Viresh Gangaram Joshi v. State of Maharashtra & Anr.

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             IN THE HIGH COURT OF JUDICATURE AT BOMBAY



                   CRIMINAL APPELLATE JURISDICTION







                    CRIMINAL APPLICATION NO. 1036 OF 2025







      Viresh Gangaram Joshi,                              … Applicant.



      Indian Citizen, Aged Around 51 years,



      Residing at T-3, 3304 33rd Floor,



      Ramona, Runwal Anthurium,



      L.B.S. Marg, Opp. Veena Nagar,



      Mulund West, Mumbai- 400 080.



      Phone No.+91 9137729928



      Email ID: viresh.joshi@gmail.com







              Vs.







1. The State of Maharashtra



   at the instance of Senior Inspector of Police,



   Economic Offence Wing, Unit- 7 (Shares)



   having address at: 3rd Floor, New Administrative



   Building, Commissioner’s Office,



   Dr.Dadabhai Naroji Road,



   Mumbai, Maharashtra – 400001.



   Phone No. 8689800015



   Email-ID: srpiunit5.eowmum@mahapolice.gov.in







2. Soni Jitendra Parmar,



   Indian Citizen, Aged around 51 years,



   residing at D/1103, Lloyds Estate,



   Near Vidyalankar Vidyalaya, Wadala,



   Antop Hill, Mumbai- 100037.



   Phone No. 9820969554.                                  ... Respondents







                                    WITH



                    INTERIM APPLICATION NO. 4102 OF 2025







Sandeep Baban Jadhav.                             …     Applicant.



      In the matter between



Viresh Gangaram Joshi.                            …     Applicant.



      V/s.



The State of Maharashtra` and another.            …     Respondents.











                                                                      1



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                                WITH



                INTERIM APPLICATION NO. 4642 OF 2025







Directorate of Enforcement.                          …     Applicant.



      In the matter between



Viresh Gangaram Joshi.                               …     Applicant.



      V/s.



The State of Maharashtra and another.                …     Respondents.







                     _______________________________







Mr. S. Nagmuthu, Senior Advocate with Mr. Shreyas Kaushal, Mr. Y. Soma



Srinath Reddy, Ms. Supriya Nair and Ms. Sakshi Kadam i/b. Jitesh Mundhwa



for the Applicant.







Mr. S. V. Walve, APP for the Respondent-State.







Mr. Amit Munde, Retainer Counsel with Jai Vohra for the Enforcement



Directorate (Intervener).



Mr. Sunny Udasi for the Applicant in IA No.4102/2025.



                     _______________________________











                  CORAM :      RANJITSINHA RAJA BHONSALE , J.



                  RESERVED ON :            26th FEBRUARY 2026.



                  PRONOUNCED ON :          13th AUGUST 2026.











JUDGMENT :-







1)        This Application is filed under section 528 of the Bharatiya Nagarik







Suraksha Sanhita, 2023 (for short “BNSS”) seeking quashing of the FIR







bearing No.0369/2024 dated 23rd December 2024 registered with Sion Police







Station (now transferred to the Economic Offences Wing, Mumbai) for the







alleged offences under sections 406, 417, 420, 465, 467, 468, 477A read with







section 34 and 120B of the Indian Penal Code, 1860 (for short “IPC”).















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2)        Heard Mr. Nagmuthu, learned Senior Advocate for the Applicant,







Mr. Walve, learned APP for the Respondent-State, Mr. Amit Munde, learned







counsel for the Enforcement Directorate (Intervener), and Mr. Sunny Udasi







for the Applicant in Interim Application No.4102/2025.







3)        Briefly stated, the case of the prosecution is as under:







3.1)      The Respondent No.2, an investor is the original complainant who







has filed the present FIR on the basis that, she has suffered financial loss due







to the alleged fraudulent acts, conduct and schemes orchestrated by the







Applicant while he was working as the Chief Dealer with Axis Asset







Management Company Limited. It is the allegation of Respondent No.2 that,







the Applicant has cheated 66 lakh investors and allegedly caused a loss of







over Rs.2.52 lakh crore due to his acts and conduct.







3.2)      That, the FIR has been filed under section 477A, 468, 467, 465,







420, 417, 406 read with sections 34 and 120B of the IPC. It is alleged that,







the Applicant was the Chief Dealer of the Axis Mutual Fund. That, while in







the said position as a Chief Dealer, the Applicant received non public







information, which he shared with the co-accused and others. That, the







Applicant along with other co-accused established companies i.e. Subtotal







Marfatia Group, Subtotal Woodstock Group and Subtotal Kurani Group. That,







the Applicant received non public information in respect of trades/ orders of







the Axis Mutual Funds. That, the Applicant would pass on the non public















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information to persons known to him. That, the Applicant had a modus







operandi which comprised of the co-accused through whom the Applicant







operated.







3.3)        That, Shri Sumit Desai, Pranav Vora, Brijesh Kurani, Vaibhav







Pandya, and the Marfatia Group were acting in collusion with the Applicant.







That the non public information as forwarded by the Applicant would be







relayed and circulated in the market by Brijesh Kurani. That, the illegal







activities were overseen by Brijesh Kurani. That, all the accused along with







the Applicant acted with a common intention and in conspiracy. The







Applicant due to the position he held i.e. Chief Dealer of Axis Mutual Funds,







was aware of and had access to the non-public information. That, as the







Applicant was aware that larger order of Axis Mutual fund would be placed,







he would transmit the said non-public information to the co-accused, who







would directly or indirectly place orders on the basis of the said non public







information before the substantial trades/ large orders of Axis Mutual Fund.







The Applicant used to divulge/ divert the non-public information in advance







to the co-accused and others. That, after the substantial trades/ large orders







of Axis Mutual Fund were placed in the market, the Applicant and the co-







accused/ persons acting in concert would then sell the shares so brought. By







this modus operandi and by acting in concert, huge amount of profit was







made.   That, this profit was made by practicing fraud, cheating and caused















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loss to Respondent No. 2 and other investors in the market. The Applicant







and others involved obtained benefit in a wrongful manner.







3.4)      That, the Applicant would forward the non public information







received from Axis Mutual Fund by way of different mobile numbers and







whatsapp calls to the other co-accused.    That, during the Covid pandemic







the Applicant used to work from home on a remote basis, had established an







office for the said purpose, and used to do the dealing work from home.







That, the Applicant was using the non public information for his own personal







benefits. That, the Applicant after receipt of the knowledge of the big orders







would forward the information to the others. That, due to the said acts,







Respondent No.2 and other investors suffered losses.







SUBMISSIONS OF APPLICANT :







4)        Mr. Nagmuthu, learned Senior Counsel for the Applicant submitted







that:-







4.1)      The complaint could not have been filed by the Complainant. That,







the procedure under section 26 of the Securities Exchange Board of India Act,







1992 (for short “SEBI Act”) ought to have been followed. The Securities







Exchange Board of India (SEBI) and its authorized officers alone can







prosecute such a complaint.    That, the SEBI Act being a Special Act, it is







mandatory that the procedure as prescribed in the SEBI Act is followed. That,







it was not open for the Complainant to directly approach the Court and file a















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complaint. The Court ought not to have taken cognizance, except on a







complaint by the Board.







4.2)      An offence of “front running” is an offence under the SEBI Act and,







therefore can be investigated only by and under the provisions of the SEBI







Act. It is not that, the offences under the SEBI Act so also the general law i.e.







BNS/ IPC have been alleged. The present complaint/FIR pertains only to the







offences under the SEBI Act. None of the ingredients of the offences as







alleged under the IPC are even available or alleged to invoke the Sections.







4.3)      Respondent No.2 has filed an affidavit dated 3 rd October 2025







whereby she has given her consent for quashing of the FIR on the ground







that, the FIR has been filed on some misunderstanding.







4.4)      It is only the SEBI who can prosecute such a case for an offence of







front running. In the alternative, it was submitted that, the offences as alleged







in the FIR are also not made out. That, offence under section 405 of IPC is







not made out as there is no entrustment of the property or dominion over







some property nor the property is dishonestly misappropriated or converted







to own use in violation of law or legal contract etc.     That, in an offence of







front running, there is no entrustment of property or any dominion over the







property which can be dishonestly misappropriated or converted for own use.







4.5)      Even a case of cheating cannot be made out against the Applicant.







That, in the offence of front running what was allegedly available with the















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Applicant would be only the non public information. That, to make out an







offence of cheating, it is necessary that a person is deceived and fraudulently







or dishonestly induced to deliver any property. That, the offence of cheating







envisages and contemplates at least two persons i.e. offender and the victim.







In the present case, there is none.







4.6)      An offence of front running or passing of non public information is







an offence only under the SEBI Act and not under IPC/BNS. That, perusal of







the affidavit in reply dated 8 th December 2025 filed by the Assistant Police







Inspector, Unit-6, Economic Offences Wing, Mumbai would clearly establish







that, the case pertains only to and is related to the offence of front running,







i.e. trades unauthorizedly executed based on non public information







forwarded/ shared by the Applicant to the various entities.       That, in an







offence of front running, a case of cheating can never be made out. That, the







offence of cheating can never be made out as in the present case, there is no







“person” who has been deceived to deliver any ‘property’, or to retain a







property. Nor is there an allegation that the Applicant has induced anyone to







do or omit to do something. That, in the reply, the investigating authority is







unable to and has not given the details of any deception.







4.7)      To make out an offence under section 408, there has to be an







entrustment of property.       That, only when there is an entrustment of







property, an offence of criminal breach can be made out. That, no property















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has been entrusted to the Applicant. That, the non public information cannot







be equated to property.







4.8)      Reliance was placed on the case of Sunil Kumar v. State of







Maharashtra 2009 SCC Online Bom 194, to submit that, the non public







information which is required to allege an offence of front running cannot be







equated to property.      If the offence of front running is alleged, it cannot







amount to any offence under IPC. Front running is an offence under the SEBI







Act for which the mode and the procedure for prosecution is provided in







section 24 and 26 of the SEBI Act.







4.9)      That, the provisions of sections 408, 409 and 420 of IPC cannot be







invoked simultaneously.      That,   the ingredients of the said sections are







different and distinct.







4.10)     That, SEBI has already issued an interim order cum show cause







notice to the Applicant and has taken certain actions in respect of the said







offence under the SEBI Act. That, it is only SEBI who can decide the next







course of action and as to whether a criminal complaint has to be filed. It is







only SEBI who is competent and empowered to prosecute a person for an







offence of front running under sections 24 and 26 of the SEBI Act. Thus, the







present criminal prosecution is therefore untenable in law.







SUBMISSIONS OF ENFORCEMENT DIRECTORATE:







5)        Learned Advocate Mr. Amit Mundhe appearing for the Enforcement















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Directorate submitted that;-







5.1)      The FIR has already been lodged and the investigation is







completed. There is more than sufficient evidence available on record to







make out the case as is alleged in the said FIR.







5.2)      The victims of such crimes have available with them two remedies,







(i) they can approach SEBI and (ii) they can approach the EOW. The







Applicant has clearly committed the offences under the IPC for which the







EOW is competent and eligible to investigate the same. The Applicant has







shared non-public information to various entities. Statements under section







50 of the Prevention of Money Laundering Act, 2022 (for short “PML Act”) of







various persons have been recorded. There is more than prima facie evidence







available against the Applicant. That, a serious offence is committed against







the system as a whole. It is case of misuse of authority by an individual to







make wrongful gains at the cost of innocent investors.







5.3)      The Applicant as a Chief Dealer had in his possession and







knowledge the non public information. That, such non public information can







be related to and equated with property for the purpose to make out an







offence of cheating or criminal breach of trust. That, the non public







information has been entitled. That, by providing the non-public information







and misusing it, the Applicant has wrongfully gained huge amount of monies.







The offence under section 405 is clearly made out in as much as the Applicant















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shared non public information and made personal gains. That, even offence







under section 408 would be made out as when the offence was committed the







Applicant was employed as Chief Dealer with Axis Mutual Fund. That, the







offence of cheating was made out as the Applicant dealt with public monies.







That, the Affidavit in reply as filed on record has all the details of the fund







movements and transfer of amounts by the Applicant to his relatives accounts.







That, the total fraud is of Rs.93 crore out of which an amount of Rs.29 crore







only has been secured.







5.4)      The Enforcement Directorate has invoked the provisions of the PML







Act and is investigating commission of offences for money laundering as







defined in sections 3 and 4 of the PML Act. That, sections 417, 420, 467,







120B of IPC are mentioned in part-A of the Schedule appended to the PML







Act and are all scheduled offences. That, the Directorate of Enforcement has







recorded an Enforcement Case Information Report i.e. ECIR/HIU-I/01/2025







and that investigation has ensued.   That the Applicant has violated the trust







of the Axis Mutual Fund by sharing non public information with the third







party individuals and entities for the personal gain and enrichment.







5.5)      The Enforcement Directorate is an interested and necessary party







which is entitled and required to be heard when the quashing petition is filed







in a predicate case. Reliance was placed on the judgment of the Hon’ble







Supreme Court (i) in the case of Vijay Mandal Choudhary v. Union of India















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reported in 2022 SCC Online SC 929, (ii) in the case of Directorate of







Enforcement v. India Bulls Housing Finance Limited, in Criminal Appeal No.







791/2024 (iii) the Order of the Madras High Court in Writ Petition







Nos.15465/2024 and 15473/2024 in the case of Maneesh Parmar v.







Directorate of Enforcement, and (iv) the Judgment of Madras High Court in







the case of Ashish Singh Vs. State in Criminal Appeal No. 30982 of 2019.







5.6)        There is more than prima facie evidence available in sharing of







non public information. That, the Applicant has unjustly gained an amount of







Rs.30 crore. That, Axis Mutual Fund as an employer can lodge a complaint







against the Applicant as he is bound by the agreement of employment.







SUBMISSION ON BEHALF OF STATE :







6)        Learned A.P.P. appearing for the Respondent-State submitted that;-







6.1)      The allegations made in the complaint prima facie make out a case.







That, the offences are serious and carried out pursuant to a well planned







conspiracy. The Applicant has helped other co-accused and indulged in acts of







cheating and breach of trust in as much as he forwarded non public







information to third parties who traded on the basis of such non public







information and made huge amounts of profit.







6.2)      Perusal of the definitions of ‘information’ and ‘property’ as stated in







the Blacks Law Dictionary, the term ‘information’ can be equated to ‘property’







and be treated or considered as property. That the Applicant as a Chief Dealer















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was occupying a fiduciary position of the trust.







6.3)      That, the Axis AMC, by a letter dated 12th October 2025, had filed a







complaint against the Applicant for the unlawful action and conduct. That,







the said complaint has been merged with the present FIR dated 23 rd







December 2024. That, the said complaint clearly make out the offences.







6.4)      The Applicant as per the terms of his appointment letter was bound







to comply with all applicable laws, regulations, statutes and guidelines. The







Applicant was bound by the corporate policies and the practices of the







Company. The Applicant was obliged and duty bound to faithfully serve the







Company and use the utmost endeavour to promote the interest of the







Company. That, Applicant has acted contrary to the terms of the appointment







by divulging non public information to the third parties.







6.5)      The Applicant has violated the ethical code and ethical principles of







confidentiality. The Applicant has engaged in unfair practices and made huge







profits. Under the code of conduct and ethic policies of the Assets







Management Company, the Applicant was duty bound to protect the propriety







and non public information including sensitive information and data that is







not in the public domain. That, Applicant was duty bound not to share the







Company’s trading activities and strategy.







REJOINDER







7)      Mr. Nagmuthu, the learned Senior Counsel for the Applicant in the















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rejoinder argument submitted that:-







7.1)    A penal statute has to be strictly construed and there is no room for







presuming or assuming a particular fact. The fact that the Applicant is a







Chief Dealer and employee of the Axis Mutual Fund cannot be disputed nor







can any fault be found with the duties and responsibilities of the Applicant







while acting as a Chief Dealer.







7.2)        In a case of front running, if the Applicant has divulged or







disclosed any non public information, the matter would be investigated by







SEBI. That, SEBI has already issued interim order cum show cause notice and







the Applicant has replied to the same. That, SEBI has the expertise to







investigate the violation under the SEBI Act. SEBI is the expert body and it is







the SEBI who will eventually decide whether a case for initiating criminal







prosecution is made out or not.







7.3)        Offences under section 406, 408 and 420 of the IPC pertain to







property. That, non public information cannot be equated to property. That,







no offence of cheating is made out as there are no two persons as are







required to constitute the offence of cheating. That, there was no statement or







inducement nor is there any delivery of property. Simple divulsion of non







public information cannot be deception.







ANALYSIS







8)        I have perused the record. An interim order cum show cause notice















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dated 28th February 2023 was issued by SEBI alleging that the Applicant and







persons connected to the Applicant have traded in different securities ahead







of the impending orders placed on behalf of a big client i.e. Axis Mutual Fund.







Subsequently, after the orders were placed, the said connected third party







entities to whom the non public information was forwarded by the Applicant







squared off their trade positions. By implementing this modus operandi, the







Applicant and other co-accused made huge wrongful gains. The said gains







have been termed as (proceeds of crime) by the Enforcement Directorate.







The connected entities, who executed the front running trades were arranged







by Mr. Sumit Desai at the behest of the Applicant.







9)        Statements of various individuals have been recorded under section







50 of the PML Act. It is alleged that, the Applicant and other co-accused were







involved in a systematic scheme to launder the illicit proceeds collected







through multiple channels. Several individuals with this network opened bank







accounts in the names of fictitious entities and large sums were credited to







those accounts from various sources and shortly thereafter a significant







portion of the amounts was transferred to the bank accounts of the family







members of the Applicant. The Applicant was at all times aware of the







coming of large volume of trades of the Axis Mutual Fund and with a







fraudulent and dishonest intention misused his position as the Chief Dealer







and the non public information received by sharing it with the co-accused/















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individuals.   That, front running trades were then executed through the







trading accounts and positions were squared off after Axis Mutual Fund







orders were placed. This led to wrongful profits to the Applicant and other







accused persons and a corresponding wrongful loss for the retail investors of







the Axis Mutual Fund including the complainant. The Applicant misused his







position by disclosing non public information to unauthorized third parties,







facilitating front running trades which were illegal trades executed in advance







of the large volume trades by Axis Mutual Fund to gain unlawful profits for







himself and his associates.







10)        The allegations against the Applicant are in respect of serious and







grave offence. Perusal of the FIR and the allegations made therein would







clearly indicate that the allegations against the Applicant are     serious in







nature and that of a fraud played on the investors and also the securities







market as a whole.    To my mind, considering the allegations a strong prima







facie case of “front running” is made out against the Applicant and the co-







accused.    The intentions of the Applicant are clear from the FIR. The







allegations are serious and as a meticulously by a well thought of pre-plan







and design to provide non public information to the co-accused, his







acquaintances and known persons. The allegations are of the Applicant and







all persons accused acting in concert, by a plan and in conspiracy to make







wrongful and undue gains for themselves and at the cost of the investors and















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the securities market.The securities market mechanism has been used for







making personal and private gains.







REASONING







11)       The record indicates that, in or around July 2019 the Applicant







was appointed as Assistant Vice President/ Chief Trader in the Equity







Department of the Axis Assets Management Company Limited (Axis AMC)







and then promoted as Senior Vice President. The Applicant was the Fund







Manager for arbitrage schemes and exchange traded fund schemes of the Axis







Mutual Fund. The Applicant’s duties comprised of implementing fund







investment strategies, managing comprehensive dealing and trading activities







for the equity schemes in and as a capacity of Chief Dealer.    As a part of his







job and responsibility, the Applicant was to execute instructions received from







the designated fund managers whereby he would execute trades in







accordance with the directives and communicate the same to the brokers







empanelled by Axis AMC.       On receipt of the non public information, the







Applicant was to strategically time the decisions considering news flow,







corporate events, broker channel checks and global market research.







12)       SEBI has issued an interim order cum show cause notice dated 28 th







February 2023 against the Applicant under 11(1), 11(4), 11(4A), 11B(1),







11B(2), 11(5), and 27 of SEBI Act, read with SEBI (Procedure for Holding







Inquiry and Imposing Penalties) Rules, 2005.















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13)       The main argument advanced by Mr. Nagmuthu the Learned Senior







Counsel is that, the complaint as filed by Respondent No.2 in the present form







is not maintainable or sustainable. It was argued that, a bare perusal of the







FIR would indicate that, the acts complained of, are in respect of an act of







misconduct of “front running” allegedly committed by the Applicant and other







co-accused. The submission was that, as “front running” is an offence under







SEBI Act the compliant or criminal prosecution could only have been







launched/ initiated by SEBI in accordance with Section 26 of the SEBI Act i.e.







on a complaint made by the Board.







14)     A reference to the relevant provisions of the SEBI Act in that regard







are therefore necessary :-







14.1)   Section 24 of SEBI Act reads as under:-







        “24. Offences.



        (1) Without prejudice to any award of penalty by the adjudicating



        officer under this Act, if any person contravenes or attempts to



        contravene or abets the contravention of the provisions of this Act or



        of any rules or regulations made thereunder, he shall be punishable



        with imprisonment for a term which may extend to ten years, or with



        fine, which may extend to twenty-five crore rupees or with both.



        (2) If any person fails to pay the penalty imposed by the adjudicating



        officer or fails to comply with any of his directions or orders, he shall



        be punishable with imprisonment for a term which shall not be less



        than one month but which may extend to ten years, or with fine,



        which may extend to twenty-five crore rupees or with both.”







14.2)   Section 24A of SEBI Act reads as under:-







        “24A. Composition of certain offences.--Notwithstanding anything











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        contained in the Code of Criminal Procedure, 1973 (2 of 1974), any



        offence punishable under this Act, not being an offence punishable



        with imprisonment only, or with imprisonment and also with fine,



        may either before or after the institution of any proceeding, be



        compounded by a Securities Appellate Tribunal or a court before



        which such proceedings are pending.”







14.3)   Section 26 of SEBI Act reads as under:-







        “26. Cognizance of offences by Courts.--



        (1) No court shall take cognizance of any offence punishable under



        this Act or any rules or regulations made thereunder, save on a



        complaint made by the Board”.







15)     Section 26 of the SEBI Act provides that no court shall take







cognizance of offence punishable under Act or any rules or regulation made







thereunder except on the complaint made by the Board. The expression Board







is defined in section 2(1)(a) to mean the “Securities and Exchange Board of







India” established under section 3 of the SEBI Act. The SEBI Act is a Special







Act enacted to regulate the financial/ security markets and to protect the







interest of the investors and the market. Being a Special Act the same would







prevail over the general law. Under section 26 of the SEBI Act, it is expressly







provided that, the complaint for an offence under the Act would be filed only







by the Board. Perusal of the FIR and the allegations made therein prima facie







show that the allegations     pertain to an offence of front running.        The







complaint in its present form is that of an offence of front running.







16)       During the course of the arguments, this court was informed that a















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complaint dated 12th October 2025 has also been filed by Axis AMC, which







complaint has been merged with the present FIR. I have noted that, the







present FIR also refers to the interim order cum show cause notice dated 28 th







February 2023 passed under 11(1), 11(4), 11(4A), 11B(1), 11B(2), 11(5),







and 27 of SEBI Act, read with SEBI (Procedure for Holding Inquiry and







Imposing Penalties) Rules, 2005. It is a settled law that, an FIR cannot be an







encyclopedia and it is not necessary that all details and finer nuances are







known to a lay man who files a complaint. It is the subsequent enquiry and







investigation which unfolds the entire facts. The basic requirement is that, the







facts as alleged should prima facie make out an offence and a case in respect







of the offence as alleged.







17)         Front running is an offence under the SEBI Act.          The concept/







default of front running is defined in Circular dated 25th May 2012 issued by







SEBI, the relevant part of which reads as under :-







      “1. SEBI shall not settle the defaults listed below:







      i.       Insider trading ie. violation of Regulation 3 and 4 of the SEBI



               (Prohibition of Insider Trading) Regulations, 1992;







      ii.      Serious fraudulent and unfair trade practices which, in the



               opinion of the Board, cause substantial losses to investors



               and/or affects their rights, especially retail investors and small



               shareholders or have or may have market wide impact, except



               those defaults where the entity makes good the losses due to



               the investors;







      iii.     Failure to make the open offer (except where the entity agrees



               to make the open offer or if in the opinion of the Board, the











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               open offer is not beneficial to the shareholders and / or the



               case is referred for adjudication);







      iv.      Front-running, for the purpose of this circular, front running



               means usage of non public information to directly or indirectly,



               buy or sell securities or enter into options or futures contracts,



               in advance of a substantial order, on an impending transaction,



               in the same or related securities or futures or options



               contracts, in anticipation that when the information becomes



               public; the price of such securities or contracts may change;







      v.       Defaults relating to manipulation of net asset value or other



               mutual funds defaults where the actions of the asset



               management company (AMC)/mutual fund (MF)/sponsor,



               result in substantial losses to the unit holders, except cases



               where the entity has made good the losses of the unit holders



               to the satisfaction of the Board;







      vi.      Failure to redress investor grievances (except cases where the



               issue involved is only of delayed redressal);







      vii.     Failure to make such disclosures under the ICDR and Debt



               Securities Regulations, which in the opinion of the Board,



               materially affect the right of the investors;







      viii.    Non-compliance of summons issued by SEBI;







      ix.      Non compliance of an order passed by the Adjudicating Officer



               (AO), Designated Member (DM) or Whole Time Member



               (WTM);







      x.       Any other default by an applicant who continues to be non-



               compliant with any order passed by the (AO) or (DM) or



               (WTM).







      Notwithstanding anything contained in this circular, based on the



      facts and circumstances of the case, the HPAC/Panel of WTMs may



      settle any of the defaults listed above.”















18)         The Hon’ble supreme Court in the case of SEBI v. Kanhaiyalal















                                                                          20



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Baldevbhai Patel, reported in (2017) 15 SCC 1 has explained the term “front







running” in para 21 as follows:-







        “21. In actuality, front-running is more complicated than these



        definitions suggest. It comprises of at least three forms of conduct.



        They are: (1) trading by third parties who are tipped on an



        impending block trade (“tippee” trading); (2) transactions in



        which the owner or purchaser of the block trade himself engages



        in the offsetting futures or options transaction as a means of



        “hedging” against price fluctuations caused by the block



        transaction (self front-running); and (3) transactions where an



        intermediary with knowledge of an impending customer block



        order trades ahead of that order for the intermediary's own profit



        (trading ahead). In this batch of appeals we are concerned with



        the first and the last types of trade i.e. tippee trading and trading



        ahead. It is important to note that trading ahead has been



        explicitly recognised under Regulation 4(2)(q) of the 2003 FUTP.”















19)       Regulation 4 of SEBI (Prohibition of Fraudulent and Unfair







Trade Practices Relating to Securities Market) Regulations, 2003 (FUTP







Regulations) deals with prohibition of manipulative, fraudulent and unfair







trade practices. Regulation 4(1) and (2)(q) read as follows ;











        “4. Prohibition of manipulative, fraudulent and unfair trade



        practices



        (1) Without prejudice to the provisions of regulation 3, no person



        shall indulge in a [manipulative,] fraudulent or an unfair trade



        practice in securities [markets].







        [Explanation.- For the removal of doubts, it is clarified that-







        (i) any act of diversion, misutilisation or siphoning off of assets or



        earnings of a company whose securities are listed or any



        concealment of such act or any device, scheme or artifice to



        manipulate the books of accounts or financial statement of such a



        company that would directly or indirectly manipulate the price of







                                                                          21



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        securities of that company, or







        (ii) transactions through mule accounts for indulging in



        manipulative, fraudulent and unfair trade practice shall be and



        shall always be deemed to have been included in sub-regulation



        (1).]







        (2) Dealing in securities shall be deemed to be a [manipulative]



        fraudulent or an unfair trade practice if it involves 10[any of the



        following]:-–



        ….…



          (q) [any order in securities placed by a person, while directly or



          indirectly in possession of information that is not publically



          available, regarding a substantial impending transaction in that



          securities, its underlying securities or its derivative;]



          …...”







20)     In order to consider the main argument advanced on behalf of the







Applicant that, the offence of front running being an offence under the SEBI







Act, it is only the Board who can initiate the criminal proceedings in







accordance with SEBI Act, it would be necessary and useful to refer to certain







judgments in that regard.







20.1)     In Union of India v. Ashok Kumar Sharma, reported in (2021) 12







SCC 674 the Hon’ble Supreme Court in para 170, in the context of Drugs and







Cosmetics Act, has observed that:







        “170.1. In regard to cognizable offences under Chapter IV of the



        Act, in view of Section 32 of the Act and also the scheme of CrPC,



        the police officer cannot prosecute offenders in regard to such



        offences. Only the persons mentioned in Section 32 are entitled to



        do the same”.



        170.2. There is no bar to the police officer, however, to investigate



        and prosecute the person where he has committed an offence, as



        stated under Section 32(3) of the Act i.e. if he has committed any



        cognizable offence under any other law.







                                                                      22



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        170.3. Having regard to the scheme of CrPC and also the mandate



        of Section 32 of the Act and on a conspectus of powers which are



        available with the Drugs Inspector under the Act and also his



        duties, a police officer cannot register an FIR under Section



        154CrPC, in regard to cognizable offences under Chapter IV of the



        Act and he cannot investigate such offences under the provisions



        of CrPC.”







20.2)       In Alka Shrivastava v. State of M.P., reported in MCRC No. 23883







of 2020 dated 22nd September 2020 the Madhya Pradesh High Court has







observed that:







        “32. We have seen that the provisions of IPC and PID Act are not



        attracted prima facie in this case, that there is an statutory bar



        against taking cognizance by Court for any such offence, which is



        in the domain of SEBI Act, 1992, which requires complaint to be



        filed by SEBI Board. This case is squarely relates to breach of



        provisions of SEBI Act, 1992 and SEBI Regulations, 2013 and only



        Special Court is empowered to take cognizance on the basis of



        complaint filed by SEBI Board. The police was not authorized to



        register an FIR in such case because there is a specific statutory



        bar in such matters.







        33. What the police could have done was that bring to the notice



        of SEBI Board the alleged violation being committed by the



        applicant Company. After providing vital information and inputs



        to the SEBI Court, the matter would have been looked into by



        SEBI Board only and appropriate complaint could have been filed



        by SEBI Board before the competent Special Court. However,



        instead of doing so, the police has embarked upon registration of



        FIR in such a case and by doing so, has travelled beyond the scope



        of its competence and jurisdiction”.







The Madhya Pradesh High Court proceeded to quash the FIR in the said case







which was registered for offences under Section 406, 418, 419, 420, 109 and







120 IPC and S.6 of PID Act. The Hon’ble Supreme Court in the case of State







of Madhya Pradesh v. Alka Shrivastava SLP(Crl) No.7737/2022 has











                                                                    23



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confirmed the view taken by the Madhya Pradesh High Court.







20.3)       In Jitendra Kumar Keshwani v. State of U.P ., Application Under







Section 482 No. 27298 of 2019 dated 24 th September 2024 the Allahabad







High Court, in a petition seeking quashing of case for offence u/s 420,409







IPC, has observed that:







        “16…At the most, from the allegations as made in the FIR, there



        can be offence under Section 15-F of the SEBI Act…



        17. For the aforesaid offences under Section 15F of the SEBI Act,



        Section 26 of the SEBI Act prohibits registration of the FIR for



        which only complaint can be filed under Section 26 of this Act, by



        the Board.



          …..     ….. ….. ….. …..



        19. The SEBI Act is an Special Act, which shall prevail over the



        general act, such as IPC or CrPC. It is settled position of law that



        once a special Act holds the field, the provisions of general law



        would not apply and only the prosecution can be lodged in



        accordance with the provisions of such special law and the



        provisions of Section 26 of the SEBI Act, specifically”.







The Allahabad High Court proceeded to quash the criminal proceedings







against the accused in that case.







20.4)     The Gujarat High Court in its judgment dated 23rd August 2024







passed in Special Criminal Appeal No.1639/2021 in the case of Sudhirkumar







Chandulal Thakkar v. State of Gujarat, in SP. Cr. Application No. 1634 of 2022







proceeded to quash FIR for offences under Section 406, 420 IPC and S.23







Securities Contract Act, with the following observations:-







        “10.        Regarding the provisions under the Securities Contract



        (Regulation) Act, upon considering Section 26 of the Act, it is



        clear that the lower court ought not to have taken cognizance of



        the offences based on a police report.











                                                                      24



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        11. In view of the above, a plain reading of S.26 of the Act



        suggests that no court can take cognizance of any offense



        punishable under the Act except on a complaint made by the



        Central Govt….”







20.5)   The Calcutta High Court in the case of Kanwar Deep Singh v. State of







West Bengal, reported in 2002 SCC OnLine Cal 602, proceeded to quash FIR







for offences under Section 420, 406, 468, 471, 421, 120B IPC, with the







following observation:







        “37. Section 41 of the Penal Code, defines special law as a law



        applicable to a particular subject. It is already indicated above that



        the allegations in the FIR make out violations of the provisions of



        the Companies Act and hence, in view of the provisions of section



        624 of Companies Act initiation of the investigating proceedings



        amounts to circumvention of the expressed bar in the Companies



        Act….It is rightly argued that the doctrine of circumvention



        applies in a case of this nature. This old doctrine based on the idea



        that what is not permitted to be done cannot be done in an



        indirect way. Any attempt to circumvent a law by an indirect



        process will yield to an impression that it is not violated or



        contravened directly. The acts of commission of offences under the



        Companies Act cannot be investigated into by merely changing the



        lexical character and describing the same as offences under



        section 417 of 420 Penal Code…”







21)     Considering the provisions of the SEBI Act, I find that an express







legal bar is engrafted in the SEBI Act. To institute or continue the present







proceedings, which are contrary to the provisions of the SEBI Act and, more







particularly, the express prohibition contained in Section 26 of the SEBI Act,







would be incorrect.







22)     Section 26 of the SEBI Act is clear and unambiguous. The SEBI Act is







a Special Act, enacted with the object to provide for the establishment of a











                                                                       25



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Board to protect the interest of the investors in the securities market, to







promote the development of and to regulate the securities market. SEBI is an







expert body, established with the prime objective of protecting the investors







and overseeing an orderly development of the securities market within the







regulatory framework as provided under the SEBI Act. To initiate proceedings







in contradiction of the Act, would amount to circumvention of the Special Act







and its provisions. The same cannot be permitted.







23)     The Securities and Exchange Board of India may pursue two streams







of enforcement actions, i.e., administrative/civil action or criminal action. The







administrative/civil actions inter alia may include the issuing of directions







under sections 11, 11B adjudicating proceedings under the Chapter VI-A of







the Securities and Exchange Board of India Act, 1992.       Criminal action, on







the other hand, involves initiating criminal proceedings against violators by







filing a complaint before the criminal courts. SEBI also has the power to pass







consent orders in respect of administrative and civil actions or in respect of







proposed criminal prosecutions which have not been instituted. Section 24A







of the SEBI Act Envisages and recognize the procedure to compound the







offences.   Under the SEBI Act, the consent process, is not undertaken in







serious offences which have an impact on the securities market and securities







market mechanism. The Securities and Exchange Board of India by its







Circular dated 25th May 2012, amended the Circular dated 20th April 2007















                                                                       26



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and issued certain new guidelines in relation to the consent orders and also







provided a list of offences, which the Securities and Exchange Board of India







shall not settled. The relevant provisions reads as under:







       “ii. Serious fraudulent and unfair trade practices which, in the



       opinion of the Board, cause substantial losses to investors and/or



       affects their rights, especially retail investors and small



       shareholders or have or may have market wide impact, except



       those defaults where the entity makes good the losses due to the



       investors; ”











24)       In addition to the regulatory and adjudicatory proceedings under







the Chapter VI-A of the Securities and Exchange Board of India Act, 1992,







SEBI can initiate criminal action under the SEBI Act for actions/acts which







are termed as offences under the SEBI Act or the rules or regulation made







thereunder. Section 24 clearly provides that without prejudice to any award







of penalty by the adjudicating officer under the Act, if any person contravenes







the provisions of the Act or Rules or Regulations, he may be punished with a







term of imprisonment which may extend to ten years or with fine which may







extend to 25 crore or with both.







25)     SEBI’s action i.e both the adjudicatory or civil action and/or the







criminal prosecution strives to protect the market integrity, protect market







abuse, and protect the interest of the investors. There is no doubt that market







abuse, undermines investors’ confidence, market integrity and impairs











                                                                      27



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economic growth of the nation. Market abuse also includes manipulation of







the system for personal gains.







26)          In my opinion, prima facie the complaint relates to an offence of







front running.    In view of the allegations, the possibility of the acts of the







Applicant and other co-accused adversely affecting the right of a small







investor and having an adverse market impact cannot be ruled out. SEBI has







already issued an interim order cum show cause notice dated 28 th February







2023. The acts of the Applicant including the accused if proved are actual







public wrongs or offences committed against society. The offences are directly







against the interest of the society and public at large. The offence of front







running, if prima facie made out clearly has an element of criminality, illegal







personal gain at the cost of the public and an act done pursuant to a well







planned design/ conspiracy to defeat the system and securities mechanism







and is in complete disregard to the law.







27)          An offence of front running if made out is a part of criminal







conspiracy executed with precision, planning and design with only one







objective i.e., the personal profit and personal illegal enrichment at the cost of







the investor In an offence of front running, the intention is to make use of







non public information which is not known or not available in the market and







position yourself in a manner or execute transactions based on the said non







public information to make wrongful gains by a dishonest and mala fide use















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of the information. In my considered view, the offence of front running is







against the securities market mechanism and the system as a whole including







the investors, the market and the society.







28)     I have also noted that, Mr. Arjun D. Padwale (Assistant Police







Inspector, Unit-6, Economic Offences Wing, Mumbai) has filed an Affidavit







dated 8th December 2025, paragraphs 8, 10 and 11 of which read as under:-







      “8. I say that, the present case pertains to Front-Running trades



      executed based on unauthorizedly provided Unpublished Price



      Sensitive Information (UPSI) by the applicant (OA) to various



      entities who was the Chief Dealer in Axis Mutual Fund at the



      relevant time. He was aware of the upcoming large-volume trades of



      the said fund and with fraudulent and dishonest intentions misused



      this information by sharing it with other co-accused individuals.



      Front Running Trades were then executed through the trading



      accounts and positions were squared off after the Axis Mutual Fund



      orders were placed. This led to gain wrongful profits for the accused



      persons and corresponding wrongful losses to the retail investors of



      Axis Mutual Fund. As the core issue in this case revolves around



      Front Running Trades. The SEBI has defined Front Running in its



      circular vide No. CIR/EFD/1/2012, dated 25/05/2012, as follows:



      "Front-running, for the purpose of this circular, front running means



      usage of non-public information to directly or indirectly, buy or sell



      securities or enter into options or futures contracts, in advance of a



      substantial order, on an impending transaction, in the same or



      related securities or futures or options contracts, in anticipation that



      when the information becomes public; the price of such securities or



      contracts may change"



             ….. ….. ….. ….. …..



      10. I say that, during the course of the investigation, summons was



      issued to the National Stock Exchange of India Limited (NSE). Trade



      data related to the suspected PAN card holders, as listed in Table



      No.01 whose trading accounts were allegedly used for executing











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      front-running transactions, was obtained from both NSE. This trade



      data was analyzed in comparison with 34 transactions of Axis



      Mutual Fund identified by Deloitte during its spike trade analysis.



      The analysis revealed that the suspected PAN holders executed



      trades immediately prior to the corresponding orders placed by Axis



      Mutual Fund. On the buy side, the trading pattern followed the



      sequence: Buy- Buy-Sell, indicating that the suspects first executed a



      buy order in their own trading accounts, followed by a significant



      buy order placed by Axis Mutual Fund, and subsequently squared off



      their positions at a profit after the price appreciated. On the sell side,



      a reverse pattern was observed: Sell - Sell - Buy, wherein the suspects



      initially took a sell position, which was followed by a large sell order



      from Axis Mutual Fund. Thereafter, the suspects covered their short



      positions by buying the stock at a lower price, thereby realizing



      gains.



      11. I say that, during the course of investigation, statement of



      authorized person of Axis Asset Management Company (Axis AMC)



      Mr.Darshan Kapadia, Compliance Officer, was recorded on 14/05/2025.



      In addition, detailed documents were sought from Axis AMC in



      connection with the investigation.”







29)     Fraud under the FUTP Regulations            has been defined under







Regulation 2(c) of the Regulations. The definition of fraud under the







Regulation is wide. In my opinion, the offence of front running is covered by







fraud and/or unfair trade practices. Front running is a extremely serious and







a grave offence which is against the securities market and the investors at







large. It adversely affects the market integrity and investor confidence. Front







running, if proved, is clearly an act of market abuse and adversely impacts the







market integrity.







30)     Considering the provisions of section 26 of the SEBI Act and the















                                                                      30



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afore-noted pronouncements, it is clear that there is statutory bar against







taking cognizance by the Court for the acts which are offences under the SEBI







Act. In a case which relates to the breach of the provisions of the SEBI Act and







which is an offence under the SEBI Act, the Court can take cognizance only if







the complaint is filed by the Board. Even assuming that an ordinary citizen,







who feels that an offence is committed against him or his financial interest,







approaches police station for filing an FIR, it is incumbent on the police







authorities in such cases to forward the said complainant/complaint to SEBI.







It is then open and upto SEBI to take appropriate action in accordance with







law. As noted hereinabove, perusal of the complaint and/or          FIR in the







present form indicates that, the offence as alleged is only that of front







running. The SEBI Act being a Special Act shall prevail over the IPC (now







BNS). The provisions of Special Law will take precedence. Once a Special







Law is enacted or is in existence, the provisions of the general law that







anybody can set criminal law in motion cannot be applied and will have to







give way.







31)     The statutory provisions of the Special Act i.e. the SEBI Act cannot be







rendered redundant nor can they be circumvented in any manner. In view







thereof, I am of the opinion that the FIR as filed by Respondent No. 2 in its







current form would not be maintainable only in view of section 26 of the SEBI







Act and the correct course of action ought to have been of filing a complaint















                                                                      31



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with the SEBI. It was then upto SEBI to take appropriate steps/ legal action in







accordance with law under Sections 24 and 26 of the SEBI Act or rules or







regulations.







32)     I have noted that, the acts complained of by the Complainant prima







facie relate to an offence of front running. Whether any other offence under







the general laws i.e. IPC/BNS is made out would have to be independently







considered.







33)     I find that, though the FIR is registered under sections 477-A, 408,







468, 465, 420, 417, 406 and 34 and 120B of the IPC, the Investigating







Agency in its Affidavit dated 8th December 2025, in paragraph 31 has stated







that only offences under Section 408, 420, 120B and 34 of the Indian Penal







code are made out.      As regards the contention of the Applicant that, no







offences under sections 408, 420, 120B and 34 of the IPC are made out or the







contention that “information” cannot be equated with “property” to make out







the offences under sections 408 or 420 of the IPC/BNS, this Court is not







considering the said arguments at this stage, more particularly as the question







of maintainability has been raised in view of the provisions of section 26 of







the SEBI Act. The FIR primarily deals only with the offence of front running.







To a common man, the same offence of front running may be equatable to the







offence of cheating or the concept of feeling cheated.       Investigation has







revealed that, the offence under sections 420, 408, 120B and 34 of IPC are















                                                                     32



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made out. The said aspect i.e. if any offence is made out under the general







laws i.e. IPC/ BNS should also be considered by SEBI and upon a complaint







being filed by SEBI, by the investigating agencies, in accordance with law.







34)     I have noted that, the complaint refers to the interim order cum







show cause notice dated 28th February 2023 issued by SEBI. Though the







investigation has revealed that, the offences have been made out under







sections 408, 420, 120B and 34 of the IPC, perusal of the entire FIR and the







allegations made therein, at present, clearly refer to an offence of front







running. The offence of front running is an offence exclusively under the







Special Act i.e. the SEBI Act and the rules and regulations made thereunder. It







is the offence pertaining to the conduct of a person in relation to the







securities market.







35)     The Axis Mutual Fund i.e. employer of the Applicant has also made a







complaint dated 12th October 2025 in respect of the unlawful actions of the







Applicant. This Court has been informed by the learned APP appearing for







the State that, the Investigating Agencies have merged the said complaint







with the present FIR dated 23rd December 2024. The Axis Mutual Fund was







the employer of the Applicant. Considering the peculiar facts of the present







case, the possibility of an independent offence being made out by the







employer in respect of the acts/ misconduct of the Applicant in course of his







employment cannot be ruled out at the present stage. In view thereof, Axis















                                                                      33



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Mutual fund is at liberty to take appropriate action in accordance with law,







as advised, in respect of their grievances as an employer or othewise. It is







clarified that, this Court has not considered the contentions or allegations







made by Axis Mutual Fund in it’s complaint. It is further clarified that, none







of the observations made by this       Court shall be construed to be an







adjudication or even a prima facie observation in respect of the complaint as







filed by Axis Mutual Fund. All contentions of the Axis Mutual Fund are







expressly kept open.







36)     In the present case, the alleged offence has been investigated and







statements have been recorded by the Investigating Agencies including the







Enforcement Directorate.   It is the say of the Investigating Agencies that,







offences under Section 408, 420, 120B and 34 have been made out, and that







there is enough prima facie evidence and material on record to make out the







offences. But when one considers the provisions of the SEBI Act, particularly







Sections 24, 24A and 26 of the SEBI Act, it cannot be in doubt that the







complaint, if any, in respect of the offence under the SEBI Act can only be







filed by the Board. As regards the complaint of Axis Mutual Fund, it is open







for them to also approach the Board if advised for an offence under the SEBI







Act or file an independent complaint/FIR in accordance with law, for an







independent offence, if any made out under the general law.



















                                                                     34



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CONCLUSION







37)     Considering the aforesaid discussions, I am of the view that the







correct procedure for filing the complaint in respect of an offence under the







Special Act i.e. the SEBI Act is that, the complaint is filed by the Board in







accordance with section 26 with the concerned Court. It is the SEBI who has







to take steps to initiate the proceedings. The SEBI being authorized under the







SEBI Act, is entrusted with the responsibility of regulating the market and







safeguarding the investors and the security market would have the expertise







to analyze the allegations for offences under the SEBI Act.







38)     In view of the aforesaid discussion I am incline to quash the FIR







bearing No. 0369 of 2024 dated 23 rd December 2024, registered with Sion







Police Station. Considering the seriousness of the allegations, gravity of the







offence and if prima facie offence is made out, the adverse financial impact it







would have not only on security markets but the entire financial system, this







Court trust that the SEBI will take prompt, swift and effective steps and action







in furtherance of the object of the SEBI Act, i.e. to protect the interest of the







investors and integrity of the security of the market.







39)     In view of the afore-stated discussion and the law as discussed, the







following Order is passed:-



















                                                                       35



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      (i)    The Criminal Application is allowed in terms of prayer (a). It will







             be open for the Securities Exchange Board of India, to







             independently consider whether the allegations made against the







             Applicant in respect of the alleged acts/misconduct of the







             Applicant or as made in the interim order cum show cause notice







             dated 28th February 2023 make out any criminal offence under the







             SEBI Act.







      (ii)   Necessary steps be taken in accordance with law as expeditiously







             as possible and in any event within a period of 12 weeks from the







             receipt of the order.







      (iii) Axis Mutual Fund is at liberty to file its independent complaint







             before the SEBI or appropriate forum as may be advised in







             accordance with law. None of the observations in the present order







             shall be construed as an observation on the merits in respect of the







             complaint dated 12th October 2025 filed by the Axis Mutual Fund.







      (iv) If Axis Mutual Fund also files a complaint with SEBI, then in that







             event SEBI to consider the same and take an appropriate decision







             in accordance with law, as expeditiously possible and, in any event







             within a period of twelve weeks from the receipt of the complaint.







      (v)    The Registry is directed to send       a copy of this Order to the







             Securities Exchange Board of India.















                                                                          36



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      (vi) In view of the disposal of Criminal Application No.1036/2025,







          Interim Application No.4102 of 2025 and Interim Application No.







          4642 of 2025 will not survive and are accordingly disposed of.















                                   (RANJITSINHA RAJA BHONSALE, J.)



















                                                                    37