Bombay High Court Stays Special Court Order Directing Registration Of FIR Against Ex-SEBI Chief Madhabi Puri Buch, Other BSE Officials

"After hearing all the counsels and persuing the impugned order... It appears that the special judge has passed the order mechanically without going into details and without giving opportunity to the respondents to file their say... Hence stayed," the judge said in open court.

Arguing for the SEBI whole time member Ashwani Bhatia, SG Mehta told the bench that Special Judge failed to apply his mind especially to the fact that the petitioners were the present office bearers while the alleged listing of the company took place way back in 1994, which is 30 years now.

He said, "My lord, must consider the fact that we were not there in 1994, the special court ought to have examined this. Please note that the 'abuse of process' is one grounds for quashing of the proceedings. Consider the fact that I have a chart that runs into two to three pages, which details the series of frivolous litigations the complainant has filed. The fact that it has been 30 years now since the alleged listing etc was permitted in 1994. This too needs to be considered."

Speaking about the complainant Sapan Shrivastava, Mehta highlighted the fact that the Bombay High Court itself had passed an order imposing Rs 5 lakhs cost on him for filing "frivolous petitions" only to "extort public servants."

"In fact, the HC in its order had asked the respondents therein to lodge extortion case against him. He is habitual litigant filing such frivolous petitions," Mehta argued.

Arguing for BSE official Pramod Agarwal, senior counsel Desai told the bench that the complainant kind of misled the court by making false statements and attributing the same to the SEBI.

"Milord, please note he has made very bold and scandalous allegations. It must be considered that these petitioners are the officials of the prominent stock exchange of India and thus these allegations are an attack on the economy. It's unfortunate that the Special Judge did not understand the significance of this matter. All the allegations are bald and baseless. The particular regulations, which the complainant claims have been violated, were brought only in 2002. The judge does not even realise that the provision was not there," Desai told the court.

Senior counsel Pasbola representing Madhabi told the judges that complainant has alleged that there were breach Securities Contract Regulation Act (Amendment of 2002) but the company in the present case was listed in 1994. The special court did not consider this fact at all.

The trio have urged the court to quash the order passed by special ACB court on Saturday against Madhabi, Ashwani Bhatia, Anant Narayan G and Kamlesh Varshney (While Time Members of SEBI) along with Agarwal and Ramamurthy.

Solicitor General Tushar Mehta representing Madhavi, appeared through VC and mentioned her plea along with senior advocate Amit Desai, who appeared for Agarwal and Ramamurthy.

Upon hearing the request, Justice Dighe, granted urgent hearing to the matter and agreed to list the same on Tuesday.

Notably, special Judge S E Bangar while hearing an application made by one Sapan Shrivastava (47), a journalist by profession, noted that the complaint discloses a "cognizable offence" and therefore, ordered the ACB to register an FIR under the relevant provisions of the Indian Penal Code (IPC), the Prevention of Corruption (PC) Act and also the SEBI Act, and submit a probe report within 30 days.

The judge in the order, clarified that he has considered the "gravity of the offence" as disclosed in the complaint and thus had ordered an investigation under section 156(3) of the Criminal Procedure Code (CrPC).

"The allegations disclose a cognizable offense, 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 judge observed in the order.

In his complaint, Shrivastava alleged that Madhabi in connivance with other authorities of the SEBI and the BSE, allowed "fraudulent" listing of a company on the stock exchange and also did not take any action against the said company for its wrongs.

According to Shrivastava he and his family had invested in shares of Cals Refineries Ltd on December 13, 1994, which was listed at BSE India, and that he had suffered huge losses. He claimed that SEBI and the officials of BSE did not act against the crimes of the companh and instead listed it against the law, and even failed to protect the interests of investors.

The complaint alleged manipulation of the market by officials BSE and SEBI, who allegedly facilitated the corporate fraud by allowing the listing of the company.