Bombay High Court Reaffirms: SEBI’s Regulatory Jurisdiction No Bar to Criminal Investigation in Financial Fraud Cases

Introduction

The judgment of the Bombay High Court in Shoaib Richie Sequeira v. State of Maharashtra[i] is a significant reaffirmation of the constitutional courts’ power to direct a fair and impartial investigation in cases involving allegations of large-scale financial fraud and transnational money laundering.

The ruling arises from the petitioner’s invocation of writ jurisdiction under a. 226 of the Constitution, seeking judicial intervention against investigative inertia displayed by the Economic Offences Wing (‘EOW’) and the Central Bureau of Investigation (‘CBI’).

Brief Facts

• The petitioner, Shoaib Richie Sequeira, a public rights activist, filed a writ petition alleging serious economic offences committed by Mr. Anand Jaikumar Jain, the promoter and director of Jai Corp Ltd (JCL), and its group entities. His complaints dated 22.12.2021 and 03.04.2023 described a complex scheme of fund diversion and laundering through shell companies, unsecured advances, fictitious invoicing, and round-tripping of funds through tax havens.

• The allegations involved major financial institutions and banks, private equity firms, and real estate ventures across India and abroad. They disclosed prima facie offences under the Indian Penal Code, 1860 (‘IPC’) and the Prevention of Money Laundering Act, 2002 (‘PMLA’).

• The complaints were first submitted to the EOW, which, in separate communications, referred them to the Securities and Exchange Board of India (‘SEBI’), citing potential securities law violations. However, upon a renewed representation, the EOW internally recorded that the matter appeared to involve a scam of substantial magnitude involving nationalized banks and cross-border transactions, and forwarded the matter to the CBI and the Serious Fraud Investigation Office (‘SFIO’).

• However, the CBI declined to proceed with the investigation, asserting that the matter primarily fell within SEBI’s regulatory domain and jurisdiction and that regulatory action was to be taken by SEBI or the Enforcement Directorate (‘ED’) as the competent authority.

• The petitioner placed on record voluminous documentary evidence, including SEBI penalty orders, findings from forensic auditors, financial statements, communications from statutory bodies, and income-tax assessments, which indicated possible criminal conduct. However, despite these materials, both the EOW and the CBI declined to investigate, which led the petitioner to approach the High Court for appropriate directions.

Decision

• The Bombay High Court allowed the writ petition and directed the constitution of a Special Investigation Team (‘SIT’) under the supervision of the Zonal Director, CBI (Mumbai), to conduct a comprehensive and fair investigation into the complaints of the petitioner.

• The Court categorically held that both the EOW and the CBI had failed to discharge their statutory duties and had effectively abdicated their responsibility to investigate cognizable offences of serious and public consequence. It found that the allegations disclosed elaborate mechanisms of financial fraud with national and international ramifications, including diversion of public and investor money, round-tripping through tax havens, and illegal profiteering through fictitious corporate transactions.

• The Court expressed deep dismay at the refusal of the agencies to act, particularly when the EOW itself had noted the gravity and complexity of the matter and had recommended action by central agencies. Reaffirming the power of constitutional courts under a. 226, the Court held that it was empowered to direct investigation by the CBI without the prior consent of the State Government, relying on the Constitutional Bench ruling in State of West Bengal v. Committee for Protection of Democratic Rights[ii].

• It emphasized that such extraordinary powers must be used sparingly, but that in this case the agencies’ conduct left the Court with no choice but to intervene to uphold the rule of law, to restore public faith in the criminal justice system, and to ensure that large-scale economic offences are not left uninspected due to institutional apathy or buck-passing between agencies.

• The High Court clarified that its directions for investigation do not imply any finding of guilt and that the SIT is expected to conduct the probe independently and in accordance with law. The Court further directed that the Joint Director, CBI (Anti-Corruption Bureau), would supervise the SIT’s investigation.

Our Analysis

The ruling is a textbook illustration of judicial intervention necessitated by systemic apathy in the investigation of white-collar crime. The High Court’s analysis is rooted in constitutional jurisprudence, which views the court not merely as an adjudicator of individual rights but also as a protector of public interest when law enforcement agencies falter in their duties. The Court’s observations reflect judicial concern over the growing instances where regulatory authorities and investigative agencies either shy away from complex economic offences or engage in blame-shifting that ultimately frustrates justice.

From a legal standpoint, the decision fortifies three core principles:

First, it affirms that the existence of national or transnational ramifications in a financial crime is a constitutionally valid ground for a court-ordered investigation by a central agency. The Court’s reliance on the Committee for Protection of Democratic Rights (Supra) and Pooja Pal v Union of India & Ors.[iii] ensures that the high watermark for such intervention – credibility, impartiality, and the need for effective enforcement – is adequately satisfied.

Second, the ruling recognizes that public accountability and intergrity in financial governance are matters of public importance. The petitioner’s investigative efforts, documentation, and perseverance were noted and appreciated by the Court. It demonstrates that citizen-initiated legal scrutiny, if backed by substantive material, is not only admissible but also capable of triggering court-directed enforcement action.

Third, the judgment indirectly critiques the compartmentalized and jurisdictionally rigid approach of regulatory and enforcement agencies. By deflecting responsibilities on the grounds of SEBI’s involvement or ED’s jurisdiction, both the EOW and CBI caused significant delay and procedural stagnation in a matter that warranted urgency and decisiveness. The High Court correctly identified this as institutional abdication, necessitating direct judicial intervention.

In conclusion, the Bombay High Court’s decision strikes a balance between procedural fairness, constitutional oversight, and the imperatives of economic justice. It sets an important precedent by reinforcing that large-scale financial frauds affecting the public at large cannot be allowed to disappear into regulatory black holes. The formation of an SIT under judicial supervision serves as a remedial mechanism to restore public faith in the investigative machinery. It ensures that the law is not rendered impotent in the face of complex corporate malfeasance.

End Notes

[i] [2025] 171 taxmann.com 752 (Bombay), dated 31.01.2025.

[ii] (2010) 3 SCC 571.

[iii] (2016) 3 SCC 135.

Authored by Sanyam Aggarwal, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.