Mumbai Court Orders FIR Against Former SEBI Chief Madhabi Puri Buch and Five Others in Alleged Stock Market Fraud

In a major legal development, a special Anti-Corruption Bureau (ACB) court in Mumbai has directed the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and five other officials. The order comes in response to allegations of regulatory lapses and collusion in a stock market listing case that dates back to 1994.

The complaint alleges that SEBI officials allowed a company’s fraudulent listing on the Bombay Stock Exchange (BSE), violating regulatory norms and misleading investors. The court’s directive raises significant concerns about regulatory oversight in India’s financial markets.

Background of the Allegations

1. The controversy revolves around the alleged fraudulent listing of a company on the BSE.
2. The complaint accuses SEBI officials, including Madhabi Puri Buch, of neglecting regulatory requirements, which led to investor losses.
3. The application before the court argued that these officials had a conflict of interest and did not take the necessary steps to prevent market manipulation.
4. The case highlights potential loopholes in SEBI’s regulatory framework, raising questions about the effectiveness of oversight mechanisms.
5. The allegations have triggered concerns about transparency and accountability in India’s financial regulatory bodies.

Court’s Directive and Observations

The special ACB court judge Shashikant Eknathrao Bangar, in an order dated March 1, 2025, stated that:

• There is prima facie evidence of regulatory lapses and possible collusion between officials and market participants.
• An independent and fair investigation is necessary to ascertain the role of SEBI officials in the alleged fraud.
• The Anti-Corruption Bureau (ACB) must file an FIR and submit a progress report within 30 days.
• Further legal action will depend on the findings of the investigation.

SEBI and BSE’s Response

Following the court’s directive, SEBI and the BSE have issued strong rebuttals against the allegations.

SEBI’s Stand

• SEBI has called the allegations baseless, claiming that the court’s directive was issued without seeking SEBI’s official response.
• The regulatory body has announced its intention to challenge the FIR in a higher court, stating that the case has no legal merit.
• It has reassured investors that SEBI remains committed to upholding market integrity and that no wrongdoing occurred under Buch’s leadership.

BSE’s Position

• The BSE has termed the accusations frivolous and misleading, arguing that the officials named in the complaint were not in their respective positions at the time of the listing.
• The exchange has vowed to cooperate with legal authorities but remains firm in its stance that the case lacks substantial evidence.

Madhabi Puri Buch’s Controversial Past

Madhabi Puri Buch, who served as the first female chairperson of SEBI, has faced controversy in the past as well.

1. In August 2024, global financial research firm Hindenburg Research alleged that Buch and her husband had investments in offshore entities linked to Vinod Adani, the elder brother of Adani Group’s Gautam Adani.
2. These allegations suggested a conflict of interest, raising concerns about whether SEBI acted impartially in investigating market manipulation cases involving the Adani Group.
3. Buch and her husband strongly denied the accusations, calling them a character assassination attempt.

Despite these controversies, Buch was known for implementing progressive regulatory reforms during her tenure at SEBI, including stricter disclosure norms for companies and enhanced investor protection measures.

Legal and Market Implications

The FIR against Madhabi Puri Buch and five other officials could have far-reaching consequences:

1. Investor Confidence at Risk

• The case raises serious concerns about market transparency, which could impact investor sentiment.
• If regulatory bodies are found complicit in fraudulent activities, it could lead to a loss of trust in India’s financial system.

2. Regulatory Accountability Under Scrutiny

• The investigation will test SEBI’s accountability and its ability to enforce strict regulatory practices.
• If lapses are confirmed, it may prompt policy reforms to prevent similar incidents in the future.

3. Political and Corporate Reactions

• Several market analysts and legal experts have criticized the timing of the case, suggesting political motives might be involved.
• Opposition parties have demanded a thorough probe, while corporate leaders warn that excessive scrutiny of regulatory bodies could weaken investor confidence.

What’s Next?

1. The Anti-Corruption Bureau (ACB) will initiate its investigation based on the court’s directive.
2. SEBI and BSE are expected to file appeals to challenge the FIR order.
3. If proven guilty, the accused officials could face severe legal consequences, including criminal charges and fines.
4. The case outcome could influence future regulatory policies and the role of SEBI in stock market governance.

Moving Ahead

The Mumbai court’s directive to file an FIR against former SEBI Chairperson Madhabi Puri Buch and five others marks a critical moment in India’s financial regulatory landscape. The allegations of regulatory lapses and stock market fraud put a spotlight on SEBI’s role in ensuring fair market practices.

As legal proceedings unfold, stakeholders across India’s financial sector will be closely watching how SEBI, the BSE, and law enforcement agencies handle the case. Ensuring due process, transparency, and accountability will be key to restoring trust in India’s financial markets.

By – Nikita