The Bombay High Court set aside a criminal FIR alleging front-running by a former chief dealer of Axis Mutual Fund, holding that under Section 26 of the SEBI Act only the Securities and Exchange Board of India can initiate criminal proceedings for offences covered by the Act.
Background & Facts
The Dispute
The applicant, Viresh Gangaram Joshi, a former Chief Dealer of Axis Asset Management Company Limited, was named in FIR No. 0369/2024 dated 23 December 2024 for alleged offences under sections 406, 417, 420, 465, 467, 468, 477A of the IPC read with section 34 and 120B. The complainant, Soni Jitendra Parmar, claimed loss of over Rs 2.52 lakh crore due to Joshi’s alleged front-running scheme.
Key Facts
- July 2019: Joshi appointed Assistant Vice President/Chief Trader at Axis AMC; later promoted to Senior Vice President.
- 12 October 2025: Axis Mutual Fund filed a complaint against Joshi, later merged with the FIR.
- 3 October 2025: Respondent No. 2 filed an affidavit consenting to quash the FIR.
- 8 December 2025: Assistant Police Inspector filed an affidavit stating the case pertains to front-running.
- 28 February 2023: SEBI issued an interim order-cum-show-cause notice to Joshi under various provisions of the SEBI Act.
- 23 December 2024: FIR No. 0369/2024 registered at Sion Police Station.
- 2025: Criminal Application No. 1036 of 2025 filed; Interim Applications No. 4102/2025 and No. 4642/2025 filed.
- 26 February 2026: Court reserved judgment.
- 13 August 2026: Judgment pronounced.
Procedural History
- 2025: Criminal Application No. 1036/2025 filed under section 528 of the BNSS seeking quash of FIR 0369/2024.
- 2025: Interim Application No. 4102/2025 and No. 4642/2025 filed seeking interim relief.
- 26 Feb 2026: Matter listed; arguments heard from counsel for applicant, respondent-State, Enforcement Directorate (intervener), and counsel for interim application No. 4102/2025.
- 13 Aug 2026: Judgment delivered.
Parties' Positions
- Applicant (Joshi): Contended that front-running is an offence exclusively under the SEBI Act; only SEBI can prosecute; non-public information is not “property” under IPC; FIR therefore untenable.
- State of Maharashtra: Asserted that the FIR disclosed offences under IPC (cheating, criminal breach of trust, conspiracy) and that sufficient prima facie evidence existed.
- Enforcement Directorate: Supported the State, highlighting money-laundering aspects and alleging that offences under IPC and the PML Act were also made out.
Relief Sought
The applicant sought quashing of FIR 0369/2024, dismissal of the interim applications, and a declaration that the court lacks jurisdiction to take cognizance of offences covered by the SEBI Act.
The Legal Issue
Whether a criminal court can take cognizance of an FIR alleging offences that fall within the ambit of the Securities and Exchange Board of India Act, 1992 when the complaint has not been filed by the SEBI Board as mandated by Section 26 of that Act.
Arguments Presented
For the Applicant
- The alleged conduct constitutes “front-running”, an offence defined in SEBI circular dated 25 May 2012 and punishable only under the SEBI Act; therefore, prosecution must be initiated by SEBI under Section 26.
- Non-public information cannot be equated with “property” for the purposes of IPC sections 408, 420, 405, etc.; consequently, IPC offences are not made out.
- Citing Alka Shrivastava v. State of M.P. and Jitendra Kumar Keshwani v. State of U.P. the applicant argued that special statutes prevail over general law and bar courts from taking cognizance.
For the Respondent/State
- The FIR lists multiple IPC offences; the investigating agencies have recorded statements and seized evidence indicating cheating, criminal breach of trust, and conspiracy.
- The Enforcement Directorate highlighted money-laundering violations under the PML Act, asserting that the offences are not confined to the SEBI Act.
- The State relied on Vijay Mandal Choudhary v. Union of India and other precedents to argue that where the conduct also violates general criminal law, prosecution can proceed.
The Court's Analysis
The Court began by examining the hierarchy of statutes, emphasizing that the SEBI Act is a Special Act intended to regulate securities markets. It reiterated the plain language of Section 26: “No court shall take cognizance of any offence punishable under this Act … save on a complaint made by the Board.”
“The SEBI Act being a Special Act, it is mandatory that the procedure as prescribed in the SEBI Act is followed. It was not open for the Complainant to directly approach the Court and file a complaint.”
The Court noted that the FIR, while drafted under several IPC sections, primarily alleged front-running - an offence expressly covered by SEBI regulations and the SEBI Act. It referenced the Supreme Court’s observation in SEBI v. Kanhaiyalal Baldevbhai Patel that front-running involves the misuse of unpublished price-sensitive information and is punishable under the SEBI framework.
The Court then surveyed precedent. In Alka Shrivastava, the Madhya Pradesh High Court quashed an FIR on the ground that only SEBI could prosecute front-running. Similarly, the Allahabad High Court in Jitendra Kumar Keshwani held that Section 26 creates an exclusive bar to court cognizance. The Bombay High Court found these authorities persuasive and consistent with the principle that a special law supersedes general criminal provisions where the subject matter overlaps.
While acknowledging the State’s contention that IPC offences might also be made out, the Court held that the primary allegation - front-running - must first be examined under the SEBI Act. If the SEBI Board decides to pursue criminal prosecution, the court may then entertain the matter; otherwise, the FIR is procedurally defective.
Consequently, the Court concluded that the FIR could not stand without a SEBI Board complaint. It ordered the FIR quashed, dismissed the interim applications, and directed SEBI to consider the matter within twelve weeks.
The Verdict
The Bombay High Court allowed the criminal application, quashing FIR No. 0369/2024 dated 23 December 2024. It disposed of Interim Applications No. 4102/2025 and No. 4642/2025. The Court directed SEBI to decide, as a matter of priority, whether the allegations constitute a criminal offence under the SEBI Act, and to act within twelve weeks of receipt of the order. Axis Mutual Fund may file an independent complaint with SEBI, but the Court’s observations do not adjudicate the merits of that complaint.
What This Means For Similar Cases
Exclusive Jurisdiction of Special Acts
- Courts must first verify whether a special statute, such as the SEBI Act, provides an exclusive remedy before taking cognizance of an FIR.
- Action Required: When drafting complaints involving securities-market offences, ensure a SEBI Board complaint is filed; otherwise, the FIR is vulnerable to quash.
Front-Running Treated as SEBI Offence
- Front-running is defined in SEBI’s circular dated 25 May 2012 and is punishable only under the SEBI Act; IPC provisions cannot be invoked concurrently.
- Action Required: Counsel should frame allegations of front-running within the SEBI regulatory framework, citing the circular and relevant SEBI provisions.
Procedural Bar Under Section 26
- Section 26 creates a clear procedural bar: no court may entertain criminal proceedings for SEBI-covered offences without a complaint from the Board.
- Action Required: Parties must file a formal complaint with SEBI before approaching criminal courts; otherwise, the petition is likely to be dismissed.
