The Supreme Court of India on Monday dismissed a plea filed by the New Delhi–based NGO Infrastructure Watchdog against the Securities and Exchange Board of India (SEBI) over the ₹560-crore initial public offering (IPO) of Smartworks Coworking Spaces Limited.
A Bench of Justices PS Narasimha and AS Chandurkar not only rejected the appeal but also rebuked the NGO and its lawyers for submitting false documents in the matter.
During the hearings, the NGO’s counsel, Senior Advocate Narender Hooda, produced what was claimed to be a letter from the Ministry of Corporate Affairs (MCA) to SEBI suggesting ongoing investigations against the Sarda family, promoters of Smartworks.
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However, Senior Advocate Gopal Subramanium, representing the respondents, immediately disputed the claim. He pointed out that a Right to Information (RTI) response from the MCA confirmed that no such letter had ever been issued.
The Court reacted sternly, warning that submitting fabricated material could attract prosecution. On Monday, SEBI and the respondents informed the Court that the letter was indeed fake.
Still, the Court chose not to initiate prosecution but issued a strong warning.
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“Lawyers should be the first barrier in such cases. How can you let this happen? How did you let them file such a document?”
– Justice PS Narasimha
The Bench also expressed dissatisfaction with the conduct of the NGO’s lawyers. The judges reminded them that advocates have a duty to prevent questionable material from being placed on record.
Senior Advocate Kapil Sibal, present in court for another matter, also remarked that filing false documents before the Supreme Court is a “serious issue.”
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Background of the Case
The dispute began when Infrastructure Watchdog approached the Securities Appellate Tribunal (SAT), seeking to block Smartworks’ IPO. The NGO alleged that Smartworks’ draft red herring prospectus contained incomplete and misleading disclosures.
SAT, however, dismissed the plea on July 16. The Tribunal noted that:
- Smartworks had disclosed the NGO’s complaints dated January 12, March 29, and May 21, along with its responses, in its prospectus and addenda.
- The internal income-tax reports relied on by the NGO were only “indicative” and had not resulted in statutory notices or tax demands.
Further, SEBI argued that the NGO lacked locus standi under Section 15T of the SEBI Act as it was not a “person aggrieved.” SAT left this issue open but decided the case on merits.
Despite the NGO’s objections, Smartworks’ IPO saw a strong investor response.
- On the first day, the IPO was subscribed only 0.83%.
- After an addendum dated July 11 disclosed the NGO’s complaints, demand surged.
- The issue closed at 13.45 times overall subscription, including 24.4 times in the Qualified Institutional Buyers (QIB) category.
SAT observed that it was unlikely that such large institutional investors would invest without proper analysis of disclosures.
After SAT dismissed its plea, the NGO moved the Supreme Court. On Monday, the top court dismissed the appeal as well, warning that any future attempt to mislead the court would face serious consequences.
Case Name: Infrastructure Watchdog vs SEBI
Parties:
Respondents: SEBI & Smartworks Coworking Spaces Limited
Petitioner: Infrastructure Watchdog (New Delhi-based NGO)
