SC wants answers on SEBI’s compounding of irregularities in Indiabulls loan transactions
The Supreme Court on Wednesday asked the Ministry of Corporate Affairs to place before it the original records of the closure of illegalities pointed out by the market regulator, the Securities Exchange Board of India (SEBI), in the affairs of Indiabulls Housing Finance Limited (IHFL), now known as Sammaan Capital Limited. A bench of Justices Surya Kant, Ujjal Bhuyan, and N Kotiswar Singh told Additional Solicitor General S V Raju, appearing for the central investigating agencies, that the court would like to know how many cases were closed.
“We would like to see in how many cases you have been so magnanimous in closing 100s of objections”, Justice Kant said, as the bench directed the Ministry to depute a senior official with the original records of the case on the next date of hearing on November 11. The bench also asked the Enforcement Directorate to clarify its position on the stand taken by the Central Bureau of Investigation on the issue of money laundering charges against the company and what steps it has taken.
“The original records of the MCA relating to the compounding of irregularities pointed out by SEBI in its report is required to be furnished. We accordingly direct the MCA that a senior officer be present in court with the original reports. We direct the ED to categorically clarify its stand with respect to the observation made by the CBI in its report to the effect that the allegations prima facie disclose a money laundering aspect for which the ED may continue its investigation into IHFL’s affairs. The ED will also explain with respect to the steps taken by it in terms of the counter affidavit by the CBI, where ED had been requested to seek registration of FIR with EoW, Delhi. The steps taken in this regard shall be placed on record,” it ordered. Indiabulls in July 2024, renamed as Sammaan Capital Limited.
The top court was hearing a plea of NGO Citizens Whistle Blower Forum, which alleged large-scale irregularities in the affairs of Indiabulls, a non-banking financial company. Senior advocates Harish Salve, Mukul Rohatgi, Abhishek Singhvi, appearing for the company and its promoters, said investigating agencies, one after the other, have not found any wrong and termed the NGO a “blackmailer“. Advocate Prashant Bhushan, appearing for the NGO, alleged that Indiabulls was involved in large-scale financial bungling, money laundering, and irregularities in the real estate sector.
A heated exchange followed between Salve and Bhushan when the latter, while referring to the former, said, a person sitting in London has the audacity to term the NGO as ‘blackmailer’, which has former Delhi High Court chief justice A P Shah and former Navy officers as its members. Salve retorted to Bhushan, saying if he is so jealous of him being in London, then he too can shift to the UK.
“This is a blackmail litigation. If an investigation is needed, it is into these NGOs. All the agencies have filed affidavits, and nothing has come out. What is this kind of witch-hunting going on? Who is this stranger? I am objecting to the maintainability of this petition,” said Salve.
Justice Kant intervened and said that the CBI has said in its report that the ED may continue its investigation into the affairs of IHFL. “We want to know what the ED’s stand is. We will hear from you on maintaining Mr.Salve. Don’t worry,” the judge said.
Bhushan said Indiabulls has disbursed some Rs.400 crores loans to many of the real estate companies, of which one company has a net worth of Rs.1 lakh only and was given a loan of Rs.1,000 crore. He referred to the finding in the SEBI’s affidavit and said it was shocking and substantiated the allegations that the petitioner has been making. Raju said the Enforcement Directorate’s affidavit has some serious things that are being looked into.
Justice Kant told Raju that the court would like to see the original records, as the bench would also like to know in how many cases you have been so magnanimous in closing hundreds of objections.
Bhushan said hundreds of violations were compounded in one day, and a penalty of only Rs.37 crore was imposed. Salve said the most important regulator, which is the RBI, has filed an affidavit in the matter and said there was nothing wrong in any of these loans.
On July 30, the CBI told the top court that it was not investigating any irregularities in IHFL and had not found any wrongdoing in the company disbursing loans to corporate entities. On July 21, the top court pulled up the CBI for not appearing in a matter against Indiabulls despite notice. The petitioner NGO alleged IBHFL and its owners were advancing dubious loans to companies owned by large corporate groups, which in turn were routing the money back to the accounts of companies owned by the promoters of Indiabulls to increase their personal wealth. The ED accused IHFL of committing some irregularities in the two cases it probed, including the one in Maharashtra, where public money was allegedly siphoned off outside the country by cheating investors of around Rs.300 crore.
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