Supreme Court directs Sebi to probe Adani fallout, Gautam Adani responds

SC directs Sebi to probe Adani case

The Supreme Court on March 2 directed the Securities Exchange Board of India (Sebi) to investigate if the Adani group had violated the securities acts and rules and any manipulation in the Adani stocks.

"It appears that Sebi is seized of the allegations and has not expressly referred to investigation in violation of the minimum public shareholding norms," the SC said.

The court also directed the regulatory body to submit a report in two months.

Also Read: Adani stocks gain after multiple block deals, SC order

In response, Gautam Adani tweeted "The Adani Group welcomes the order of the Hon'ble Supreme Court. It will bring finality in a time-bound manner. Truth will prevail."

The Adani Group welcomes the order of the Hon'ble Supreme Court. It will bring finality in a time bound manner. Truth will prevail.

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— Gautam Adani (@gautam_adani) March 2, 2023

The apex court appointed a six-member panel led by retired SC judge Abhay Manohar Sapre for assessing if there has been regulatory failure in this situation and also strengthening the existing regulatory mechanism to protect investors from market volatility.

The committee will also have OP Bhatt, Nandan Nilekeni, KV Kamath and Somasekar Sundaresan as its members. It was appointed as an offshoot of a batch of public interest litigations (PILs) related to the impact of the Hindenburg report on the Adani Group.

The SC on February 17 rejected the government’s offer to suggest in a sealed cover the names of members and the scope of a proposed committee to examine stock market regulatory mechanisms after Adani company stocks crashed in the wake of the Hindenburg Research report on the group.

The court said it will now appoint the committee, nominate its members and draw up the scope of its functioning. The apex court also reserved its orders on PILs pertaining to the impact of the Hindenburg report on the Adani Group.

When the hearing began on February 17, Solicitor-General Tushar Mehta circulated the suggested names for the committee and the scope of its work in a sealed cover. Mehta said the government’s objectives were to ensure that the truth comes out and a holistic view of the issue is taken, and to ensure that the market is not affected in this process.

“We would not accept the sealed cover suggestion because we want to maintain transparency,” Chief Justice of India DY Chandrachud said. “Sealed cover means the other side is not seeing it. The impression will be that it will be a government-appointed committee even though SC appointed it.”

On February 10, the SC bench asked the markets regulator to suggest measures that could be taken to protect Indian investors from market volatility of the type that followed the release of the Hindenburg report on January 24.

Regulatory mechanism

The bench asked Sebi to apprise it of the existing regulatory framework for protecting investors and whether it would be necessary to put in place additional measures to strengthen the mechanism.

It also asked whether the government would agree to form a committee to come up with suggestions on the mechanism and who could be members of the panel. The court subsequently heard and reserved the orders on two PILs filed on the Adani-Hindenburg controversy.

The PIL filed by lawyer Vishal Tiwari stated that the government has not taken any concrete action so far, despite the Hindenburg report perpetrating a massive attack on the economy of the country.

Tiwari’s PIL called for a committee under a retired Supreme Court judge to look into the Hindenburg report that alleged unfair practices by the Indian conglomerate.

Another PIL filed by ML Sharma demanded that short-selling be made an offence and that US short-selling firm Hindenburg Research founder Nathan Anderson and his associates be prosecuted.

It also sought an investigation against Anderson and his associates in the US and in India for allegedly exploiting innocent investors and the 'artificial crashing' of the valuation of Adani Group companies in the stock market. A third PIL was filed by Congress leader Dr Jaya Thakur.

"The Chairperson of SEBI is requested to ensure that all requisite information is provided to the Committee. All agencies of the Union Government including agencies connected with financial regulation, fiscal agencies and law enforcement agencies shall co-operate with the Committee. The Committee is at liberty to seek recourse to external experts in its work," the order noted.