CBI acting unusually friendly in Sammaan Capital fraud case: Supreme Court bats for SIT probe

The Supreme Court on Wednesday took strong exception to the manner in which multiple investigative agencies have handled allegations of large-scale financial irregularities involving Indiabulls Housing Finance Ltd (IHFL), now renamed Sammaan Capital Ltd [Citizens Whistle Blower Forum Versus Union Of India And Ors.].

The Bench of Justices Surya Kant, Ujjal Bhuyan and NK Singh suggested the creation of a Special Investigation Team (SIT) comprising senior officers from the Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO) and the Securities and Exchange Board of India (SEBI), while making it clear that the Court had not expressed any opinion on the merits of the allegations against Sammaan.

In its order, the Court noted that steps shall be taken to convene a meeting with the heads of the probe agencies within two weeks to decide on the formation of the SIT.

The Court was hearing a plea seeking a court-monitored probe into alleged round-tripping of public funds, quid pro quo loan arrangements and diversion of money through shell entities by Sammaan.

The Bench noted that SEBI’s investigation report, placed on record earlier, contained enough material to warrant a serious look at the transactions in question.

As the hearing began, the Court pressed the agencies on why no formal case has been registered so far despite detailed findings from SEBI.

When informed that the CBI has not proceeded with the investigation citing lack of authority, the Bench questioned the passivity of the agency.

“Very surprisingly CBI has a very cool kind of attitude in this case. We have never seen such a friendly attitude by the CBI as in this case. This is ultimately public money. There is strong element of public interest. Even if 10% allegations are correct still there are large scale transactions which can be dubbed as dubious," Justice Kant said.

The Bench then pressed the Ministry of Corporate Affairs (MCA) on its inaction to order an investigation on the face of the SEBI report, especially when public money is involved. The Court questioned whether the Ministry had any vested interest in letting the matter rest.

“Why is the MCA indulging in closing the matter like this? What is their interest in this?” Justice Surya Kant said.

The judges observed that the MCA’s approach could not be allowed to stall the work of specialised agencies.

“The investigating agencies should not sit idle on the plea that we can’t do anything because ministry has closed it,” said Justice Kant.

SEBI also faced pointed questions from the Bench after expressing hesitation about participating in a coordinated investigation. The Court noted that when it came to taking over properties for recovery, SEBI spoke of its exclusive authority, but when asked to investigate, it cited limitations.

"When question of taking over someone’s property comes SEBI says we are the only authority in the country and we have the jurisdiction. But when the question of investigation comes, you say you don’t want to do it? Your officers have some vested interest? When we are giving you jurisdiction to do investigation why are you reluctant? Everyday we see double standard of SEBI. In one of the matters where I constituted a high powered sale committee your stand was only SEBI has the right to auction all these properties. And what have you been auctioning? We know that very well. A property worth 30 crores you sold in 2 lakhs. Why your officers are getting salaries if you don’t have power?" Justice Kant retorted.

Appearing for the Citizens Whistleblower forum, advocate Prashant Bhushan argued that the SEBI report pointed to round-tripping, evergreening of loans and flows of funds from abroad. He submitted that two corporate groups had borrowed money from IHFL and allegedly moved it to promoter-linked entities, and that the MCA had compounded more than 100 offences within days without addressing the findings.

He said that the Court should direct immediate registration of an FIR so that ED, CBI and SFIO could proceed effectively based on a common starting point.

Summarising the alleged pattern, he said that Sameer Gehlaut, founder of IHFL, had fled the country and acquired assets abroad worth more than ₹10,000 crore, and that a shareholding shift had gradually moved public shares into his hands. The Bench however, did not express any view on these allegations.

Senior Advocate Abhishek Manu Singhvi, representing Sammaan Capital, urged the Court to separate the company’s present structure from its earlier promoters including Gehlaut.

He submitted that the company was now a widely held, professionally run entity with over 4.5 lakh public shareholders and heavy institutional investment, including LIC and BlackRock.

“From 2021 prior Mr. Gehlaut diminished from less than 10% shareholding and is zero from 2021… There is a totally new company running on high funds by LIC, BlackRock etc, it is still being linked with Gehlaut which is a pre 2020 incarnation," Singhvi argued.

During the hearing, Additional Solicitor General (ASG) SV Raju informed the Court that the ED had earlier filed a complaint under Section 156(3) CrPC seeking registration of a predicate FIR, but the magistrate had rejected it. He added that applications had been made before Economic Offences Wing (EOW) in Delhi and police commissioner of Maharashtra but no step had been taken.

The Court then noted that the ASG shall convene a joint meeting of senior officers of CBI, ED, SEBI and SFIO within two weeks to examine the allegations and decide on the need for forming an SIT. It said that if the agencies agreed, the SIT shall be headed by an officer not below the rank of Inspector General of Police or equivalent.

To facilitate this meeting, the Court directed the ED to file a fresh complaint before the CBI accompanied by the SEBI report and relevant pleadings. The CBI was asked to place an affidavit indicating its stand after considering the material.

The Bench also directed the Commissioner of Police of Delhi to assign a senior Economic Offences Wing officer to produce records explaining why the ED’s earlier complaint was rejected on the ground that no cognisable offence was disclosed.

The matter will be heard next on December 17 when the agencies are expected to update the Court on their coordinated steps.

Note: An initial version of the story said that the Court ordered an SIT probe. The Court is yet to pass such an order though it suggested an SIT probe. The error has been corrected and is regretted.