Supreme Court notice to Centre, RBI and CBI on plea on Participatory-notes

NEW DELHI: Supreme Court today sought responses from the Centre, RBI, market regulator SEBI and CBI on a plea seeking a direction that the offshore portfolio investors, who invest in the Indian stock market through participatory-notes, should not be allowed to withdraw the money till further orders. A bench of Justices Dipak Misra and C Nagappan issued the notice on the interim application, which was

filed by advocate M L Sharma in his pending PIL seeking CBI probe against Indian offshore bank account holders named in the Panama papers.

P-notes are derivative instruments issued by registered foreign portfolio investors to overseas investors to enable them trade in 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," he said.

Besides seeking an ex-parte stay on release or transfer of P-note amounts till further orders, the plea has sought a direction to the Finance Ministry and others including the CBI to "seize entire black money/participatory 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," the plea said.

The plea has also referred to a SIT report on blackmoney and said that Foreign Institutional Investors invest through P-notes since 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.

"That, in fact, more than Rs 25 lakh crores values 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.