SC Pulls Up SEBI for Lethargy Shown in Investigating Listing Norm Violations of Alps Motor Finance

Moneylife Digital Team 07 February 2024

Investor Interest

Criticising market regulator Securities and Exchange Board of India (SEBI) for its sluggish approach in handling a case, the Supreme Court rapped SEBI for taking 10 years to conclude an investigation into a case involving alleged violation of listing norms and unfair trade practice. Last year also, the apex court had pulled up SEBI for issuing a show-cause notice (SCN) after a 10-year probe in the Alps Motor Finance Ltd (AMFL) case.

A bench comprising justice Sanjiv Khanna and justice Dipankar Datta, asked critical questions to SEBI's counsel, highlighting concerns over the market regulator's efficacy and the global perception of its regulatory standards. "Does it take ten years for India's premier regulator to conclude an investigation? Is it an effective and good regulation practice? Is that the standard you want the world to know of the regulator that you are?"

This rebuke came to light during proceedings related to SEBI's investigation into AMFL which was accused of misusing funds raised through preferential allotment back in August 2013. In 2016, BSE identified potential violations by AMFL. However, SEBI started an investigation only in 2018 and issued a SCN only in 2023.

"It takes 18 months for you to start an investigation, which takes another 50 months to complete. This is wrong. Your officers must be taken to task. This was done to help them (AMFL). Explain the delay…Why did you take around two years to start the investigation after BSE flagged it? And what did you do between 2018 and 2022? You issued a show-cause notice in 2023. Is this what is expected from a good regulator? We can't keep on accepting your lethargy," the SC says.

In October last year, the SC bench of justice Khanna and justice Bela M Trivedi, while criticising SEBI for issuing a SCN to AMFL 10 years after conducting an investigation, had directed to hold an inquiry into the delay and submit a report. (Read: SC Pulls Up SEBI for Issuing a Show-cause Notice after 10-year Probe in AMFL Case)

The case is related to Rs7.01 crore raised through preferential allotment by AMFL and loans provided to six entities from the proceeds.

In 2013, SEBI investigated six preferential allotments made by Alps Motor Finance for possible misutilisation of proceeds. The investigation revealed that Chander Bhusan and Dream Procon Pvt Ltd were allotted Rs1 crore and Rs4 crore, respectively, without interest in opening a showroom and vehicle finance. Pioneer Buildstates Pvt Ltd was given a loan of Rs36 lakh without interest to improve its business relationship. Bulwark Partner (Rs1.5 crore), MLAP Commodities (Rs18 lakh) and Nanda Parbat Finlease Ltd (Rs46 lakh) were given the loan with an interest of 10%pa (per annum). However, only Pioneer Buildstates and Bulwark Partner repaid the loan.

In January 2023, SEBI issued a SCN to AMFL. Later in May, it imposed a fine of Rs41 lakh on AMFL and Brij Bhushan Sabharwal, the company's former whole-time director and Himanshu Agarwal, former non-executive and non-independent director, for mis-utilising funds collected from the preferential allotment.

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