IBHFL, now known as Sammaan Capital Ltd, is a mortgage-focused non-banking financial company (NBFC) regulated by the Reserve Bank of India (RBI).

A bench comprising justices Abhay S Oka and AG Masih issued notices to IBHFL and other respondents on the plea filed by the Citizens Whistle Blower Forum, which has sought a court-monitored special investigation team (SIT) probe into the alleged financial misconduct by IBHFL, its subsidiaries, and their promoters. Apart from IBHFL, the Union government, RBI, Serious Fraud Investigation Office, and the Securities and Exchange Board of India (SEBI) have been arrayed as respondents.

Senior advocate Abhishek Manu Singhvi appeared for IBHFL and strongly opposed the petition. The PIL, originally filed in 2019 in the Delhi high court, accuses IBHFL of advancing dubious loans to corporate entities, resulting in alleged violations of statutory norms under the Companies Act, 2013, and misuse of public funds. The petition claims that such loans enabled financial irregularities, including round-tripping of funds while creating private wealth at the expense of public money.

The petitioner organisation, represented by advocate Neha Rathi, has said that IBHFL and its group companies engaged in questionable financial practices, such as issuing preference shares, mobilisation advances, and convertible debentures. It alleged that certain borrower companies shared directors and office addresses with IBHFL, while others, lacking tangible assets or operational businesses, were given substantial loans.

The PIL highlights alleged links between IBHFL and prominent corporate groups such as Reliance ADAG, DLF, Vatika, and Americorp, asserting that these transactions jeopardised public investments in IBHFL through both shareholder equity and loans from public and private banks.

The petition emphasised the need for an independent investigation, arguing that ongoing inquiries by the National Housing Bank (NHB) and the Ministry of Corporate Affairs (MCA) were insufficient to uncover the full extent of the alleged violations. It maintained that a thorough and time-bound probe by an SIT would ensure transparency and accountability in the matter.

The Supreme Court’s decision to hear the PIL came after the Delhi high court dismissed the petition on February 2. The high court ruled that the allegations were unsubstantiated and not backed by sufficient evidence. It observed that the documents submitted by the NGO, including balance sheets, were in the public domain and failed to support the claims of financial impropriety.

The high court noted that necessary investigations were already underway, with the NHB conducting inspections and the MCA following up on related concerns. The court emphasised that the jurisdiction to investigate financial irregularities lies with regulatory agencies, and judicial interference is warranted only in cases of grave miscarriage of justice. The high court criticised the NGO for causing reputational harm to IBHFL and financial losses to its shareholders through its allegations, which it termed speculative and devoid of merit.

Indiabulls has denied the allegations, asserting that its financial practices adhered to regulatory standards set by the RBI, SEBI, and NHB. The company claimed that many of the loans flagged by the petitioner were backed by sufficient securities or mortgages and had already been repaid. It argued that the PIL was malicious, and intended to harm the company’s reputation and disrupt its business operations.

During the hearing on Friday, the Supreme Court refrained from making any observations on the merits of the case but sought responses from the respondents.