SC Declines Order for Full Public Disclosure of AIF and FPI Owners Without Legal Rules

On October 29, 2026, the Supreme Court of India declined to instruct the Securities and Exchange Board of India (SEBI) to enforce complete public disclosure of the ultimate beneficial owners (UBOs) behind Alternative Investment Funds (AIFs) and Foreign Portfolio Investors (FPIs) operating in the Indian securities market. The court emphasized that such a directive requires a proper legal framework before it can be implemented.

A three-judge bench led by Justice BV Nagarathna made it clear that it was the prerogative of the Union government and SEBI to establish the necessary regulatory structure. Only once such a framework is in place could the court consider issuing a mandate for full transparency regarding the individuals or entities profiting from these investment vehicles.

During the hearing, the bench urged the government and SEBI to contemplate the introduction of suitable transparency rules. Justice DK Upadhyay commented on the evolving nature of the domestic and global markets, noting that SEBI, as the regulator, has been empowered to respond accordingly.

Background and Petition Details

The matter arose from a writ petition filed by Member of Parliament Mahua Moitra, who was represented by senior advocates Prashant Bhushan and Chery D’souza. The petition highlighted growing concerns about the opacity surrounding AIFs and FPIs, especially when contrasted against the stringent disclosure requirements imposed on mutual funds.

Unlike mutual funds, which have clear public disclosure norms under SEBI's Mutual Fund Regulations of 1996 and the Collective Investment Scheme Regulations of 1999, AIFs and FPIs operate with limited transparency. This lack of visibility raises issues related to potential market manipulation, money laundering, and tax evasion.

Moitra's petition pointed out that the number of AIFs registered with SEBI surged from 42 in 2013 to 1,528 in 2025, marking a more than 30-fold increase. Their average Assets Under Management (AUM) also grew dramatically, from ₹1,437 crore in 2013 to nearly ₹13 lakh crore by the conclusion of 2024. Meanwhile, the Asset Under Custody (AUC) for FPIs stood at over ₹74 lakh crore in 2025, surpassing the total mutual fund AUM in India, which was approximately ₹68 lakh crore the same year.

Judicial Deliberations and Arguments

Justice Nagarathna questioned why an elected Member of Parliament chose to file a public interest litigation under Article 32 of the Constitution instead of raising the issue through parliamentary debate. Advocate Bhushan responded that Moitra was motivated by concern for millions of investors and that there has been limited discussion on this matter within the legislature recently. He stressed that denying MPs the right to approach the Supreme Court under Article 32 for public interest issues would set a dangerous precedent.

The judge challenged whether a petition filed by an MP could be considered purely public interest if the petitioner has personal expertise or investment experience. Bhushan countered that Moitra’s background as a former investment banker and investor herself lends credibility to her concerns.

Justice Nagarathna acknowledged the court's discretionary power to entertain such petitions and noted past instances, such as Moitra's petition related to the premature release of convicts in the Bilkis Bano case, where the court had allowed intervention.

SEBI’s Position and Regulatory Context

Solicitor General Tushar Mehta, representing SEBI, explained that disclosures by AIFs and FPIs are indeed made to the regulator, and detailed inquiries are conducted when necessary. He referenced the Supreme Court’s January 2024 ruling in the Adani-Hindenburg short-selling case (Vishal Tiwari versus Union of India), which clarified that judicial review of SEBI’s regulatory decisions must remain limited.

The SEBI’s role as a market watchdog includes balancing investor protection with market development. The regulator’s existing powers allow it to monitor and investigate suspicious activities, though comprehensive public disclosure of UBOs currently lacks a statutory basis.

Why This Matters

The rapid growth of AIFs and FPIs in India reflects a broader global trend of increasing private and foreign investment flows into emerging markets. Transparency around beneficial ownership is critical for maintaining market integrity, preventing illicit financial activities, and enhancing investor confidence.

Calls for greater openness stem from the desire to align these investment structures with the regulatory standards that govern mutual funds, which are more extensively scrutinized. The Supreme Court's decision signals a preference for legislative and regulatory bodies to take the lead in framing detailed disclosure norms rather than the judiciary imposing such mandates unilaterally.

As India’s securities market continues to evolve, establishing clear rules on ownership transparency will play a key role in ensuring fair and efficient market operations. The government and SEBI are now expected to consider these issues seriously and possibly introduce reforms that balance growth with accountability.