Madhabi Puri Buch Case: How a Journalist Exposed Financial Fraud and Brought SEBI Under Scrutiny

Sapan Shrivastava’s dedication and commitment to truth have led to a major legal battle against high-profile regulatory officials.

Journalism has long been regarded as the fourth pillar of democracy, standing as a watchdog against corruption and abuse of power. In a striking example of journalistic integrity and relentless pursuit of truth, legal reporter Sapan Shrivastava exposed an alleged large-scale financial fraud involving the Securities and Exchange Board of India (SEBI), Bombay Stock Exchange (BSE) officials, and a fraudulent stock listing from 1994. His investigative work has led to a court order directing the Anti-Corruption Bureau (ACB) to register a First Information Report (FIR) against former SEBI chairperson Madhabi Puri Buch and five other officials.

This case not only highlights deep-rooted regulatory lapses but also exemplifies the immense power a journalist wields in bringing hidden financial malpractices to light. It underscores the role of media in upholding transparency, accountability, and justice in the financial sector.

The Journalist Behind the Revelation

Sapan Shrivastava, a legal reporter from Dombivli, Maharashtra, unearthed details about the alleged fraudulent listing of Cals Refineries Ltd on the Bombay Stock Exchange (BSE) in 1994. His relentless pursuit of truth led him to approach multiple authorities, including SEBI and law enforcement agencies, urging them to act on the blatant violations of financial and regulatory norms. However, his complaints were repeatedly ignored, forcing him to escalate the matter to the judiciary.

As a journalist, Shrivastava leveraged his investigative skills, legal knowledge, and access to critical documents to build a strong case against those responsible. His determination and refusal to back down ultimately led to the special ACB court in Mumbai taking cognizance of the matter and ordering an investigation.

The Court’s Ruling: A Vindication of Investigative Journalism

On March 1, special ACB court judge Shashikant Eknathrao Bangar issued a detailed order directing the Worli ACB to register an FIR under the Indian Penal Code, the Prevention of Corruption Act, the SEBI Act, and other relevant laws. The court found prima facie evidence of regulatory lapses, collusion, and corruption, necessitating a thorough and impartial investigation.

Judge Bangar observed:

“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 court also mandated that the investigation be monitored and a status report be submitted within 30 days. This ruling stands as a landmark in financial journalism, reinforcing the idea that press freedom and investigative reporting can play a pivotal role in unveiling high-level corruption.

The Allegations: A Web of Corruption

Shrivastava’s complaint accused SEBI and BSE officials of facilitating market manipulation, corporate fraud, and regulatory violations in the fraudulent listing of Cals Refineries Ltd. He alleged that:

• The company was listed on the BSE in 1994 without fulfilling SEBI’s mandatory regulatory requirements.
• SEBI officials failed in their statutory duty and allowed market manipulation.
• The company’s promoters siphoned off public funds after its listing.
• SEBI ignored multiple red flags, allowing insider trading, price manipulation, and round-tripping.

Despite clear indications of financial irregularities, SEBI and law enforcement agencies took no action. Shrivastava’s dogged pursuit of the case finally forced the judiciary to intervene.

SEBI’s Defense and the Market Regulator’s Response

In response to the court order, SEBI issued a statement expressing its intent to challenge the decision legally. The market regulator argued that:

• The named officials, including former SEBI chief Madhabi Puri Buch, were not in their respective positions at the time of the 1994 listing.
• SEBI had not been given sufficient time or notice to respond to the allegations.
• The complaint was based on historical events with no immediate legal standing.

Similarly, BSE dismissed the allegations as “frivolous and vexatious,” asserting that its officials were not responsible for decisions made three decades ago. However, the court’s ruling stands as an example of how regulatory bodies must be held accountable, regardless of when the violations occurred.

The Power of Journalism: A Catalyst for Justice

Shrivastava’s investigative reporting underscores the undeniable power of journalism in shaping public discourse, exposing corruption, and holding institutions accountable. This case is a testament to how journalists, armed with determination and evidence, can challenge powerful entities and bring the truth to light.

His work aligns with a long tradition of fearless journalism, reminiscent of cases like:

• Harshad Mehta Scam (1992): Unearthed by journalist Sucheta Dalal, this case exposed stock market manipulations and loopholes in the financial system.
• Nirav Modi Scam (2018): Investigative journalists played a crucial role in exposing the $2 billion banking fraud.
• ICICI Bank-Videocon Scandal: A probe initiated by media reports led to regulatory action against high-level banking executives.

In each of these cases, journalists played a critical role in ensuring transparency and accountability, proving that journalism is an indispensable force in any democracy.

Challenges and Risks Faced by Investigative Journalists

Investigative journalism is fraught with risks, including legal threats, financial repercussions, and, in extreme cases, physical danger. Shrivastava faced significant obstacles in his pursuit of justice:

1. Institutional Apathy: Despite filing multiple complaints, no action was taken until he approached the courts.
2. Legal Hurdles: Regulatory bodies attempted to dismiss the allegations as outdated and irrelevant.
3. Threats and Intimidation: Many journalists exposing financial fraud face backlash from powerful corporate entities.

Despite these challenges, Shrivastava persevered, proving that investigative journalism remains a powerful tool for uncovering truth and serving public interest.

Mumbai Court Orders FIR Against Ex-SEBI Chief Madhabi Puri Buch, Five Others in Major Financial Fraud Case

SEBI Faces Legal Battle Amid Allegations of Stock Market Manipulation and Regulatory Lapses

In a major development, a Mumbai Special Court has ordered the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and five others over their alleged involvement in large-scale financial fraud, regulatory violations, and corruption linked to the 1994 listing of Cals Refineries Ltd on the Bombay Stock Exchange (BSE). The order has triggered a legal storm, with SEBI announcing plans to challenge the directive.

Court Finds Prima Facie Evidence of Regulatory Collusion

The Special Anti-Corruption Bureau (ACB) Court, presided over by Judge Shashikant Eknathrao Bangar, directed the ACB in Mumbai’s Worli division to file an FIR against Ms. Buch, three SEBI whole-time members—Ashwani Bhatia, Ananth Narayan G., and Kamlesh Chandra Varshney—along with BSE officials Pramod Agarwal and Sundararaman Ramamurthy. The charges include serious violations under the Indian Penal Code (IPC), the Prevention of Corruption Act, the SEBI Act, and other financial regulations.

In his order dated March 1, Judge Bangar noted: “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) of the Criminal Procedure Code.”

The court has mandated that the investigation be monitored and that a status report on the probe be submitted within 30 days.

Complaint Alleges SEBI’s Role in Facilitating Market Manipulation

The complaint was filed by legal journalist Sapan Shrivastava, 47, from Dombivli, Maharashtra. He accused SEBI and BSE officials of facilitating market manipulation by allowing the fraudulent listing of Cals Refineries Ltd without fulfilling the necessary regulatory compliance under the SEBI Act, 1992.

Mr. Shrivastava alleged that SEBI officials failed in their statutory duty, turning a blind eye to corporate fraud and stock price manipulation that misled investors. He claimed the promoters of Cals Refineries siphoned off public funds while regulatory authorities looked the other way.

He further asserted: “SEBI permitted the listing of the accused company despite its failure to comply with essential regulatory norms, including disclosure requirements and due diligence procedures.”

Cals Refineries was suspended from trading in 2019, according to BSE records.

SEBI and BSE Reject Allegations, Vow Legal Action

Reacting to the court’s order, SEBI dismissed the allegations as baseless, claiming that the officials named in the complaint were not in their current roles when the company was listed three decades ago. SEBI stated: “We were not given time to respond, nor were we served any notice. SEBI remains committed to regulatory compliance and will take appropriate legal steps to challenge this order.”

The BSE also labeled the complaint as “frivolous and vexatious,” arguing that its officials named in the FIR were not employed by the exchange during the 1994 listing. The stock exchange reaffirmed its commitment to regulatory transparency.

Evidence Points to Widespread Corruption and Financial Fraud

The court acknowledged substantial material evidence presented by the complainant, including:

• Written complaints lodged with SEBI, the police, and other authorities, along with their acknowledgments.
• Documents revealing procedural lapses and non-compliance in the IPO process, leading to the fraudulent listing of Cals Refineries.
• Regulatory filings and stock market reports indicating artificial inflation of share prices and market manipulation.
• Whistleblower statements from within SEBI exposing favoritism towards the accused company.

Judge Bangar emphasized that these materials provide a strong foundation for a criminal investigation into the alleged financial fraud.

What’s Next? Legal Battle Looms Over SEBI’s Regulatory Oversight

The order comes just two days after Madhabi Puri Buch completed her tenure as SEBI Chairperson, raising questions about potential regulatory failures during her leadership. With SEBI and BSE gearing up to challenge the court’s ruling, the case could set a major precedent for regulatory accountability in India’s financial markets.

As the investigation unfolds, market observers and investors alike await clarity on whether regulatory bodies will be held accountable for past failures and whether the judiciary will push for deeper scrutiny into alleged stock market manipulations spanning decades.

(India CSR)