The Bombay High Court has stayed a special court's order that directed the registration of a First Information Report (FIR) against former SEBI Chief Madhabi Puri Buch, whole-time members of SEBI, and senior officials of the Bombay Stock Exchange (BSE).
Following the special court's directive, Buch and other officials promptly approached the Bombay High Court seeking to quash the proceedings.
Justice Shivkumar Dige, after considering arguments presented by Solicitor General Tushar Mehta and senior advocates Amit Desai and Sudeep Pasbola, stayed the special court's order, terming it "mechanical."
"After hearing all the counsels and perusing the impugned order... It appears that the special judge has passed the order mechanically without going into details and without giving an opportunity to the respondents to file their say... Hence, stayed," Justice Dige stated in open court.
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Arguments Presented by SEBI and BSE Officials
Solicitor General Tushar Mehta, representing SEBI Whole Time Member Ashwani Bhatia, pointed out that the special court failed to consider a crucial timeline.
"My Lord must consider the fact that we were not there in 1994. The special court ought to have examined this. Please note that 'abuse of process' is one of the grounds for quashing the proceedings," Mehta argued.
Mehta further submitted that the complainant, journalist Sapan Shrivastava, had a history of filing frivolous litigations, some of which had already been penalized by the Bombay High Court.
"In fact, the High Court had previously imposed a Rs 5 lakh cost on the complainant for filing frivolous petitions meant to extort public servants. The court had even directed respondents to lodge an extortion case against him," Mehta highlighted.
Senior Advocate Amit Desai, representing BSE official Pramod Agarwal, contended that the complainant misled the court with false statements.
"Milord, he has made bold and scandalous allegations. These petitioners are officials of a major stock exchange in India, and such allegations strike at the core of the economy. The special judge failed to comprehend the significance of this matter. The regulations in question were introduced in 2002, whereas the alleged violation pertains to 1994," Desai argued.
Senior Counsel Sudeep Pasbola, appearing for Madhabi Puri Buch, also emphasized this timeline discrepancy.
"The complainant alleges a violation of the Securities Contract Regulation Act, which was amended in 2002, whereas the listing in question occurred in 1994. The special court did not even consider this fundamental fact," Pasbola stated.
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The Special Court's Order & Background
The special court, presided over by Judge S.E. Bangar, had ordered an FIR registration based on a complaint by Sapan Shrivastava, who claimed that SEBI and BSE officials facilitated the fraudulent listing of a company and failed to act against its misconduct. Shrivastava alleged that he and his family had suffered financial losses due to the fraudulent listing of Cals Refineries Ltd on the BSE in 1994.
"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 special court observed in its order.
However, the High Court's stay order has put a temporary halt to the investigation, allowing SEBI and BSE officials to present their case in greater detail.
Following the urgent plea mentioned by Solicitor General Tushar Mehta via video conference, Justice Dige agreed to schedule a detailed hearing on Tuesday. This will provide all parties an opportunity to present their arguments before any further legal proceedings take place.
The case underscores the ongoing legal scrutiny around financial regulations and accountability in the Indian stock market. The High Court’s decision in the upcoming hearing will likely set a precedent for similar cases in the future.
Stay tuned for further updates on this developing legal matter.
