PMLA Court Directs Registration of FIR against Former SEBI Chief, BSE Chairman, 3 Current Whole-time Members

Moneylife Digital Team 03 March 2025

Investor Interest

In an extraordinary case, a special court under the Prevention of Money Laundering Act has directed the anti-corruption bureau (ACB) in Mumbai to file an FIR regarding allegations of stock market fraud, regulatory violations, and corruption against top officials of the Securities and Exchange Board of India (SEBI) and the Bombay Stock Exchange (BSE). In response to a complaint filed by Sapan Shrivastava, 'media reporter (legal)', who sought judicial intervention under Section 156(3) of the Code of Criminal Procedure (Cr.P.C.), 1973, the court found prima facie evidence of regulatory lapses and collusion, calling for a fair and impartial investigation. The complaint names former SEBI chairperson Madhabi Puri Buch, three SEBI whole-time members, BSE chairman Pramod Agarwal and chief executive officer (CEO) Sundararaman Ramamurthy as the accused. The case pertains to a 1994 initial public offering (IPO), according to a media report.

SEBI has responded saying that even though these officials were not holding their respective positions at the relevant point of time, the court allowed the application without issuing any notice or granting any opportunity to SEBI to place the facts on record.

SEBI has also alleged that the applicant is known to be a frivolous and habitual litigant, with previous applications being dismissed by the court, with imposition of costs in some cases. Indeed, according to a media report, in 2019, the Bombay High Court fined Mr Shrivastava Rs5 lakh for filing a public interest litigation (PIL) which claimed that thousands of schools affiliated to the Council for Indian School Certificate Examination (ICSE) were being run illegally. The judges also ordered an FIR be filed against the petitioner for threatening ICSE-affiliated schools to show their approvals.

According to the report, the judges asked the petitioner to pay Rs5 lakh to ICSE board in four weeks and directed the high court registry to not entertain any petitions filed by him unless he showed proof of the payment. The court also ordered the registration of an FIR against him for alleged extortion after the ICSE counsel Raju Subramanian pointed out that Shrivastava had written letters to various ICSE board-affiliated schools threatening them to show their approvals or he would take criminal action against them.

Central to Mr Shrivastava’s complaint is the fraudulent listing of a company on the stock exchange, which is alleged to have been facilitated by SEBI. The complainant argues that SEBI failed in its regulatory duties by permitting the company to list without meeting the necessary legal requirements under the SEBI Act, 1992. This failure is said to have resulted in market manipulation, corporate fraud, and public deception. Despite the complainant’s repeated attempts to address the issue with relevant authorities, no action was taken, which forced the matter to be brought before the court, claims Mr Shrivastava.

According to the complainant, SEBI allowed the listing of the company, despite its failure to comply with key regulatory requirements, including disclosure and due diligence processes mandated by the SEBI Act, 1992, and related regulations. The company allegedly engaged in fraudulent activities such as round-tripping, insider trading and price manipulation.

SEBI plans to challenge the court's order on Monday, while asserting its commitment to regulatory compliance.

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