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Supreme Court Rejects Plea for Public Disclosure of Fund Beneficiaries, Citing Lack of Legal Framework
Reported by Tanvi Pillai (Section Editor) · The New Indian Express ·
Confirmed by a second source: The Hindu
Photo: Wikimedia CommonsThe Supreme Court on Thursday disposed of a public interest petition filed by Member of Parliament Mahua Moitra that sought public disclosure of the ultimate beneficial owners and portfolio holdings of alternative investment funds and foreign portfolio investors.
Court Rulings and Arguments
A three-judge bench of Justices B.V. Nagarathna, R. Mahadevan, and D.K. Upadhyaya stated the court could not issue a mandamus directing the Securities and Exchange Board of India to enforce full public disclosure without an existing legal framework of regulations. The bench noted that it was ultimately for the Union government and the market regulator to put such a framework in place, asking them to consider bringing out suitable transparency rules. The court also questioned why an MP chose to file a petition under Article 32 instead of raising the issue and seeking a discussion on the floor of Parliament. Advocates Prashant Bhushan and Cheryl D'Souza, representing the petitioner, argued that rapid fund expansion created serious transparency concerns. The petition stated that alternative investment funds and foreign portfolio investors operated under opaque structures compared to mutual funds, raising risks of market manipulation, money laundering, and tax evasion. Mr. Bhushan submitted that innocent investors were being manipulated by entities driving up share prices, and noted that alternative investment funds registered with the market regulator surged from 42 in 2013 to 1,528 in 2025, with assets under management rising from 1,437 crore rupees to nearly 13 lakh crore rupees by late 2024. Furthermore, registered foreign portfolio investors held assets under custody of over 74 lakh crore rupees in 2025, while mutual fund assets stood at around 68 lakh crore rupees in the same year.
Context
The Securities and Exchange Board of India regulates the country's securities markets and oversees investment funds, while mutual funds are bound by strict public disclosure regulations established in the late 1990s. Courts generally require specific statutory backing before compelling regulators to enforce sweeping disclosure mandates on financial market participants.
ExplainerWhy this matters
What Happened
The Supreme Court dismissed a petition seeking mandatory public disclosure of the beneficial owners and portfolios of Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs), ruling that courts cannot issue binding transparency orders to regulators without a specific legal framework passed by the legislature.
Why It Matters
This case highlights a major regulatory gap in India's financial markets. While traditional mutual funds face strict public disclosure rules, AIFs and FPIs manage massive sums of money—surpassing mutual fund assets in scale—while operating with fewer transparency requirements. Critics and petitioners argue this opacity creates blind spots that can facilitate market manipulation, money laundering, and hidden price inflation.
What Happens Next
The responsibility now shifts back to the Union government and the Securities and Exchange Board of India. Because the court explicitly asked them to consider the need for new rules, market observers will watch whether the government introduces formal legislative changes or if the regulator drafts new transparency norms for these investment channels.
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