The Securities and Exchange Board of India (SEBI) has announced plans to take legal action against a Mumbai special court's directive to file an FIR against former SEBI chairperson Madhabi Puri Buch and other officials over alleged stock market fraud and regulatory violations.

On Sunday, SEBI dismissed the complainant as a "frivolous and habitual litigant" and assured that it would challenge the Anti-Corruption Bureau (ACB) court’s order.

SEBI’s Official Statement:

"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. SEBI would be initiating appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters."

Mumbai Special Court Orders FIR Against Madhabi Puri Buch & SEBI Officials

A special ACB court in Mumbai has directed the Anti-Corruption Bureau (ACB) to register an FIR against Madhabi Puri Buch and five other SEBI officials for alleged regulatory lapses and stock market manipulation.

Judge Shashikant Eknathrao Bangar, who passed the order, stated that there is prima facie evidence of regulatory lapses and collusion, making a fair and impartial probe necessary.
The court has demanded a status report within 30 days, noting that the allegations indicate a cognizable offence requiring an official investigation.

Why the Court Intervened?
The court’s decision comes after reports that law enforcement agencies and SEBI failed to act on repeated complaints of financial fraud and regulatory violations.

Allegations: Market Manipulation & Regulatory Failures

The case originates from a complaint by a media reporter, who alleged that:

SEBI officials facilitated financial fraud and ignored regulatory violations.
A company was fraudulently listed on the stock exchange without meeting regulatory norms under the SEBI Act, 1992.
SEBI officials failed in their statutory duty, allowing market manipulation and corporate fraud.
Repeated appeals to law enforcement and regulatory bodies were ignored, leading the complainant to approach the special court.

Court’s Order to ACB

The ACB’s Worli, Mumbai Region has been instructed to file an FIR under relevant sections of the:
Indian Penal Code (IPC)
Prevention of Corruption Act
SEBI Act
Other applicable laws

Madhabi Puri Buch’s Controversial Tenure at SEBI

Madhabi Puri Buch, who made history as India’s first female SEBI chairperson, completed her three-year term on Friday. During her tenure, she implemented several key reforms, including:

Faster equity settlements
Tighter foreign portfolio investor (FPI) regulations
Expanded mutual fund participation

However, her leadership was not without controversy.

Hindenburg Research’s Allegations & SEBI’s Adani Controversy

In 2023, Hindenburg Research accused Buch of a conflict of interest in handling fraud allegations against the Adani Group.
The US-based short-seller claimed that Buch and her husband, Dhaval Buch, had investments in offshore entities linked to Vinod Adani, brother of Adani Group’s chairman Gautam Adani.
While Buch denied the allegations, stating that the investments were made before her SEBI appointment, the controversy led to political and public backlash.

Work Culture Controversy

Aside from the Adani issue, Buch faced internal criticism over claims of a “toxic work environment” at SEBI, with employees protesting against the leadership style.

Hindenburg Research’s Role & Its Shutdown

Hindenburg Research was instrumental in exposing corporate fraud allegations, including those against Adani Group and SEBI’s handling of cases. However, the firm recently announced its closure, raising questions about the long-term impact of its reports on the Indian stock market.

What’s Next?

SEBI has vowed to challenge the court’s FIR directive, maintaining that the case lacks merit.
The ACB will conduct a preliminary investigation and submit a status report within 30 days.
Market watchers will be closely following whether this case impacts SEBI’s credibility and India’s regulatory framework.