SEBI relies on revised rules in Embassy REIT 'Fit and Proper' matter, says Bombay HC, no disqualification made

The Securities and Exchange Board of India (SEBI) has told the Bombay High Court that its scrutiny of complaints relating to the “fitness and propriety” of persons associated with Embassy Office Parks REIT has been completed after the regulatory framework was amended in April 2026 and that the material available does not warrant disqualification under the amended provisions.

However, SEBI’s affidavit does not specifically record whether Jitendra Virwani and Karan Virwani were deemed disqualified under the earlier regulatory framework between 17 November 2021, when the rules-based ‘fit and proper’ criteria came into force, and 16 April 2026, when the relevant provisions were amended, despite the affidavit covering them during that period.

The affidavit was filed in two joint petitions by Chayan Upadhyay and Shashank Garg after the Bombay High Court directed SEBI to record its decision on the statements made by the petitioners.

SEBI stated that its examination was completed following the amendment of Schedule II of the SEBI (Intermediaries) Regulations, 2008, dated 16 April 2026. This amendment omitted clauses 3(b)(i) and 3(b)(ii), the clauses relied upon by the petitioners in raising their objections.

The petitions relate to allegations relating to the “fit and proper” status of the sponsor, its directors and certain disclosure issues relating to the REIT’s embassy. SEBI said the amended framework does not consider mere pendency of an indictment or complaint for prosecution to be an automatic reason for holding a person “unfit and proper”.

Regulatory measures

The regulator insisted that the amendment was a general regulatory measure and was not introduced specifically in relation to Embassy REIT or its sponsor. The changes, according to SEBI, followed public consultation and regulatory deliberations, during which 63 comments were received, of which 45 agreed with the proposal.

SEBI said it investigated the complaints with reference to the regulatory framework in place at the time the review was completed. It also denied that the 2026 amendment was “an occasion for or tailored to” the Embassy REIT matter.

The affidavit states that SEBI sought details of the prosecution from the Executive Directorate through an email dated September 30, 2025. The ED provided the relevant material on February 16, 2026, including its prosecution complaint regarding proceedings under the Prevention of Money Laundering Act.

After examining the material, SEBI said that reliance on the CBI charge sheet dated November 21, 2014, the ED prosecution complaint and the Economic Offenses Department charge sheet dated November 7, 2024 alone cannot prove lack of integrity. She stated that none of the proceedings resulted in a conviction.

However, SEBI admitted that there was an error in the publication of the record sheet of the EOW. It said that although the existence of the allegations was disclosed in Embassy REIT’s financial statements, the disclosure did not specifically mention Jitendra Virwani and Karan Virwani. According to SEBI, the Manager subsequently issued a corrective notice naming them after the regulator raised the issue.

SEBI said it subsequently issued advisory letters to the directors and trustees of Embassy REIT on July 29, 2026. The letters required compliance with the relevant disclosure obligations while reserving to SEBI the right to take further action in accordance with law in case of any repeat or other violation.

On the other disclosure allegations, SEBI said its investigation found that the Embassy REIT had regularly disclosed that Jitendra Virwani and Karan Virwani had been named as respondents in the ED proceedings. She said no further action was warranted in the matter.

SEBI also opposed the petitioners’ demand for disclosure of its internal regulatory records, including notes, correspondence, reports and meetings. The regulator insisted that complainants or whistleblowers do not gain the right to view such internal materials.

The Bombay High Court had earlier directed SEBI and other respondents to file their replies by August 27, 2026, after which the petitions were to be heard along with the petitioners’ rejoinders.

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