SC seeks govt, SEBI and RBI response on the plea to seize P-notes

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SME Times News Bureau | 02 Jul, 2016
The Supreme Court on Friday asked the central government, market regulator SEBI and apex bank RBI to file their response to a plea for seizing Participatory Notes (P-notes) and the profits accrued on them as they were "camouflaged black money".

Participatory notes are financial instruments, which can be used by individual foreign investors or hedge funds to invest in Indian markets without disclosing their identity.

A bench of Justice Dipak Misra and Justice C. Nagappan also sought response from the Central Bureau of Investigation (CBI) on the plea to direct the investigating agency to seize the entire records of the P-notes, mostly used by overseas individual investors, hedge funds and foreign institutions, to allow investments in Indian markets through registered foreign institutional investors (FIIs), under their control.

The bench sought response from the central government, the market regulator, the apex bank, and the CBI on an application by PIL petitioner, advocate M.L.Sharma, who has also sought direction to the SEBI not to release/transfer P-notes amount without the nod from the court.

At the outset of the hearing, senior counsel Arvind Datar appearing for the market regulator said that after the release of Panama Papers, Sharma has levelled wild allegation without any substance.

However, it was contested by Sharma who said that whatever he has said is backed by evidence. He said that SEBI had itself admitted that about Rs. 2.5 lakh crore of black money was in circulation through P-notes.

Describing the SEBI estimates as an understatement, Sharma said that in fact more than Rs. 25 lakh crores were in circulation across the country.

Asking the respondents to file their response - the bench said that application would be taken up for hearing along with the main petition on July 25.

The top court had on May 9, 2016, issued notice to the CBI on Sharma's PIL seeking probe against the people named in the Panama Papers. Sharma, had also sought an investigation against the SEBI head, his associates and others for what he said was the market regulator's failure to act on the curbing of circulation of black money allegedly through P-notes.

Seeking probe against the SEBI chairman, his associates, share-holders and share brokers and the certain companies under the Prevention of Corruption Act 1988, Prevention of Money Laundering Act, 2002 and SEBI regulations, Sharma had earlier in his PIL told the top court that even though market regulator was aware of the circulation of P-notes and that of the off-shore accounts of some companies way back in 2007, yet it did not move into the matter.