Smartworks Coworking Spaces Limited, a prominent managed workspace provider, is facing a fresh round of legal scrutiny following the dismissal of a petition against it by the Securities Appellate Tribunal (SAT). The petition, filed by a non-governmental organisation named Infrastructure Watchdog, raised serious allegations regarding the company’s financial and compliance conduct ahead of its initial public offering (IPO). Though SAT ruled against the petition on July 16, 2025, the matter has now reached the Supreme Court of India, where an appeal has been filed.

The development comes barely a week after Smartworks listed its shares on the NSE and BSE under the symbol SMARTWORKS, and follows a rising trend of pre-IPO legal interventions in India. The outcome could have implications for investor confidence, SEBI’s regulatory role, and IPO due diligence standards going forward.

Allegations Raised by Infrastructure Watchdog

The appeal filed by Infrastructure Watchdog is based on multiple allegations, all aimed at halting or questioning the legitimacy of Smartworks’ IPO process. These include:

• Non-action by SEBI on pre-existing complaints involving Smartworks and its promoters.

• Pending investigations by the Income Tax Department against Smartworks.

• Alleged receipt of funds from shell or dummy companies by Smartworks’ promoters, namely NS Niketan LLP, SNS Infrarealty LLP, and Neetish Sarda.

• Benami transactions, which allegedly violate transparency and financial accountability norms.

• Incomplete disclosure of ongoing probes and inspection details by the Registrar of Companies (RoC) in the company’s Red Herring Prospectus (RHP).

• A chargesheet against individual promoter Neetish Sarda that was allegedly omitted from disclosures.

• Incomplete listing of associate and group companies, a key factor in IPO risk assessments.

The Appellant had also demanded an interim stay on the IPO process until a full investigation by SEBI could be completed.

Dismissal by SAT and Further Appeal

Despite the seriousness of the accusations, the Securities Appellate Tribunal (SAT) issued a comprehensive order on July 16, 2025, dismissing the appeal. In its ruling, SAT did not find sufficient merit to halt the IPO or direct SEBI to initiate a new investigation.

However, the petitioner has since filed an appeal before the Supreme Court, challenging the SAT’s decision. As of July 19, 2025, the matter remains pending before the Supreme Court of India.

No Clear Financial Implications Yet

In Smartworks’ official communication to the stock exchanges (NSE and BSE), the company stated that the financial impact of the ongoing litigation remains unascertainable. The letter, signed by Company Secretary Punam Dargar, reiterates Smartworks’ compliance with Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.

The company maintains that all required disclosures were made in the IPO filings and that the accusations are unsubstantiated. However, should the Supreme Court take cognizance of the appeal and order an investigation, the IPO proceeds, listing status, or market sentiment could be affected.

Role of Promoters Under Scrutiny

The litigation brings to light questions about the role and transparency of Smartworks’ key promoters:

• Neetish Sarda, a high-profile name in India’s startup and commercial real estate ecosystem, is directly named in the appeal.

• The alleged criminal matter involving Sarda, including the existence of a chargesheet, is now under legal review.

• Ghanshyam Sarda, another promoter-group member, is also among the respondents.

Should any of these individuals be formally investigated or penalised, it could lead to governance and reputation issues for Smartworks.

Regulatory Compliance in Spotlight

This litigation is also a test case for SEBI, whose role has been called into question. The appeal accuses SEBI of inaction and procedural negligence in allowing the IPO to proceed without addressing long-standing complaints. The regulator’s handling of this matter will be closely watched, especially with increasing scrutiny on IPO-bound companies in India.

Moreover, this is one of the rare instances where a Supreme Court review is being sought on a dismissed SAT order, adding another layer of complexity to corporate legal jurisprudence in India.

Investor Outlook and IPO Continuity

Investors who participated in the Smartworks IPO, which was well-received in the market and listed at a premium, are now left in a limbo. The ongoing Supreme Court appeal, even if it doesn’t result in immediate action, creates legal overhang that could affect stock performance, future fundraising, and expansion plans.

While no immediate stay has been granted by the Supreme Court, the possibility of retrospective action or investigation remains open.

Background on Smartworks

Smartworks is India’s largest provider of customised managed workspaces. It caters to enterprises, MNCs, and startups, offering modern, tech-enabled office environments. The company has rapidly scaled its presence across India’s metro cities and has emerged as a leading player in India’s flexible office space industry.

It is backed by prominent promoters and has built a high-occupancy, asset-light model that leverages leasing over ownership. Its IPO was one of the most anticipated listings in 2025, given the growth of hybrid and flexible working post-pandemic.

What Lies Ahead?

The Supreme Court’s response to the appeal will be crucial in deciding whether Smartworks continues its market journey without interruption or whether fresh regulatory and legal hurdles arise. For now, the matter serves as a cautionary tale for other IPO-bound firms on the importance of exhaustive disclosures, robust corporate governance, and addressing pending investigations transparently.

Investors, regulators, and the startup ecosystem will be watching this case closely in the weeks to come.

The Upcoming IPOs in this week and coming weeks are Indiqube Spaces, GNG Electronics, Brigade Hotel Ventures, TSC India, Patel Chem Specialities, Monarch Surveyors & Engineering Consultants, TSC India, Swastika Castal, Savy Infra, NSDL.

The Current active IPO are Monika Alcobev.

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