Supreme Court orders CBI probe into Indiabulls promoters

The Supreme Court has directed the Central Bureau of Investigation (CBI) to probe allegations of financial irregularity against the promoters of Indiabulls Housing Finance Limited, now rebranded as Sammaan Capital, despite a report by the Delhi Police’s Economic Offences Wing (EOW) that substantially exonerated the company on five of six counts. The order, passed by a Bench led by Chief Justice of India Surya Kant, signals a shift in the investigative setting for the real estate and finance conglomerate, pushing the probe away from the state police agency.

Divided Responsibilities for the Agencies

The Bench ruled that the CBI must investigate the allegations regardless of the EOW’s findings on five matters. The Court instructed the EOW to complete its investigation on the remaining sixth allegation and file a status report. On the specific issue of the sixth allegation—allegedly involving ₹1,575 crore—the Court directed the trial court to decide a pending CBI application for further investigation within two weeks. This division ensures that the premier federal agency handles the bulk of the inquiry while the state agency finishes its specific task.

Arguments presented during the hearing highlighted a jurisdictional dispute. Additional Solicitor General S.V. Raju, representing the CBI and EOW, stated that the EOW was already investigating five allegations and the CBI had not touched the same set because two agencies cannot investigate identical matters. For the petitioner, Advocate Prashant Bhushan argued that the EOW was not competent to handle the probe, pointing to an RBI circular that mandates CBI investigation for bank frauds above ₹50 crore. He contended that the EOW’s exoneration relied on the company’s own chartered accountant and the claim that loans had been returned, which he said “does not absolve the company.”

Senior Advocate Narender Hooda countered that no “bank fraud” existed, noting that no bank had appeared before the Court to claim the money was not repaid. The Bench made two notable observations during the exchange. Justice Joymalya Bagchi noted that the EOW’s exonerating report was founded on the company’s own auditor’s account. He also observed that the evergreening of loans—the practice of extending fresh credit to enable the repayment of existing debt so that a loan does not show as in default—is not, by itself, a crime.

Investigation Mandate Without Presumption of Guilt

The Court’s order resolves a jurisdictional tangle in favor of a CBI-led probe, while keeping the EOW’s remaining work and the trial court’s decision on track. Nothing has been established against the company or its promoters, and the directions are confined to how, and by which agency, the allegations are to be investigated.

This case follows a long history of oversight. The proceedings arise from a public interest litigation by the Citizens Whistle Blower Forum alleging serious financial misconduct by the company’s erstwhile promoters, including the round-tripping of funds and violations of the Companies Act. The PIL has run alongside investigations by multiple agencies, including the Enforcement Directorate, whose prosecution complaint identified the six allegations now at the center of the dispute.

In previous stages of the litigation, the Court had sharply criticized both the EOW and the CBI for failing to apprise it of the progress of their investigations. The current direction forces the agencies back into a cooperative, albeit competitive, investigative mode. The outcome of this CBI-led inquiry will likely determine whether the ₹1,575 crore allegation results in formal charges or is dismissed as a routine financial restructuring.