Supreme Court Lambasts SEBI's 'Double Standards' and CBI's 'Cool Attitude' in Indiabulls Probe

New Delhi — In an extraordinary display of judicial censure, the Supreme Court of India has severely criticized the country's premier regulatory and investigative bodies for their perceived inaction and reluctance in probing serious financial allegations against Indiabulls Housing Finance Ltd. (IHFL). During a hearing, a bench led by Justice Surya Kant accused the Securities and Exchange Board of India (SEBI) of demonstrating "double standards" and questioned the Central Bureau of Investigation's (CBI) unusually "cool kind of attitude" in a case involving significant public interest and alleged financial misconduct.

The scathing remarks came during the hearing of a plea filed by the Citizens Whistle Blower Forum, represented by Advocate Prashant Bhushan, which seeks the formation of a Special Investigation Team (SIT) to probe allegations of fund siphoning, round-tripping, and violations of the Companies Act by IHFL (now known as Sammaan Capital) and its promoters. The bench, which also included Justices Ujjal Bhuyan and N Kotiswar Singh, expressed profound disappointment with the agencies' handling of the matter, emphasizing that the case involves "public money" and warrants a thorough, unbiased investigation.

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SEBI's 'Double Standards' Under Fire

The Court's sharpest critique was reserved for SEBI. The hearing took a dramatic turn when it became apparent that SEBI was represented by a separate counsel who expressed reluctance to proceed with the investigation as directed, prompting a powerful rebuke from Justice Surya Kant. The Justice contrasted the regulator's current hesitation with its assertive stance in other matters, particularly concerning the auctioning of properties.

"Every day we see double standards of SEBI!" Justice Kant remarked pointedly. "In one of the matters where I constituted a High Powered Committee, your stand was only SEBI has the right to auction the properties. And what you have been auctioning, we know that! 30 crore property, you have sold in few lakhs."

Justice Kant's observations highlighted a perceived hypocrisy in the regulator's approach—aggressively claiming jurisdiction when it involves asset sales but retreating when tasked with complex investigations that may involve powerful corporate entities. He directly questioned the motives behind this reluctance.

"When question of taking over properties and selling comes, then you say we are the only authority in the country with jurisdiction. But when question of investigation comes? Because your officers have some vested interest?" he asked. "When Courts are instructing, you should perform your statutory duty. You say you don't have power. Why are your officers getting salary if you do not have power?"

These comments strike at the heart of regulatory accountability and the statutory mandate of bodies like SEBI, which are entrusted with protecting investor interests and maintaining market integrity. The Court's remarks imply a dereliction of this duty, suggesting a potential conflict of interest or institutional lethargy is hampering the course of justice.

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CBI's 'Friendly Attitude' and the Missing FIR

The CBI, often the lead agency in major financial fraud cases, also faced the Court's displeasure. Justice Kant noted the agency's uncharacteristically passive approach, which he found concerning given the gravity of the allegations.

"Very surprisingly CBI has a very cool kind of attitude and approach in this case. We have never seen such a friendly attitude, as we find in this case. We are sorry to observe like this," he stated.

A central issue that persisted throughout the hearing was the failure of any agency to register a First Information Report (FIR) for a predicate offense. The registration of an FIR is a critical legal step that formally initiates a criminal investigation and empowers agencies like the Enforcement Directorate (ED) and the Serious Fraud Investigation Office (SFIO) to exercise their full investigative powers.

Additional Solicitor General (ASG) SV Raju, appearing for the CBI and SFIO, informed the court about unsuccessful attempts to file a complaint before a Magistrate's court under Section 156(3) of the Criminal Procedure Code. However, the bench remained unconvinced by the explanations for the delay.

Justice Kant stressed the importance of an FIR, noting, "But registering an FIR will strengthen the hands of the ED, SFIO, SEBI. What really prevents the authorities?" He argued that even if only a fraction of the allegations were true, the "large scale transactions which can be dubbed as dubious" warrant a formal investigation. The registration of an FIR, he clarified, does not presuppose guilt but is an essential tool for unearthing the truth.

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Scrutiny on the Ministry of Corporate Affairs

The Ministry of Corporate Affairs (MCA) was also drawn into the Court's line of fire. Justice Kant questioned the Ministry's decision to compound approximately 100 violations related to the case within a short span of two days.

"Why is the MCA indulging in closing the matter like this? What is their interest in this?" he exclaimed, suggesting that such actions could be seen as an attempt to prematurely conclude matters that require deeper scrutiny. This observation raises significant questions about the process of compounding corporate offenses and whether it is being used to bypass comprehensive investigations into systemic wrongdoing.

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The Path Forward: A Coordinated Probe and a Call for Records

In response to the Court's pressure, ASG Raju assured the bench that the CBI Director would convene a high-level meeting with senior officers from the ED, SFIO, and SEBI to coordinate their efforts. This commitment came after Advocate Prashant Bhushan reiterated his proposal for a court-monitored SIT comprising officers from all four agencies to ensure a cohesive and effective probe.

The Supreme Court, not fully satisfied with assurances alone, issued specific directives to ensure progress. It ordered the CBI to file a fresh affidavit, following the ASG's statement that the ED would lodge a new complaint with the CBI.

Furthermore, the Court directed the Commissioner of Police, Delhi, to depute a senior officer from the Economic Offences Wing (EOW) to produce all records related to the inquiry conducted on the ED's previous complaint. This includes the justification for the EOW's conclusion that the complaint did not disclose a cognizable offense—a finding the Supreme Court appears to view with skepticism.

The case, CITIZENS WHISTLE BLOWER FORUM v. UNION OF INDIA, SLP(C) No. 2993/2025 , is set to become a landmark in defining the judiciary's role in ensuring the accountability of financial regulators. The Court's incisive questioning and direct orders signal a dwindling tolerance for procedural delays and inter-agency inertia, especially when vast sums of public money and the integrity of the financial system are at stake. Legal observers will be watching closely to see if this judicial intervention galvanizes the agencies into long-overdue action.