The Supreme Court on Friday asked the Centre, the RBI, market regulator Sebi and CBI to respond on a plea that the offshore portfolio investors, who invest in the Indian stock market through participatory notes (P-Notes, should not be allowed to withdraw the money till further orders.
A bench of Justices Dipak Misra and C Nagappan issued notices on an interim application, moved by advocate ML Sharma in his pending PIL that has sought a CBI probe against Indian offshore bank account holders named in the Panama papers.
The bench had in May agreed to examine a plea for ordering a CBI investigation against Indian offshore bank account holders named in the Panama Papers, published by The Indian Express after an eight-month investigation in collaboration with the International Consortium of Investigative Journalists.
P-Notes are derivative instruments issued by registered foreign portfolio investors to overseas investors to enable them to trade in the stock market here without getting registered with Sebi. Sharma has referred to a recent proposal of Sebi which increases disclosure requirements for issuance of P-Notes and said this would lead to siphoning of monies by investors. The new rules enable the regulator to check the complete transfer trail of P-Notes money on a monthly basis.
“25 lakh crore rupees black money which is floating in the stock market would be siphoned off. FIIs are Indian investors who have invested through P-Notes … issue direction to CBI to seize entire records of participatory notes under their (Sebi and RBI etc) control and to file their report before this court for further action and direction/prosecution,” said his plea.
Sharma’s application has also referred to a SIT report on black money and said that foreign institutional investors invest through P-Notes as they allow them to earn returns on investment in the Indian market without undergoing the significant cost and time implications of directly investing in the India.
“In fact, more than Rs 25 lakh crore of P-Notes are in circulation in India in stock/ financial market. It is blackmoney and come under Money Laundering Act. But due to illegal protection by the Sebi, these are running and Sebi did no action till date,” it said. The Panama Papers leaks contain an unprecedented amount of information, including more than 11 million documents covering 2,10,000 companies in 21 offshore jurisdictions. Each transaction spanned different jurisdictions and may involve multiple entities and individuals.
The plea sought direction to CBI to lodge FIR and conduct investigation against the Sebi chairman, his associates, share brokers etc. for alleged offences, including under Prevention of Corruption Act and Prevention of Money Laundering Act. The petition has alleged that Panama Papers include the names of nearly 500 Indians, including celebrities and industrialists, who have allegedly parked funds in offshore accounts.