The Supreme Court of India has mandated the Central Bureau of Investigation (CBI) to scrutinize all six allegations presented by the Enforcement Directorate (ED) concerning Indiabulls Housing Finance and associated entities. The directive was issued by a bench comprising Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and V Mohana.
According to the court’s observations, five of the six allegations listed in the ED’s complaint had previously been examined by the Economic Offences Wing (EOW) of the Delhi Police. The EOW had concluded that further investigation was unnecessary. However, the CBI sought to delve deeper into the sixth allegation.
The Supreme Court has instructed the special judge in Mumbai to address the CBI’s request for further investigation within two weeks from August 24. Following this, the CBI is expected to submit a progress report to the Supreme Court.
In addition to this, the Court has directed the CBI to independently investigate the five allegations that had been reviewed by the EOW, irrespective of their findings. The Court emphasized the need for a comprehensive report on these allegations.
The judicial directions were given in response to a petition by the Citizen Whistle Blower Forum. The petition referenced findings by the ED, which alleged dubious loan transactions, fund diversions, share price manipulations, and loan evergreening involving Indiabulls-linked entities. Advocate Prashant Bhushan, representing the petitioner, highlighted an RBI circular requiring CBI involvement in bank fraud cases exceeding ₹50 crore. He contended that the ED’s allegations revealed potential fraud, criminal conspiracy, fund diversion, and loan evergreening.
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One significant allegation involved loans amounting to nearly ₹1,693 crore given to Americorp Group entities, which were purportedly funneled back into Indiabulls shares, thereby manipulating share prices for profit. Bhushan also brought attention to the ED’s findings on alleged fund diversions and suspicious dealings linked to the Palais Royale project.
Justice Bagchi acknowledged that the EOW’s examination did not uncover any irregularities. Nonetheless, Bhushan insisted that a competent agency should independently assess all the allegations. Counsel for Indiabulls Housing Finance argued that since the loans were repaid, no bank fraud occurred, and no bank reported any default or financial loss. Furthermore, they argued that while evergreening—using new loans to repay existing ones—may not inherently be criminal, it was not considered fraudulent in this context.
Justice Bagchi, however, referred to the ED’s affidavit, expressing concern about the reclassification of what constitutes evergreening. CJI Kant queried the CBI on why further investigation required permission. CBI’s counsel clarified that the sixth allegation, involving around ₹1,574 crore, was part of an existing chargesheet and thus needed court approval for further probing.
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Bhushan reiterated that EOW was not adequately equipped to investigate such bank fraud allegations, and advocated for a thorough examination by a leading agency. CJI Kant also noted the CBI’s status report, which mentioned coordination with EOW, SEBI, and RBI. The Court mandated independent CBI investigations into the five previously reviewed allegations and requested a detailed report.
The case will be revisited once the CBI submits its progress report and the Mumbai special judge rules on the further investigation application concerning the ₹1,574-crore allegation.
