Bombay HC Quashes Front-Running FIR Against Ex-Axis MF Dealer Viresh Joshi
The Bombay High Court has quashed a front-running First Information Report registered at the Sion police station against former Axis Mutual Fund chief dealer Viresh Joshi, ruling that offences under the Securities and Exchange Board of India (SEBI) Act can only be initiated on a complaint by the market regulator.
Justice RR Bhonsale passed the order on August 13, observing that the special provisions of the SEBI Act prevail over general criminal law. The case, which was initially registered by the Sion police and subsequently transferred to the Economic Offences Wing (EOW), centred on allegations of front-running.
According to the FIR, Joshi had access to confidential information regarding large orders placed by Axis Mutual Fund while serving as its chief dealer. He allegedly shared this information with co-accused individuals, who traded ahead of the mutual fund's orders and later squared off their positions to generate illegal profits. The prosecution claimed these actions resulted in losses for investors, while the Enforcement Directorate stated that proceeds were routed through multiple entities and bank accounts.
During the proceedings, the Enforcement Directorate submitted that sufficient material existed to proceed against Joshi and argued that the EOW was competent to investigate offences including cheating and criminal breach of trust.
The High Court held that the FIR was fundamentally about front-running. Under Section 26 of the SEBI Act, no court can take cognisance of an offence under the Act except on a complaint filed by the SEBI Board. The court observed that SEBI was established as an expert body to protect investors and regulate the securities market, and allowing proceedings outside the special framework would circumvent the law.
The court added that if an investor approaches the police with allegations constituting an offence under the SEBI Act, the complaint should be forwarded directly to the market regulator.
While quashing the FIR, the court noted that there was a strong prima facie case of front-running and urged SEBI to take prompt, swift, and effective steps if warranted. The court also clarified that it had not ruled out independent offences under general criminal law and left open the right of Axis Mutual Fund to pursue its own separate complaint against Joshi.
