Court orders FIR against ex-Sebi chief Madhabi Puri Buch, five others in stock market fraud

Mumbai: A special court here has instructed 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," said Shashikant Eknathrao Bangarthe, special ACB court judge, in an order passed on Saturday.

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 Buch, the other officials booked are BSE’s Managing Director and Chief Executive Officer, Sundararaman Ramamurthy, its former chairman and public interest director Pramod Agarwal, and Sebi’s three full-time members, Ashwani Bhatia, Ananth Narayan G and Kamlesh Chandra Varshney. The court said it will monitor the probe and sought a status report (of the case) within 30 days.

Reacting to the court order, the Sebi said, "A Miscellaneous Application was filed before the ACB Court, Mumbai against the former Chairperson of SEBI, three current Whole Time Members of SEBI and two officials of the BSE". It also added that appropriate legal steps would be initiated to challenge this order, and it remains committed to ensuring due regulatory compliance in all matters.

The complainant, Sapan Shrivastava (47), 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.

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. Buchs denied the allegation, saying the investments were made before she joined the regulator and she had complied with all disclosure requirements.

Hindenburg recently announced the closure of its business.