The Supreme Court on Thursday declined to direct the Securities and Exchange Board of India (SEBI) to make public the ultimate beneficial ownership details and investment portfolios of Alternative Investment Funds (AIFs), Foreign Portfolio Investors (FPIs) and their intermediaries, holding that such a direction cannot be issued in the absence of an existing legal framework.
A three-judge bench comprising Justices BV Nagarathna, R Mahadevan and DK Upadhyaya disposed of a public interest litigation filed by Trinamool Congress MP Mahua Moitra, which sought greater transparency in India’s securities markets.
The Court clarified that judicial intervention to enforce disclosure requirements would be possible if a governing law existed and SEBI failed to comply with it. However, it found no legal regime requiring the full public disclosure sought in the petition.
Court Questions Basis for Seeking Disclosure Directions
During the hearing, the bench observed that it could not issue a writ of mandamus requiring SEBI to undertake disclosures for which no statutory or regulatory framework had been established.
The judges also questioned Moitra’s decision to approach the Court, pointing out that, as a Member of Parliament, she could have brought the matter before Parliament for discussion.
The bench distinguished between directing a regulator to fulfil an existing legal obligation and requiring it to implement a disclosure mechanism without an applicable legal mandate.
Petitioner Raises Concerns Over Investor Protection
Advocate Prashant Bhushan, appearing for Moitra, argued that the absence of a specific legal framework should not prevent the Court from directing SEBI to disclose the identities of the actual beneficiaries behind investment funds.
He submitted that ordinary investors were being manipulated by investors who artificially increased the share prices of companies. According to his argument, public disclosure of beneficial ownership information was necessary to address these concerns.
The petition sought mandatory disclosure of both ultimate beneficial ownership information and portfolio holdings of AIFs and FPIs to improve transparency and investor awareness in Indian financial markets.
It identified SEBI as the statutory regulator responsible for supervising securities markets, including the activities of alternative investment funds and foreign portfolio investors.
The Supreme Court, however, declined to impose the requested disclosure obligations and disposed of the petition.
