The Supreme Court on October 29 declined to direct the Securities and Exchange Board of India (SEBI) to mandate public disclosure of the ultimate beneficial owners and portfolio holdings of Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs). The Bench held that such a direction could not be issued in the absence of an existing legal or regulatory framework requiring the disclosures.
Background
The writ petition was filed by Trinamool Congress MP Mahua Moitra, seeking greater transparency in investment structures operating in Indian financial markets. She argued that limited public information about the actual investors behind AIFs and FPIs could make it difficult for ordinary investors to understand certain market movements.
Appearing for Moitra, Advocate Prashant Bhushan submitted that undisclosed investment structures could raise concerns about potential market manipulation. He also argued that investors should know who ultimately controls the funds purchasing shares in Indian companies.
The Bench, comprising Justice B.V. Nagarathna, Justice R. Mahadevan and Justice D.K. Upadhyaya, examined whether the requested disclosure requirements could be imposed without an existing regulatory framework.
Justice Nagarathna observed,
the Court could direct the implementation of an existing disclosure policy, but questioned whether it could order such disclosure when no relevant policy or regulatory framework was in place.
The Court noted that disclosures concerning AIF and FPI investments were already being made to SEBI or the relevant custodians for regulatory purposes. However, the material before it did not establish an existing framework requiring the full public disclosure sought by Moitra.
The Bench further clarified that issuing a direction under Article 32 of the Constitution would require an appropriate legal or regulatory basis.
The Court concluded that it could not direct mandatory public disclosure of beneficial ownership and investment portfolios without the necessary framework.
“In the absence of any such framework this Court cannot exercise its discretion and issue a writ of mandamus to respondents to mandate a full public disclosure,” the Bench stated.
Accordingly, the Supreme Court disposed of Moitra’s writ petition.
