India, Aug. 16 -- The Bombay High Court on Friday quashed a police FIR against Viresh Gangaram Joshi, the former chief dealer at Axis Mutual Fund, in a case alleging that he and his associates defrauded 6.6 million investors of Rs.2.52 lakh crore through a "front-running" racket involving the mutual fund's trades.

The court did so not by holding that the allegations against Joshi were false or that he had been cleared of wrongdoing, but because of a legal bar under the Securities and Exchange Board of India (SEBI) Act, 1992.

A single-judge bench of justice Ranjitsinha Raja Bhosale held that the allegations in the FIR primarily concerned "front-running", an offence covered by the SEBI Act. Under Section 26 of the Act, a court cannot take...