Stock market `fraud`: Bombay HC stays order directing FIR against ex-SEBI chief
The Bombay High Court (HC) on Tuesday stayed for four weeks a special court`s order directing the registration of a first information report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and five other officials over accusations of stock market fraud and regulatory violations, noting that the order was passed “mechanically”, news agency PTI reported.
A single bench of Justice Shivkumar Dige said the special court order of March 1 also did not attribute any specific role to the accused in the stock market `fraud` case.
“After hearing all the parties concerned and after going through the order of the special court, it appears that the order is passed mechanically without going into details and without attributing any specific role to the applicants [Buch and others],” Justice Dige said, according to PTI.
“Hence, the order is stayed till next date. Four weeks time is given to the complainant in the case [Sapan Shrivastava] to file his affidavit in reply to the petitions,” the court further stated.
PTI reported that the HC`s judgment came on petitions filed by Buch, three current whole-time SEBI Directors Ashwani Bhatia, Ananth Narayan G and Kamlesh Chandra Varshney, Bombay Stock Exchange`s (BSE) Managing Director and Chief Executive Officer Sundararaman Ramamurthy and its former chairman and public interest director Pramod Agarwal.
The pleas sought quashing of the order passed by the special court directing the Anti-Corruption Bureau (ACB) to register an FIR against them pertaining to certain allegations of fraud committed in 1994 while listing a company on the BSE.
Stock market `fraud`: Complete non-application of mind by special court in passing order, says Solicitor General
The pleas said the order was illegal and arbitrary.
The special court had passed the order on the basis of a complaint filed by reporter Sapan Shrivastava, who sought investigation into the alleged offences committed by the accused, involving large-scale financial fraud, regulatory violations and corruption.
Solicitor General Tushar Mehta, appearing for the three SEBI officials, said there has been complete non-application of mind by the special court in passing the order.
“Based on a vague and vexatious complaint, the special court has ordered an FIR. For something allegedly done in the year 1994, how can the current members of SEBI be held responsible,” Mehta argued.
He claimed that the complainant was an “extortionist” who was working under the garb of being a public spirited person.
Senior counsel Amit Desai, appearing for Ramamurthy and Agarwal, said to take such an action against senior members of BSE was an “attack on the economy itself” especially on such “frivolous” allegations.
Stock market `fraud`: Special court had asked ACB to file status report in 30 days
“If there was any merit in the allegations, then yes, every public servant is open for prosecution, but not on some bald allegations like the present case,” Desai said.
Buch`s advocate Sudeep Pasbola reiterated the arguments put forth by Mehta and Desai.
Public prosecutor Hiten Venegaonkar, appearing for ACB, said the bureau would comply with whatever order is passed by HC.
Shrivastava, who appeared in person, refuted the allegations made against him by Mehta and sought time to respond to the petitions.
The petitions claimed the special court order was “manifestly erroneous, patently illegal and passed without jurisdiction”.
“The court has failed to consider that the complainant has failed to make out a prima facie case against the applicants for failing to discharge their duties as officers of the SEBI,” the pleas said.
They further stated that there was no material submitted by the complainant to support the allegations made by Shrivastava.
“At the relevant point of time, there was no requirement for obtaining an NOC (No-objection Certificate) from SEBI for listing of any shares on the BSE,” the pleas said.
No vicarious liability can be fastened on SEBI officials in respect of the alleged offence, as per the pleas, which sought the quashing of the special court order and stay on its execution by way of interim relief.
The order was not legally sustainable as the petitioners were not even issued a notice or heard before the decision was taken, the pleas pointed out.
Special ACB court judge SE Bangar, in his March 1 order, noted there was prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe.
The ACB court also said it will monitor the probe, and sought a status report from the agency within 30 days.
The allegations in the complaint pertained to “fraudulent listing of a company on the stock exchange in 1994 with the active connivance of regulatory authorities”, particularly SEBI, without compliance under the SEBI Act, 1992, and rules and regulations thereunder.
(With PTI inputs)
