Delhi High Court dismisses petition seeking investigation into financial irregularities by Indiabulls Housing Finance Limited

delhi high court

Delhi High Court: A petition was filed by Citizens Whistle Blower Forum seeking direction for an in-depth, thorough and time-bound investigation by a SIT into various serious illegalities, violations and siphoning of funds committed by the promoters of Indiabulls Housing Finance Limited (IBHFL), its subsidiaries and their promoters. A division bench of Suresh Kumar Kait and Neena Bansal Krishna, JJ., dismissed the petition being devoid of merits.

The petitioner claimed to be a registered organization, working to provide a platform to whistleblowers across the country and to take up litigation on their behalf to provide them anonymity and to instill in them the necessary confidence to make disclosures without fear, arrange for their objective and impartial investigation and help to take such cases to their logical conclusions in a time bound manner. The petitioner alleged that IBHFL and its promoters, through subsidiaries and affiliated companies, have advanced dubious loans to large corporate groups, leading to an increase in personal wealth through circular financial transactions. The petitioner claimed that these activities violate various statutes, including the Companies Act, 2013, and the rules and regulations of regulatory bodies such as the Reserve Bank of India (RBI), SEBI, and the National Housing Bank.

The allegations include round-tripping of funds, non-disclosure of sources, and inaccurate financial reporting by IBHFL and its affiliated companies. The petitioner asserted that IBHFL and its group of companies have a net worth of over Rs. 75,838 crores, with a significant presence across India and substantial contributions to the Indiabulls group’s turnover. The petitioner detailed various methods employed by IBHFL, such as investing in preference shares, compulsory convertible debentures, and mobilization advances, allegedly aimed at creating private wealth from public funds. The petitioner claimed that some companies affiliated with IBHFL have common directors and office addresses, and certain companies with no fixed assets or business activities have been extended loans. The petitioner referred to relevant Sections of Companies Act, 2013, emphasizing the duty of companies to register charges created on their assets and the requirement for borrowing companies to file charge documents. IBHFL is accused of extending substantial loans to specific groups, including Americorp Group, Reliance ADAG, Chordia Group, Vatika Group, DLF Group, and other promoter group companies.

The Court opined that the allegations levelled by the petitioner are not substantiated as these are not supported by any evidence. The balance sheets or other material placed on record is already available on the website of these companies and is thus already in public domain. Not only a large portion of alleged loans were repaid by the respondent companies but also the loans were advanced against mortgages and securities furnished by the borrowers. Moreover, due to alleged complaints, the Government functionaries have already set in motion and necessary inspections have been carried out by NHB. The Ministry of Corporate Affairs is also investigating further.

The Court noted that due to articles published in magazines and newspapers, the tweets made by members of the petitioner-firm or a Member of Parliament, the shareholders of accused-companies were jolted, and they were made to suffer huge losses. It is a settled position of law that the jurisdiction of investigation lies within the realm of the investigating agency and a Court has no authority to interfere in the investigation until and unless there is a grave miscarriage of justice or misuse of process of law. The investigation must be transferred to CBI, SIT, or any other agency only in exceptional cases, not as a matter of routine. There is no dispute to the position that necessary investigation in the present case has already been carried out by NHB and the Ministry of Corporate Affairs is in the process of further investigation.

Thus, the Court dismissed the petition finding no merit in the allegations.

[Citizens Whistle Blower Forum v Union of India, W.P.(C) 9887 of 2019, decided on 02-02-2024]

Advocates who appeared in this case :

Mr. Prashant Bhushan, Ms. Neha Rathi and Mr. Kamal Kishore Tyagi, Advocates for petitioners

Mr. Anurag Ahluwalia, CGSC for respondents No.1, 2 & 6 Ms. Shobhana Takiar, Advocate for respondent No.3 Mr. Ramesh Babu, Ms. Manisha Singh, Ms. Tanya Choudhary & Ms. Jagriti Bharti, Advocates for respondent No.4 Ms. Pinky Anand, Senior Advocate with Mr. Ashish Aggarwal, Ms.Saudamini, Mr. Nishchay Kapoor & Mr. Satyajit Yadav, Advocates for respondent No.7 Ms. Pallavi Kumar & Mr. Pranav Tanwar, Advocates for respondent No.9

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