Supreme Court Shuts Down IPO Challenge Against Smartworks, Rebukes NGO Over False Claims

In a decisive ruling that reinforces judicial scrutiny over public interest litigation, the Supreme Court of India has dismissed an appeal filed by New Delhi-based NGO Infrastructure Watchdog against the Securities and Exchange Board of India (SEBI) concerning the IPO of Smartworks Coworking Spaces Ltd. The verdict, delivered on August 25, 2025, not only clears the path for Smartworks’ Rs 560 crore public offering but also issues a stern warning against the misuse of judicial forums through fabricated evidence.

Key Highlights From The Supreme Court Hearing

• The appeal was filed by Infrastructure Watchdog challenging SEBI’s approval of Smartworks’ IPO  
• The NGO presented a letter allegedly from the Ministry of Corporate Affairs (MCA) suggesting pending investigations against Smartworks’ promoters  
• Senior Advocate Gopal Subramanium, representing Smartworks, countered the claim with an RTI response confirming no such letter existed  
• The Supreme Court dismissed the appeal and warned the NGO of possible prosecution for submitting false documents  
• The Bench, comprising Justices PS Narasimha and AS Chandurkar, expressed dissatisfaction with the conduct of the NGO’s legal counsel  

Background Of The Dispute

• Smartworks Coworking Spaces Ltd launched its IPO on July 17, 2025, debuting with a 7 percent premium on both BSE and NSE  
• Infrastructure Watchdog alleged that the company’s draft red herring prospectus omitted material facts, particularly regarding tax and regulatory issues involving the Sarda family, its promoters  
• The NGO filed complaints with SEBI on January 12, March 29, and May 21, 2025, which were acknowledged and addressed in the IPO addenda  
• The Securities Appellate Tribunal (SAT) dismissed the NGO’s appeal on July 16, stating that the disclosures were adequate and investor participation was robust  

SAT’s Observations And IPO Performance

• SAT noted that the income tax reports cited by the NGO were indicative and had not led to statutory notices or demands  
• The Tribunal emphasized that Smartworks had disclosed all relevant complaints and responses in its IPO documentation  
• The IPO saw a surge in demand after the July 11 addendum, closing at 13.45 times subscription overall, including 24.4 times in the Qualified Institutional Buyers category  
• SAT also questioned the NGO’s locus standi, stating that it may not qualify as an aggrieved party under Section 15T of the SEBI Act  

Supreme Court’s Rebuke And Legal Implications

• The apex court criticized the NGO’s legal team for allowing questionable material to be submitted without verification  
• Justice Narasimha remarked that lawyers must act as the first barrier against false documentation  
• While the Court chose not to initiate prosecution, it issued a strong warning that future misconduct would attract serious consequences  
• Senior Advocate Kapil Sibal, present during the hearing, concurred with the Bench’s concerns over the integrity of judicial proceedings  

Impact On Smartworks And Investor Sentiment

• The dismissal of the appeal removes a key legal overhang on Smartworks’ IPO and strengthens investor confidence  
• The company, a leading provider of flexible workspaces, is expected to use the IPO proceeds to expand its footprint and enhance technology infrastructure  
• The ruling also sets a precedent for how courts may handle public interest litigation involving corporate disclosures and regulatory oversight  

Conclusion

The Supreme Court’s dismissal of Infrastructure Watchdog’s appeal against Smartworks Coworking Spaces Ltd underscores the judiciary’s intolerance for procedural abuse and fabricated evidence. While safeguarding investor interests and regulatory integrity, the verdict also reinforces the importance of responsible legal advocacy. As Smartworks moves forward with its growth plans, the ruling brings clarity and closure to a contentious chapter in its IPO journey.

Sources: Bar & Bench, Moneylife, UNI India, Legally Present.

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