A special court in Mumbai on Saturday ordered the anti-corruption bureau (ACB) to file a fir against former SEBI chief Madhabi Puri Buch, top officials of the Bombay Stock Exchange (BSE) and the market regulator in a case of alleged stock market fraud and regulatory violations. 

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The special court ordered the bureau to probe the allegations, which it will monitor and asked for a status report within 30 days. In response, reports show that the SEBI and the BSE moved the high court, challenging the special court order. 

Reports on Monday showed the bureau was asked to put the filing on hold as the high court is set to hear the matter on Tuesday. 

What’s the case about? 

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The complainant, Sapan Shrivastava, alleges that former chair Madhabi Puri Buch and officials at the SEBI and the BSE were involved in a ‘Large-scale financial fraud’ by allowing the listing of a firm on the stock exchange. Reports show Shrivastava and his family had lost a substantial amount of money after investing in shares of Cals refineries on December 13, 1994, which was listed on the BSE India. 

He claimed that SEBI and BSE did nothing to address the firm's illegal activities, listed it, and failed to safeguard investor interests by not following IPO norms. 

Cals refineries was granted listing permission in 1994 and was suspended from trading in August 2017 and continues to remain suspended until now. The complainant said the police and regulatory bodies did nothing in response to his complaint, which drove him to seek judicial intervention. Shrivastava presented material including 'written complaints' and 'documents revealing the procedural lapses' in the IPO norms. 

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The complainant said, ‘The accused persons engaged in round-tripping, insider trading, and price manipulation, misleading investors into believing the company was financially sound.’ 
Meanwhile, the special court said, ‘Upon reviewing the material on record, this court finds the allegations disclose a cognizable offense, necessitating an investigation.’ 

The order added, ‘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.’  

Reacting to the special court order, the SEBI said on Sunday that it would challenge the court order. The SEBI said, ‘The court allowed the application without issuing any notice or granting any opportunity to SEBI to place the facts on record.’ It claimed the case dates back to 1994 when the officers named in the order were not with the market regulator.