SC Probes Financial Irregularities in Indiabulls Housing: ED

Supreme Court Examines Serious Financial Irregularities in Indiabulls Housing Finance, Says ED

ED flags possible money laundering; Court questions MCA’s leniency in condoning violations

NGO alleges corporate governance failures; SC seeks original records from Ministry of Corporate Affairs

By Our Legal Reporter

New Delhi: October 09, 2025:

The Supreme Court of India has taken a serious view of alleged financial irregularities at Indiabulls Housing Finance Ltd (IHFL), now renamed Sammaan Capital Ltd, after the Enforcement Directorate (ED) told the court that there were “serious issues” with the company’s financial transactions.

The matter came up during the hearing of a public interest litigation (PIL) filed by the Citizens’ Whistleblowers Forum, which alleged large-scale corporate governance violations, money laundering, and irregularities in loan disbursals by IHFL in collusion with real estate developers.

Background of the Case

IHFL, one of India’s largest non-banking housing finance companies, has been under scrutiny for several years. Allegations include:

Dubious loan disbursals to real estate companies.
Diversion of funds through shell entities.
Corporate governance violations allegedly condoned by the Ministry of Corporate Affairs (MCA) despite adverse reports from the Securities and Exchange Board of India (SEBI).

The PIL claims that IHFL, in conspiracy with certain real estate groups, misused the subvention scheme to defraud homebuyers. SEBI had reportedly flagged over 200 instances of irregularities, but the MCA allegedly compounded or closed these cases instead of pursuing strict action.

Supreme Court’s Observations

A bench of Justices Surya Kant, Ujjal Bhuyan, and N. Kotiswar Singh heard the matter. The Court made several important observations:

The bench directed the MCA to produce original records relating to the compounding of irregularities flagged by SEBI.
The Court asked whether the MCA had shown similar “magnanimity” in other cases or if IHFL was given special treatment.
The Court directed the ED to clarify its stand on the Central Bureau of Investigation (CBI) affidavit, which had earlier indicated prima facie evidence of money laundering.

Justice Surya Kant remarked that the Court would like to see the original files to understand why the MCA condoned such violations.

Enforcement Directorate’s Stand

Additional Solicitor General S.V. Raju, appearing for the ED, told the Court that “something is seriously wrong in this case.”

The ED has been asked to:

Clarify whether it intends to pursue a money laundering probe against IHFL.
Explain what steps it has taken after the CBI’s affidavit suggested possible laundering.
Provide details of its communication with the Economic Offences Wing (EOW) of the Delhi Police, which had earlier declined to register an FIR.

NGO’s Allegations

The Citizens’ Whistleblowers Forum, represented by advocate Prashant Bhushan, alleged that:

IHFL advanced loans worth hundreds of crores to companies with little or no financial strength.
The company conspired with real estate developers, including the Vatika Group, to defraud flat buyers.
SEBI’s detailed reports on irregularities were ignored by the MCA, which instead compounded over 200 violations.
Promoters of IHFL, including founder Sameer Gehlaut, had allegedly evaded accountability in related cases, including the Yes Bank probe.

Bhushan argued that the case was not isolated but part of a larger pattern of financial misconduct in the housing finance sector.

Defence by Indiabulls

Senior advocates Harish Salve and Abhishek Manu Singhvi, appearing for IHFL, strongly opposed the allegations.

Salve described the PIL as “blackmail litigation” and claimed it was a “cut-paste” version of an earlier petition dismissed by the Delhi High Court.
He argued that all loans advanced by IHFL had been recovered and that multiple agencies had already given the company a clean chit.
Singhvi added that seven different agencies, including the Reserve Bank of India (RBI), had investigated the matter and found no wrongdoing.

The defence maintained that SEBI’s reports were only show-cause notices and not conclusive findings.

The Larger Context: Corporate Governance and Accountability

The case has raised important questions about corporate governance in India:

Role of Regulators: SEBI had flagged irregularities, but the MCA allegedly condoned them. The Court is now examining whether this was an isolated instance or part of a larger pattern.
Money Laundering Concerns: The ED’s statement that “something is seriously wrong” suggests that the matter may not be limited to governance lapses but could involve criminal misconduct.
Judicial Oversight: By demanding original records, the Supreme Court has signalled its intent to closely scrutinize the role of regulators and ministries.

Implications of the Case

For IHFL/Sammaan Capital: The company faces renewed scrutiny, which could impact investor confidence and its reputation in the financial markets.
For Regulators: The MCA’s role in condoning violations is under the scanner, which may lead to stricter oversight in future.
For the Housing Finance Sector: The case highlights systemic risks in loan disbursals and the need for stronger checks against fund diversion.
For Homebuyers: The allegations of fraud in subvention schemes underline the vulnerability of ordinary buyers in complex financial arrangements.

Reactions from Experts

Corporate lawyers have said the case underscores the need for transparency in compounding of offences by the MCA.
Financial analysts believe the outcome could set a precedent for how regulators handle governance violations in large NBFCs.
Public interest groups have welcomed the Court’s intervention, saying it will strengthen accountability in the financial sector.

Next Steps

The Supreme Court has scheduled the matter for further hearing on November 19, when a senior MCA officer must appear with the original files. The ED is also expected to file a detailed affidavit clarifying its position.

The Court’s decision on whether to order a full-fledged investigation could have far-reaching consequences for IHFL, its promoters, and the regulatory framework governing India’s financial sector.

Conclusion

The Supreme Court’s scrutiny of IHFL’s financial transactions marks a critical moment in India’s corporate governance landscape. With the ED flagging “serious issues” and the Court demanding accountability from the MCA, the case could reshape how regulators and companies operate in the housing finance sector.

For now, the spotlight remains firmly on IHFL, the MCA, and the ED, as the nation awaits the next hearing that could determine the future course of this high-stakes legal battle.