The Supreme Court has refused to grant relief on a petition filed by Trinamool Congress MP Mahua Moitra seeking mandatory public disclosure of the ultimate beneficial owners and investment portfolios of Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs).
A Bench comprising Justices B.V. Nagarathna, R. Mahadevan and D.K. Upadhyaya considered Moitra’s plea seeking greater transparency in the securities market, particularly regarding the identities of individuals and entities that ultimately own or exercise control over investments routed through these financial instruments.
The petition raised concerns that inadequate public disclosure of beneficial ownership could leave investors unaware of the persons exercising control over substantial investments in Indian companies. It sought regulatory intervention to ensure greater transparency in the ownership structures and portfolio holdings of AIFs and FPIs.
Appearing for Moitra, senior advocate Prashant Bhushan argued that the existing disclosure requirements were insufficient, particularly when compared with those applicable to mutual funds. He contended that opaque investment structures could potentially facilitate market manipulation, money laundering and tax evasion.
Bhushan submitted that investors should be able to ascertain who ultimately controls investments in listed companies, especially where acquisitions are made indirectly through investment funds. He also referred to changes in beneficial ownership disclosure requirements since 2018 and relied on the findings of the expert committee constituted by the Supreme Court in the Adani-Hindenburg matter to emphasise the need for greater transparency.
Arguing that public disclosure would advance investor protection, Bhushan urged the Court to direct the Securities and Exchange Board of India (SEBI) to introduce a framework requiring disclosure of ultimate beneficial ownership and investment portfolios. He also relied on previous Supreme Court judgments concerning disclosure obligations in support of his submission that directions could be issued in the public interest.
Solicitor General Tushar Mehta opposed the plea, submitting that the information necessary for regulatory supervision was already being furnished to SEBI and custodians. He argued that the petition sought to go beyond regulatory disclosure by requiring the information to be made publicly accessible, with potentially significant implications for the economy and foreign investment.
The Bench considered whether it could direct the introduction of a disclosure regime when no existing legal or regulatory framework mandated the kind of public disclosure sought by the petitioner.
During the hearing, Justice Nagarathna questioned whether the Court could issue a writ of mandamus in the absence of an existing policy governing the proposed disclosure requirements.
The Bench observed that there was a distinction between directing authorities to implement an existing policy and requiring them to formulate a new framework through judicial directions. It indicated that the relief sought could not be granted under Article 32 of the Constitution without an applicable legal or regulatory basis.
While Bhushan maintained that greater transparency would help protect investors and strengthen confidence in the securities market, the Court declined to direct SEBI to introduce the proposed mandatory public disclosure regime. The writ petition was accordingly disposed of.
The decision leaves the question of whether broader public disclosure requirements should be introduced for AIFs and FPIs to the relevant regulatory and policy framework.
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