Supreme Court Turns Down Plea to Force Open Disclosure for Foreign and Alternate Funds

The Supreme Court on Thursday decided against ordering market authorities to make the ultimate owners of Alternative Investment Funds and Foreign Portfolio Investors openly known to the public without proper rules in place.

Court and Regulator Stance

Led by Justice B.V. Nagarathna, a three-judge Bench stated that the Union government and the Securities and Exchange Board of India must first build a regulatory structure before any judicial command for full public disclosure can be issued. The bench urged the central government and the market regulator to check if new openness rules are needed. Justice D.K. Upadhyay noted that the regulator holds specific powers and must adapt as the national and global economy shifts. Solicitor General Tushar Mehta told the court that investment details are shared with the regulator and investigated when necessary, pointing to a January 2024 judgment in the Adani-Hindenberg case that limits judicial review over the regulator's work.

Petitioner Arguments

The bench reviewed a writ petition brought by Member of Parliament Mahua Moitra, with lawyers Prashant Bhushan and Cheryl D'Souza representing her. The petition stated that rapid growth in these funds creates serious worries about market secrecy, potentially hiding risks like tax evasion, money laundering, and market rigging. Ms. Moitra pointed out that registered Alternative Investment Funds grew thirty times from 42 in the year 2013 to 1,528 by 2025, while their average assets climbed 835 times from ₹1,437 crore to nearly ₹13 lakh crore by the close of 2024. Lawyer Prashant Bhushan added that registered foreign funds held over ₹74 lakh crore in assets under custody in 2025, which dwarfs the roughly ₹68 lakh crore held by standard mutual funds that face tough public disclosure duties.

Court Queries on Parliament Role

During the hearing, Justice Nagarathna questioned why an elected lawmaker chose to file a public interest petition under Article 32 instead of bringing up the topic on the floor of Parliament. Mr. Bhushan defended the move by highlighting the welfare of millions of regular investors and noting that meaningful debates rarely happen in the legislature lately, while also mentioning Ms. Moitra's background as a former investment banker and market investor. The judge reminded counsel that the court holds the power to choose which writ petitions to hear, noting past entertainment of the petitioner's challenge against the release of convicts in the Bilkis Bano case, while still questioning the public nature of the current filing.

Context

Alternative Investment Funds and Foreign Portfolio Investors are pooled investment vehicles that allow high-net-worth individuals and institutional players to park money in Indian markets outside standard retail mutual fund routes. Because these structures deal with large sums of capital with fewer public transparency mandates than regular mutual funds, regulators and lawmakers often debate how much ownership detail should be made visible to everyday citizens.