Adani Hindenburg : No Material To Doubt SEBI Probe & Impartiality Of Expert Committee Members, Says Supreme Court; Reserves Judgment

The Supreme Court on Friday (November 24) reserved its judgment in a batch of Public Interest Litigations (PILs) seeking a Court-monitored investigation into the allegations made by US-based short-selling firm Hindenburg Research against the Adani group of companies regarding violations of stock market regulations.A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Justices Manoj Misra heard the matter for nearly two hours on the Friday afternoon.During the hearing, CJI Chandrachud orally said that the SEBI must take steps to protect the stock market from volatility caused by instances like short-selling. CJI also expressed disapproval of the allegations made by petitioners against the impartiality of the members of the Expert Committee, which was constituted by the Court in March to examine if there was any regulatory framework in the matter. The allegations made against the investigation of the Securities and Exchange Board of India(SEBI) also did not seem to impress the CJI. "SEBI is a statutory body exclusively entrusted with investigating stock market manipulation. Is it proper for a court without any proper material to say that we don't trust SEBI and we will form our own SIT? This has to be done with much calibration," CJI told Advocate Prashant Bhushan.SEBI should regulate short-selling: CJIWhen the matter was taken up, Solicitor General of India Tushar Mehta, on behalf of the Securities and Exchange Board of India (SEBI), said that the agency is not seeking any extension of time. He informed that out of the 24 cases of suspected transactions, the investigation of 22 was over. He added that the quasi-judicial process for inquiry into these cases had started and fot the remaining 2 cases, information from foreign regulators was needed. Thus, the SEBI haf been in consultation with them.Chief Justice of India DY Chandrachud said that the concern which led the Court to intervene was the extreme volatility caused in the stock market, resulting from short-selling, and asked what the SEBI is doing with respect to the tightening of regulations."What is SEBI planning to do for this kind of volatility in the investor market? What is it planning to do to protect investors?", CJI asked. SG said that these are larger issues which are under the consideration of the SEBI. He added that the SEBI was not objecting to the suggestions given by the Court-constituted Expert Committee on improving the regulatory framework."SEBI has to take steps in the future to ensure that the loss of investor wealth due to instances of short-selling is obviated", CJI told the SG. CJI also asked how much of the regulatory changes will fall within the framework of the Ministry of Finance and the SEBI. SG replied that some aspects of rule-making will be within the domain of the Union Government and some others will be within the SEBI's domain.SG then pointed out that one of the petitioners had filed an application questioning the neutrality of certain members of the expert committee constituted by the Court. Saying that the application was not at all justified, the SG said that a "conscious decision was taken not to dignify the application by filing a reply."He also said that the petitioner also sought an investigation into a report by OCCRP (Organized Crime and Corruption Reporting Project), which the SG called a "local NGO". The SG said that though the OCCRP was asked to share the details, the organization refused to do so saying that sources cannot be disclosed.Regarding the contempt petition filed by another petitioner against SEBI, the SG said that the regulator had sought for extension of 15 days and since the SEBI has initiated the quasi-judicial process, the non-compliance is only for just 10 days.Can't proceed by assuming Hindenburg report to be correct: CJIWhen Advocate Prashant Bhushan, for petitioner Anamika Jaiswal, referred to the "factual revelations" in the Hindenburg report, CJI categorically said that the Court could not proceed on the assumption that the report was true, as it was a matter for investigation."We don't have to accept the Hindenburg report as ipso facto factually correct. That is why we asked SEBI to investigate..." CJI said.In response, Bhushan said that the SEBI's role was "suspect" as it was aware of the violations of the Adani group since 2014 when the DRI sent it a letter flagging the issue. He referred to a letter written in January 2014 by Najeeb Shah, Director of Revenue Intelligence, to the then SEBI director UK Sinha about siphoning off of funds by Adani power group by over invoicing the import of coal."SEBI feigns ignorance of this letter which was received way back in 2014. They don't conduct any formal investigation on this letter by the DRI...." he said.CJI then asked if overvaluation was related to the present subject matter. "Investigation into an allegation of overvaluation of imports would pertain to DRI itself?" CJI asked.At this juncture, SG intervened...

Adani Hindenburg : No Material To Doubt SEBI Probe & Impartiality Of Expert Committee Members, Says Supreme Court; Reserves Judgment

Padmakshi Sharma

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