SC castigates SEBI, CBI in Indiabulls probe, questions 'double standards'

The Supreme Court on Wednesday delivered a stinging critique of multiple regulatory and investigative agencies over their handling of allegations against Indiabulls Housing Finance Ltd (now renamed Sammaan Capital), questioning what it described as a pattern of reluctance, inconsistency and institutional complacency.

A Bench of Justices Surya Kant, Ujjal Bhuyan and N. Kotiswar Singh was hearing a petition filed by the Citizens Whistle Blower Forum seeking a Special Investigation Team (SIT) to probe allegations of large-scale financial impropriety, including alleged round-tripping of funds, violations of the Companies Act and siphoning of money by the company’s promoters and subsidiaries.

During the hearing, Justice Surya Kant sharply criticised the Securities and Exchange Board of India (SEBI) for what the Court viewed as a refusal to investigate the allegations despite having repeatedly asserted its exclusive jurisdiction over several aspects of corporate regulation.

“When it comes to taking over properties and selling them, you say you are the only authority with jurisdiction,” Justice Kant remarked. “But when it comes to investigation, you claim you have no power. Is it because some of your officers have vested interests? Every day we see double standards.

"In one matter, after we constituted a high-powered committee, your stand was that only SEBI could auction properties — and we know what has happened there. A property worth Rs 30 crore was sold for a few lakhs. When courts instruct you to perform your statutory duty, you claim you lack power. Why are your officers being paid if you have no power?”

The judge also expressed concern over what he described as the “surprisingly cool attitude” of the Central Bureau of Investigation (CBI) in the case, saying the agency appeared unusually accommodating.

“We have never seen such a friendly approach,” Justice Kant observed. “This concerns public money. Even if 10 per cent of the allegations are true, there are large-scale transactions that appear dubious. Once there is doubt, you must register an FIR. It need not name specific persons — that can come later. Registering an FIR strengthens the hands of the ED, SFIO and SEBI. What prevents these authorities from acting?”

The Bench further questioned the Ministry of Corporate Affairs (MCA) over reports that nearly 100 violations were compounded in just two days. “Why is the MCA closing the matter in this way?” Justice Kant asked. “What interest do they have?”

The Court noted that earlier CBI filings had indicated prima facie evidence supporting allegations of money laundering, and that the Enforcement Directorate (ED) had been permitted to continue its investigation into the affairs of Indiabulls and its promoters.

Despite this, the issue of the absence of an FIR for the predicate offences persisted. Appearing for the CBI and the Serious Fraud Investigation Office (SFIO), additional solicitor-general S.V. Raju informed the Court that the agencies had pursued remedies before a magistrate under Section 156(3) of the Code of Criminal Procedure, and through the Economic Offences Wing (EOW) of the Delhi Police, but without result.

Senior advocate Prashant Bhushan, representing the petitioners, urged the Bench to direct the CBI to register an FIR, arguing that filings from both the CBI and SEBI demonstrated a strong basis for criminal investigation. Bhushan also proposed the formation of an SIT comprising senior officers of the CBI, SFIO, ED and SEBI.

ASG Raju assured the Court that the CBI director would convene a meeting of senior officers from all concerned agencies. However, the hearing took a sharp turn when the Bench was informed that SEBI was being represented by counsel other than the ASG, and that this counsel had signalled hesitancy about participating in a coordinated inquiry. The Court reacted strongly, prompting Justice Kant’s earlier remarks about SEBI’s alleged “double standards”.

The Bench directed the CBI to file a fresh affidavit, after the ASG stated that the ED would shortly submit a fresh complaint to the agency. The Court also ordered the commissioner of police, Delhi, to depute a senior EOW officer to produce the records of the inquiry conducted on the ED’s earlier complaint, including the basis on which the EOW concluded that no cognisable offence had been disclosed.

The matter will be taken up again after the agencies submit their updated responses.

With media inputs