Mumbai court orders probe against former SEBI Chief Madhabi Puri Buch over stock market fraud allegations

Shruti Kothari | Jaipur, March 2 | In a major legal move, a special court in Mumbai has ordered the Anti-Corruption Bureau (ACB) to file a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and five other officials. The order follows allegations of stock market fraud and regulatory misconduct.

Allegations and Court Proceedings
The complaint, filed by journalist Sapan Shrivastava, accuses SEBI officials of facilitating the listing of a company that allegedly did not meet the necessary regulatory norms. This purportedly led to market manipulation and investor losses. The petition further alleges collusion between SEBI officials and corporate entities, resulting in financial irregularities and compromising the integrity of the stock market.
Special Judge Shashikant Eknathrao Bangar, presiding over the case, noted that the allegations pointed to a cognizable offense, making an independent investigation necessary. “The allegations disclose a cognizable offense, necessitating a fair and impartial probe,” the court stated. The judge further observed, “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.”

Emphasizing the seriousness of the case, the court ruled that an investigation must be conducted under relevant sections of the Indian Penal Code, the Prevention of Corruption Act, the SEBI Act, and other applicable laws. “Considering the gravity of allegations, applicable laws, and settled legal precedents, this Court deems it appropriate to direct an investigation,” the court order stated. The ACB has been instructed to submit a status report within 30 days, ensuring judicial oversight in the matter.

Officials Named in the Complaint
Alongside former Chairperson Buch, the complaint names SEBI Whole-Time Members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney. Additionally, Bombay Stock Exchange (BSE) Chairman Pramod Agarwal and CEO Sundararaman Ramamurthy are implicated. Notably, none of the respondents were represented during the court proceedings.

Background on Madhabi Puri Buch
Madhabi Puri Buch made history as the first woman to lead SEBI, serving a three-year term that concluded on February 28, 2025. Her tenure was marked by significant initiatives aimed at enhancing market transparency and investor protection. However, it was also marred by controversies, including allegations from Hindenburg Research in August 2024. The research firm claimed that Buch and her husband had undisclosed investments in offshore entities linked to the Adani Group, potentially hindering SEBI’s investigations into the conglomerate. Buch has consistently denied these allegations, emphasizing her adherence to regulatory guidelines and transparency in financial dealings.

Implications for Regulatory Oversight
The court’s directive to file an FIR against a former SEBI chief is unprecedented and raises concerns about the regulatory body’s oversight mechanisms. It underscores the necessity for robust checks and balances within regulatory institutions to maintain market integrity and protect investor interests. The case has also sparked concerns among market participants about potential gaps in regulatory enforcement and accountability.