SEBI tells Bombay HC its probe into Embassy REIT was post-rule change

SEBI told the Bombay HC its review of the “fit and proper” status of Embassy REIT associates was based on amended rules from April 2026, which did not warrant disqualification despite pending criminal proceedings against persons involved.

The Securities and Exchange Board of India (SEBI) has told the Bombay High Court that its examination of complaints concerning the “fit and proper” status of persons associated with Embassy Office Parks REIT was completed after the regulatory framework was amended in April 2026, and that the material available did not warrant disqualification under the amended provisions.

However, SEBI’s affidavit does not specifically record whether Jitendra Virwani and Karan Virwani were considered disqualified under the earlier regulatory framework between November 17, 2021, when the rule-based “fit and proper” criteria came into force, and April 16, 2026, when the relevant provisions were amended, despite the affidavit referring to criminal proceedings involving them during this period.

SEBI Explains Regulatory Amendment

The affidavit was filed in two connected petitions by Chayan Upadhyay and Shashank Garg, after the Bombay High Court had directed SEBI to place on record its decision on representations made by the petitioners. SEBI said its examination was completed after the April 16, 2026 amendment to Schedule II of the SEBI (Intermediaries) Regulations, 2008. The amendment omitted clauses 3(b)(i) and 3(b)(ii), provisions which had been relied upon by the petitioners in raising their objections.

The petitions concern allegations relating to the “fit and proper” status of the sponsor, its directors and certain disclosure issues involving Embassy REIT. SEBI said the amended framework does not treat the mere pendency of a chargesheet or prosecution complaint as an automatic ground for holding a person not “fit and proper” The regulator maintained that the amendment was a general regulatory measure and was not introduced specifically in relation to Embassy REIT or its sponsor.

According to SEBI, the changes followed a public consultation and regulatory deliberations, during which 63 comments were received, with 45 agreeing with the proposal. SEBI said it examined the complaints with reference to the regulatory framework applicable when its examination was completed. It also denied that the 2026 amendment was “occasioned by, or tailored to” the Embassy REIT matter.

Examination of Criminal Proceedings and Disclosures

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

After examining the material, SEBI said the pendency of a CBI chargesheet dated November 21, 2014, the ED prosecution complaint and an Economic Offences Wing chargesheet dated November 7, 2024 could not, by themselves, establish a lack of integrity. It noted that none of the proceedings had resulted in a conviction.

Disclosure Lapse Acknowledged

SEBI, however, acknowledged a disclosure lapse concerning the EOW chargesheet. It said that although the existence of the chargesheet had been disclosed in Embassy REIT’s financial statements, the disclosure did not specifically name Jitendra Virwani and Karan Virwani. According to SEBI, the Manager subsequently issued a corrective announcement naming them after the regulator raised the issue.

SEBI said it consequently issued advisory letters on July 29, 2026 to the Manager and Trustee of Embassy REIT. The letters required compliance with applicable disclosure obligations, while reserving SEBI’s right to take further action in accordance with law in case of any recurrence or other violation.

On other disclosure allegations, SEBI said its examination found that Embassy REIT had periodically disclosed that Jitendra Virwani and Karan Virwani were named as respondents in the ED proceedings. It said no further action was warranted on that issue.

SEBI Opposes Disclosure of Internal Records

SEBI has also opposed the petitioners’ request for disclosure of its internal regulatory records, including notes, correspondence, reports and deliberations. The regulator maintained that complainants or informants do not acquire a right to inspect such internal material.

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

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