Bombay High Court Quashes Police FIR in Front-Running Case: Upholds Supremacy of SEBI Act Over General Criminal Law
The intersection of specialized securities regulations and general criminal jurisprudence often creates complex jurisdictional friction. In a landmark judicial pronouncement, the Bombay High Court in the matter of Viresh Gangaram Joshi Vs State of Maharashtra (Criminal Application No. 1036 of 2025, decided on 13/08/2026) addressed a pivotal legal question: Can law enforcement agencies register a First Information Report (FIR) under the general penal statutes for market infractions like front-running, or does the statutory framework of the market regulator hold exclusive domain?
The High Court decisively ruled that the statutory mechanism provided under the specialized securities law completely overrides general criminal procedures for offences explicitly covered by the market regulator's mandate. Consequently, the Court invalidated the police proceedings, reinforcing the exclusive cognizance powers vested in the regulatory board.
The Factual Matrix of the Dispute
The controversy originated from the professional conduct of the assessee, who held a senior fiduciary position as the Chief Dealer and Senior Vice President within the equity department of Axis Asset Management Company Limited (Axis AMC). In this capacity, the assessee functioned as a fund manager for exchange-traded funds and arbitrage schemes, bearing the critical responsibility of executing trade directives and implementing investment strategies for Axis Mutual Fund.
The Core Allegations
According to the prosecution's narrative, the assessee allegedly orchestrated a sophisticated front-running syndicate. The primary accusation was that the assessee exploited his privileged access to highly sensitive, non-public information regarding impending, large-volume trade orders of Axis Mutual Fund.
Instead of maintaining the strict confidentiality required by his fiduciary role, the assessee allegedly transmitted this confidential data to external co-conspirators. The network of co-accused allegedly included individuals and entities such as Sumit Desai, Pranav Vora, Brijesh Kurani, Vaibhav Pandya, Subtotal Marfatia Group, Subtotal Woodstock Group, and Subtotal Kurani Group.
The alleged modus operandi involved these external entities placing substantial buy or sell orders in the securities market just moments before Axis Mutual Fund executed its massive institutional trades. Once the mutual fund's massive orders moved the market prices, the co-accused would immediately square off their positions, thereby extracting risk-free, illicit profits.
Financial Impact and Investigations
The scale of the alleged financial misconduct was staggering. The original complainant, an investor, alleged that the manipulative practices compromised the financial interests of approximately 66 lakh investors, leading to a notional or indirect market loss estimated at a colossal Rs. 2.52 lakh crore.
Following these explosive allegations, FIR No. 0369 of 2024 dated 23 December 2024 was registered at the Sion Police Station, which was subsequently transferred to the Economic Offences Wing (EOW) in Mumbai. The FIR invoked severe penal provisions, specifically Section 406, Section 417, Section 420, Section 465, Section 467, Section 468, and Section 477A read with Section 34 and Section 120B of the Indian Penal Code, 1860.
Simultaneously, Axis AMC filed a formal corporate complaint against the assessee on 12 October 2025, citing gross violations of corporate governance, ethical codes, and employment terms. This corporate complaint was subsequently merged into the ongoing police FIR.