Ex-SEBI Madhavi Puri Buch Faces Law Again

The allegations of fraud in the capacity of the then-SEBI chief against Madhabi Puri Buch have resurfaced, thanks to an order from a special anti-corruption court in Mumbai that found her conduct deserving enough to merit a first information report (FIR). The indictment involves large-scale corporate financial fraud, criminal offences and misconduct during her tenure as SEBI chairperson, as cited in the Mumbai ACB court's order.

In the order dated March 1, special ACB court judge Shashikant Eknathrao Bangar said, “The allegations disclose a cognisable offence, necessitating an investigation. There is prima facie evidence of regulatory lapses and collusion, requiring a fair and impartial probe. The inaction by law enforcement and SEBI necessitates judicial intervention under Section 156(3) CrPC.”

The court ordered the ACB of Worli in Mumbai to register an FIR under the relevant provisions of the Indian Penal Code, the Prevention of Corruption Act, the SEBI Act and other applicable laws. “The investigation shall be monitored by this Court. A status report shall be submitted within 30 days,” the order read. 

The accusations stem from claims of regulatory lapses and collusion, particularly in allowing the listing of a company, Cals Refineries Ltd., on the Bombay Stock Exchange in 1994, which allegedly led to market manipulation and investor losses.

Hindenburg Research's 2024 report accused Buch and her husband of undisclosed investments in offshore entities linked to the Adani Group, raising concerns about conflicts of interest in SEBI's investigations into Adani, though Buch has denied these claims.

The court order also references allegations of insider trading, siphoning of public funds, and failure to adhere to SEBI regulations, prompting the directive for an FIR and investigation by the Anti-Corruption Bureau.

Market manipulation

A journalist, Sapan Srivastava, has lodged a complaint alleging that SEBI officials facilitated market manipulation and corporate fraud by permitting the listing of a company that failed to comply with established regulations. The petitioner asserts that SEBI's neglect of its statutory responsibilities resulted in financial fraud, insider trading, and the misappropriation of public funds following the company's listing. The Bombay Stock Exchange (BSE) has also been implicated in these allegations.

The complaint identifies several prominent figures, including former SEBI Chairperson Madhabi Puri Buch, Whole Time Members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney. Additionally, BSE Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy are named as respondents. It is noteworthy that none of the accused individuals were present during the court proceedings.

Judicial findings

Upon examining the complaint and accompanying documents, Judge Bangar discovered prima facie evidence of regulatory failures and potential collusion, necessitating a thorough investigation. The court underscored that the allegations indicate a cognizable offence, which requires a fair and unbiased inquiry. As a result, the Anti-Corruption Bureau (ACB) in Mumbai has been instructed to file a First Information Report (FIR) under the relevant sections of the Indian Penal Code, the Prevention of Corruption Act, and the SEBI Act.

Acknowledging the seriousness of the allegations, Judge Bangar ordered the ACB to carry out an investigation and provide a status report within 30 days. The court emphasized that judicial intervention was required because of SEBI’s lack of action and the possible repercussions on investor confidence.

SEBI to challenge order

The SEBI said in a statement that the court gave it little time to respond and the board had not been served any notice. The exchange noted that the officials named in the order were not holding their current positions when Cals Refineries was listed three decades ago.

“SEBI would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters,” the market regulator said. 

In a separate statement, the BSE said that the application was “frivolous and vexatious in nature”. Echoing a sentiment similar to SEBI's, it said that no notice had been issued and neither time nor opportunity had been granted to respond to the charges.

The BSE officials named in the order had not been holding positions at the exchange during the listing of Cals Refineries, it clarified (again like the SEBI). “As a responsible market institution, BSE remains committed to upholding regulatory compliance and ensuring transparency,” the statement said.

Meanwhile, Buch, along with five others, have moved the Bombay High Court, seeking to quash the recent order of the special court directing an FIR against them for alleged stock market fraud.