The Supreme Court Today (Aug 18) witnessed dramatic arguments over Smartworks IPO when an NGO produced a disputed letter. The Bench warned that if the letter was fake, prosecution would follow.
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NEW DELHI: The Supreme Court on Monday saw high drama during the hearing of an appeal filed by the New Delhi-based NGO against the Securities Appellate Tribunal’s (SAT) refusal to stop the Initial Public Offering (IPO) of Smartworks Coworking Spaces Limited.
Appearing for the NGO, Senior Advocate Narender Hooda showed what he claimed to be a letter from the Ministry of Corporate Affairs (MCA) to SEBI. According to him, the letter suggested that there were ongoing investigations against the Sarda family, promoters of Smartworks.
However, Senior Advocate Gopal Subramanium, representing the respondents, strongly denied this claim. He told the Court that an RTI query to the MCA revealed that no such letter was ever sent to SEBI. He further alleged that the NGO was misleading the Court with false and fabricated documents.
A Bench of Justices PS Narasimha and AS Chandurkar reacted very sternly, stating:
“You cannot get away with simply apologising to the Court. We will examine the document, and if it is found to be false, prosecution may follow.”
The Supreme Court also asked SEBI to confirm whether it had fully complied with all statutory rules before approving the IPO of Smartworks.
Infrastructure Watchdog is an NGO registered under the Societies Registration Act, 1860. It describes itself as a public interest group that keeps an eye on regulatory and corporate governance issues in India.
Smartworks was officially listed on July 17 and made its debut with a 7% premium on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The case originally began before SAT after Infrastructure Watchdog filed a plea asking SEBI to investigate alleged non-disclosures in Smartworks’ draft prospectus and to stop the company from going ahead with its IPO.
On July 16, SAT dismissed the NGO’s appeal.
The Tribunal gave several reasons for its decision:
- It noted that Smartworks’ red herring prospectus (RHP) and later addenda had already disclosed details of the complaints filed by Infrastructure Watchdog on January 12, March 29, and May 21, 2025, along with the company’s responses.
- Regarding income-tax reports relied on by the NGO, the Tribunal said these were “indicative in nature and not exhaustive” and had not led to any statutory notices or tax demands.
- The Tribunal also pointed to investor behaviour, observing that when the IPO opened, subscription was just 0.83% on Day 1. But after the July 11 addendum, which disclosed the NGO’s complaints, subscription jumped dramatically and finally closed at 13.45 times overall, including 24.4 times in the Qualified Institutional Buyers’ (QIB) category. As SAT noted: “It would be incongruous to assume that QIB investors and High Net Worth investors would have invested without proper analysis.”
- On the question of whether the NGO had the legal standing to file such a case, SEBI had argued that Infrastructure Watchdog was not a “person aggrieved” under Section 15T of the SEBI Act. SAT left this issue open but decided the matter on merits, citing “in the peculiar facts.”
The Tribunal was also informed that Infrastructure Watchdog might have been acting at the behest of estranged members of the Sarda family.
This was indicated by its possession of a withdrawn Punjab National Bank show-cause notice, which had been addressed to companies linked with the family.
CASE TITLE:
Infrastructure Watchdog vs Securities and Exchange Board of India (SEBI)
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