SC widens probe into dubious loans disbursed by Indiabulls

The Supreme Court is probing dubious loans by Indiabulls Housing Finance, seeking original records from the Ministry of Corporate Affairs amid SEBI's irregularities.

The Supreme Court on Wednesday deepened its enquiry into the dubious loans disbursed by non-banking financial company Indiabulls Housing Finance Limited (IHFL) to corporate entities by directing the Union government to produce original records of the Ministry of Corporate Affairs (MCA) that condoned multiple irregularities found against the company by Securities and Exchange Board of India (SEBI).

The top court noted that the irregularities pointed out by SEBI were either closed or compounded by MCA. (Sanjay Sharma)

Hearing a public interest litigation filed by a non-profit organisation Citizens Whistle Blowers Forum, the top court noted that the irregularities pointed out by SEBI were either closed or compounded by MCA and wished to know if the Centre has been so “magnanimous” in other cases as well.

Posting the matter for November 19, a bench headed by justice Surya Kant said, “It appears that the original records of MCA relating to compounding or closing of irregularities pointed out by SEBI in its report is required to be seen. We direct t MCA that a senior officer of the ministry shall remain present with original records on the next date.”

The court further directed the Enforcement Directorate to clarify its stand on whether it intends to probe the alleged money laundering charges against IHFL (now Sammaan Capital) after CBI filed an affidavit in July indicating that no case is made out for its probe.

The bench, also comprising justices Ujjal Bhuyan and N Kotiswar Singh said, “We direct ED to categorically clarify its stand with regard to observations made in the CBI affidavit to the effect that allegations disclose money laundering aspect on which ED may continue its probe.”

Additional solicitor general (ASG) SV Raju appearing for ED said, “It is our case that there is something serious in this matter. We have shared the information with the Economic Offences Wing (of Delhi Police) requesting for registration of FIR. They have rejected it.” The court directed ED to explain further steps being taken in this regard.

The CBI affidavit filed on July 29 in this case said, “In absence of any prima facie criminal act being disclosed from the material, in the transactions of M/s Indiabulls Housing Finance Ltd. with public sector or private banks or any such report by such banks, CBI is unable to take up investigation into the affairs of M/s IHFL.”

However, the affidavit added, “As the allegations prima facie disclosed money laundering aspect, therefore, Enforcement Directorate may continue with the investigation into the allegations of money laundering by M/s Indiabulls Housing Finance Ltd. and its erstwhile promoters…”

The NGO’s petition alleges that loans were extended by IHFL to companies that routed the money back to firms promoted byIHFL’s erstwhile promoter Sameer Gehlaut.

Appearing for IHFL, senior advocates Harish Salve and Abhishek Manu Singhvi objected to such allegations being made without any basis. Singhvi said, “I have summarised the responses of what the SEBI and CBI have said. They say that either there is nothing wrong or there are trivial issues that have been compounded.”

But Prashant Bhushan, appearing for the NGO pointed out that almost similar allegations were found by SEBI in its report forwarded to MCA on February 22, 2022, a copy of which has been filed before the court. The SEBI report said, “It may be noted that the special audit report (of National Housing Bank) states that IHFL had sanctioned loans to entities having negative/negligible net worth. Further, in respect of companies related to Sameer Gehlaut, the special audit report states that these companies have negligible revenues from operations. The companies either have a very insignificant net worth or have negative net worth in contrast to their borrowings/ investments which form a very substantial part of their Balance Sheet Size. They also have negligible ‘trade receivables, short term loans and advances and other current assets’.”

SEBI concluded, “The structure of these transactions, prima facie, appear to be quid pro quo transactions between IHFL and other banks and NBFCs, being regulated by RBI.”