Mumbai Court Investigates Sebi Role in 1994 Listing Fraud
A special court in Mumbai has directed the Anti-Corruption Bureau (ACB) to file a First Information Report (FIR) against Madhabi Puri Buch, the former chief of the Securities and Exchange Board of India (Sebi), and five other public officials in connection with alleged irregularities in granting listing permission to a company on the Bombay Stock Exchange (BSE) in 1994. This order comes after a private complaint raised concerns about procedural lapses, market manipulation, and potential corruption linked to the listing of Cals Refineries Ltd.
The complaint, filed by media professional Sapan Shrivastava, has set the stage for a broader investigation into what is being described as a high-stakes corporate fraud involving the Sebi and BSE officials. In addition to Buch, the court has also named Ashwani Bhatia, Ananth Narayan, Kamlesh Varshney—all of whom are current whole-time members of Sebi—as well as Pramod Agarwal, Chairman of BSE, and Sundararaman Ramamurthy, the Managing Director and CEO of BSE, at the time of the alleged events.
The complaint has sparked concerns about regulatory oversight and the integrity of India’s financial markets. It alleges that the company was allowed to list on the BSE despite failing to meet the statutory requirements of the Securities and Exchange Board of India Act, 1992. The complaint further accuses the officials of being complicit in allowing the manipulation of share prices and enabling a fraudulent listing process. Documents submitted with the complaint point to artificial inflation of share prices, suggesting that the listing was a carefully orchestrated market manipulation scheme.
The court, in its February 1 order, stated that there was prima facie evidence to suggest both regulatory lapses and potential collusion among the involved parties. Special Judge S E Bangar noted that the case required a fair and impartial investigation. Notably, the order followed Shrivastava’s claims that multiple complaints to regulatory bodies and police stations had failed to yield any meaningful action, prompting him to seek judicial intervention under Section 156(3) of the Criminal Procedure Code (CrPC).
The court found sufficient grounds to direct an investigation, citing the existence of a cognizable offence that necessitated action. This ruling comes despite Sebi’s objections, which argued that the court’s order was issued without providing an opportunity to present facts or challenge the claims made in the complaint. Sebi, in a statement released on Sunday, affirmed its commitment to regulatory compliance and indicated plans to challenge the order legally.
The BSE, too, has expressed concerns about the court’s ruling. In a statement, it argued that the officials named in the complaint were not holding their positions at the time of the alleged wrongdoing and that the complaint itself was “frivolous and vexatious.” BSE also contended that no notice was issued to them prior to the court’s decision, denying them an opportunity to present their case. The exchange assured that it would pursue appropriate legal recourse following the court’s directive.
The case has far-reaching implications, particularly for the credibility of India’s capital markets and the agencies entrusted with overseeing them. It raises pertinent questions about the transparency of listing procedures and the role of regulators in safeguarding investor interests. The public and the financial community will be closely watching as the investigation unfolds, with the potential for broader scrutiny into the practices of both Sebi and BSE officials during the 1994 listing.
This development highlights a growing concern about accountability within India’s regulatory framework, where lapses in governance could expose the country to significant financial risks. As the investigation progresses, stakeholders will be eager to see if it prompts necessary reforms to ensure better oversight and safeguard market integrity.
