock Exchange).

The Bombay High Court on Tuesday granted a four-week stay on a special court's order directing the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) chief Madhabi Puri Buch and five others over allegations of stock market fraud and regulatory violations.

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The court observed that the special court's decision was issued "mechanically" without proper scrutiny. The case is linked to the 1994 Cals Refineries stock listing fraud.

On March 3, Buch, along with three whole-time SEBI directors—Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney—and two senior BSE officials, Pramod Agarwal and Sundararaman Ramamurthy, approached the Bombay High Court seeking to annul the special court's March 1 order. This order had instructed the police to register an FIR against them.

Justice Shivkumar Dige, presiding over a single bench, noted that the special court's directive lacked a thorough examination of details and failed to assign specific roles to the accused individuals.

The FIR order was based on a complaint filed by journalist Sapan Shrivastava, who sought an investigation into the alleged offenses. "Therefore, the order is stayed until the next hearing. The complainant (Sapan Shrivastava) has been given four weeks to submit his affidavit in response to the petitions," the high court stated.

Legal Representation and SEBI’s Stand

Solicitor General Tushar Mehta appeared on behalf of Buch and SEBI officials, while senior counsel Amit Desai represented former BSE chairman Pramod Agarwal and managing director (MD) and chief executive officer (CEO) Sundararaman Ramamurthy.

In a statement issued on Sunday, SEBI clarified that the officials in question were not holding their respective positions at the time of the alleged events. Additionally, the regulator emphasized that the special court allowed the application without issuing any prior notice or allowing SEBI an opportunity to present its defense.

“The applicant is known for filing frivolous and habitual litigations, with several past cases being dismissed by courts, some even attracting cost penalties,” SEBI stated. BSE also criticized the application, calling it “frivolous and vexatious in nature.”

Background of Cals Refineries and Regulatory Actions

Cals Refineries, the company at the center of the controversy, has remained suspended from trading since August 2017 due to regulatory concerns. The company has a history of facing strict actions from SEBI.

In 2014, SEBI had barred multiple directors of Cals Refineries from participating in the securities market for a decade due to their involvement in irregularities related to Global Depository Receipts (GDRs). Further scrutiny led to additional penalties, and in 2021, SEBI imposed a fine of ₹15 crore on the company for continuing regulatory violations.

What’s Next?

With the Bombay High Court intervening, SEBI officials and BSE representatives have received temporary relief from legal proceedings. The upcoming hearing will determine whether the allegations warrant further investigation or if the case will be dismissed as another instance of frivolous litigation.

The decision in this case could also set a precedent for how similar matters are handled in the future, particularly when it comes to reviewing past regulatory decisions. If the court finds no substantial merit in the allegations, it could reinforce stricter measures against habitual litigants to prevent misuse of the legal system.