The Supreme Court on Thursday declined to direct the Securities and Exchange Board of India to enforce mandatory public disclosure of the ultimate beneficial owners of Alternative Investment Funds and Foreign Portfolio Investors. A three-judge bench headed by Justice B.V. Nagarathna observed that it would not be legally sound to mandate such comprehensive disclosures through a judicial decree in the absence of a governing regulatory framework. Instead, the court asked the Union government and the capital markets regulator to examine the necessity of introducing suitable rules to enhance transparency. During the hearing, Justice D.K. Upadhyay emphasized that SEBI remains a statutory body endowed with specific legislative powers, pointing out that domestic and global economic conditions continue to evolve and require regulatory instruments to adapt accordingly.
Mahua Moitra’s Petition Flags Market Risks
The proceedings arose from a public interest litigation filed by Trinamool Congress Member of Parliament Mahua Moitra, who was represented by senior advocate Prashant Bhushan and advocate Cheryl D’Souza. The petition sought extensive public disclosures regarding the identities of ultimate beneficial owners behind AIFs and FPIs, which have registered massive growth across Indian capital markets. The petitioner argued that unlike mutual funds, which are bound by strict public disclosure mandates, AIFs and FPIs operate under opaque structures that heighten risks related to market manipulation, money laundering, and tax evasion. The petition asserted that protecting ordinary investors and safeguarding public interest requires absolute clarity regarding individuals who control and profit from these massive pools of capital.
To illustrate the sheer scale of the issue, the petition cited regulatory data showing that the number of SEBI-registered AIFs surged from 42 in 2013 to 1,528 in 2025, with their assets under management expanding from ₹1,437 crore to nearly ₹13 lakh crore by late 2024. Furthermore, the assets under custody of registered FPIs exceeded ₹74 lakh crore in 2025, surpassing the domestic mutual fund industry, which managed around ₹68 lakh crore in the same period. Moitra contended that this vast disparity in regulatory openness between mutual funds and foreign investment vehicles creates an uneven regulatory landscape that leaves the wider financial market vulnerable.
Bench Questions Need for Article 32 Petition
During the hearing, Justice Nagarathna questioned why Moitra chose to file a writ petition under Article 32 of the Constitution before the apex court instead of raising the subject on the floor of Parliament. The bench noted that as an elected lawmaker, she could have initiated discussions in the House. Bhushan responded that the petition was aimed at protecting millions of market investors, arguing that establishing a precedent that bars MPs from approaching the court in the public interest would be dangerous. He pointed out that meaningful parliamentary debates had been lacking in recent times, adding that Moitra’s background as a former investment banker and active investor gave her insight into the matter.
Justice Nagarathna countered by questioning whether personal professional experience alone could establish the bona fide public interest character of the litigation, while observing that entertaining Article 32 petitions remains within the discretionary power of the court. The judge recalled that the top court had previously entertained Moitra’s challenge against the premature release of convicts in the Bilkis Bano case, noting that each matter must be assessed on its individual merits.
SEBI Defends Oversight and Internal Disclosures
Appearing for the market regulator, Solicitor General Tushar Mehta submitted that AIFs and FPIs are already required to make regular, comprehensive investment-related disclosures directly to SEBI. He explained that regulatory oversight is actively maintained and detailed probes are launched whenever anomalies emerge. Mehta cited the Supreme Court’s January 2024 verdict in the Adani-Hindenburg case, Vishal Tiwari versus Union of India, highlighting that judicial intervention within SEBI’s technical and economic domain remains strictly circumscribed.
The hearing centered on distinguishing between data submitted internally to the regulator and information made accessible to the general public. While the petitioner insisted that retail investors require public access to beneficial ownership data to make informed choices, SEBI maintained that its internal supervisory systems are robust and sufficient. In disposing of the plea without coercive directives, the Supreme Court placed the decision on the Centre and SEBI, leaving it to policymakers to decide whether to frame formal statutory rules governing public beneficial disclosures.
