The Supreme Court of India on Thursday dismissed a public interest litigation (PIL) filed by Trinamool Congress MP Mahua Moitra, which sought greater transparency regarding foreign investments. The court ruled that it could not compel the Securities and Exchange Board of India (SEBI) to mandate public disclosures in the absence of an existing legal or regulatory framework.
Plea for Enhanced Transparency
Moitra's petition specifically requested directions for SEBI to make public the ultimate beneficial ownership details and comprehensive portfolio holdings of both Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs). Her argument centered on the rapid expansion of these investment vehicles within India's financial markets without corresponding public disclosure requirements, which she contended posed significant risks to transparency and investor protection.
Court's Stance on Judicial Mandate
A bench comprising Justices B V Nagarathna, R Mahadevan, and D K Upadhyaya stated unequivocally that the court lacked the authority to issue such directives without an established legal or regulatory basis. The bench observed, "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 court further questioned its power to force a regulator to implement a disclosure requirement that is not enshrined in law or policy.
Risks Highlighted by the Petition
Moitra's petition underscored several concerns, arguing that inadequate public disclosure of ultimate beneficial ownership could heighten risks of:
- Money laundering
- Round-tripping
- Front-running
- Tax evasion
- Market manipulation
The plea also drew a comparison with mutual funds, which are subject to stringent public disclosure norms, contrasting them with the "virtually no public disclosure norms" for AIFs and FPIs.
Growth in Investment Vehicles
The petition highlighted the substantial growth of these investment categories:
- AIFs: The number of SEBI-registered AIFs surged from 42 in March 2013 to over 1,528 by March 9, 2025. Their assets under management (AUM) concurrently rose from Rs 1,437 crore to nearly Rs 13 lakh crore by December 2024.
- FPIs: Assets under custody for FPIs exceeded Rs 74 lakh crore as of January 2025, surpassing the approximately Rs 68 lakh crore AUM of mutual funds.
Despite these concerns, the Supreme Court declined to impose new disclosure obligations through judicial directions, instead leaving the matter for relevant authorities to consider in light of the issues raised during the proceedings. While AIFs and FPIs already submit investment-related disclosures to the regulator or custodians for oversight, a framework for public disclosure of entity-wise investments remains absent.