In a courtroom drama that gripped the legal fraternity this week, the Supreme Court of India became the stage for a heated exchange between two of the country’s most formidable legal minds, Harish Salve and Prashant Bhushan.
The matter at hand? A Public Interest Litigation (PIL) filed by the Citizens Whistle Blower Forum, seeking a probe into alleged financial misconduct by Indiabulls Housing Finance Ltd., now rebranded as Sammaan Capital Ltd.
The Allegations: A ₹1,000 Crore Loan to a ₹1 Lakh Company
The PIL, spearheaded by Bhushan, alleges that Indiabulls extended massive loans to shell companies with negligible net worth. One such entity, reportedly worth just ₹1 lakh, received a staggering ₹1,000 crore loan.
The money was clearly traced back to the entities, having a clear link with the promoters. That inadvertently aroused critical concerns regarding round-tripping, infidelity in financial exchanges, and violations of the Companies Act of 2013.
Important affidavits issued by the SEBI and the Corporate Affairs ministry were also upheld during the petition. It finally showcased more than 200 violations taking place in less than 24 hours. The worst part was that many of those violations involved transactions with undisclosed parties.
The Courtroom Clash: Salve vs. Bhushan
Appearing via video from London, Salve dismissed the PIL as “blackmail litigation,” prompting Bhushan to retort that Salve had the “audacity” to make such claims “while sitting in London.” Salve responded, “One can read an affidavit written in simple English sitting in any city.”
The exchange, though laced with sarcasm, underscored a deeper ideological divide—between corporate legal defence and activist litigation.
Judicial Response: A Call for Transparency
The Supreme Court bench, comprising Justices Surya Kant, Ujjal Bhuyan, and N Kotiswar Singh, has taken a proactive stance:
· Directed the MCA to produce original records of the compounding process.
· Asked the Enforcement Directorate (ED) to clarify its position on money laundering charges.
· Criticised the CBI for failing to appear despite being served notice.
Legal Framework: Case Law and Statutory Provisions
The legal framework needs serious introspection in lieu of the seriousness surrounding this recent case under review. The existing provisions need to be revisited:
Corporate Fraud
Under Section 447 of the Companies Act, 2013, fraud includes any act of deception intended to gain undue advantage. The PMLA, 2002, requires a predicate offence for money laundering charges to be invoked.
Relevant Case Law:
· SEBI v. Sahara India Real Estate Corp. Ltd. (2012): The Supreme Court upheld SEBI’s authority over financial instruments disguised as private placements, ordering Sahara to refund ₹24,000 crore with interest.
· SFIO v. Aditya Sarda (2025): Affirmed SFIO’s powers under Sections 212 and 217 of the Companies Act to investigate serious financial irregularities.
Defamation and Corporate Reputation
Explanation 2 to Section 499 IPC allows defamation claims against companies.
Key Judgments:
· S. Khushboo v. Kanniammal (2010): Clarified that companies can be “persons aggrieved” under defamation law.
· Subramanian Swamy v. Union of India (2016): Emphasised the magistrate’s role in scrutinising defamation complaints.
Corporate Fraud in India: The Numbers Speak
According to PwC’s Global Economic Crime Survey 2024, 59% of Indian firms reported financial fraud in the past two years—18% higher than the global average.
· Procurement fraud emerged as the top concern for 50% of Indian businesses.
· Corruption and bribery accounted for 33% of economic crimes.
· Barely 37% companies monitor their fluid payments in real time, which allows them to filter the suspicious transactions.
These stats clearly show that there is major delinquency in corporate governance, especially regarding how money flows in the sector.
Case Study: Indiabulls and the Shell Entity Network
The PIL outlines a complex web of transactions involving shell companies, unsecured loans, and alleged fund diversion. Bhushan claims that ₹400 crore was disbursed to entities with no real assets or business operations.
The ED’s status report corroborates several of these claims, suggesting that a deeper investigation is warranted.
Conclusion: A Defining Moment for Corporate Accountability
The tussle between Salve and Bhushan reached a dramatic point, with many underlying theatrical issues coming to a peak confrontation.
According to corporate lawyers in India, this case marked a new definition of public interest litigation and calls for the refinement of corporate transparency and judicial oversight of corporate affairs.
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