Supreme Court Refuses SIT/CBI Probe In Adani-Hindenburg Case; Endorses SEBI Investigation, Regulations

The Supreme  Court on Wednesday (January 3) refused to order a probe by a Special Investigation Team (SIT) or the Central Bureau of Investigation(CBI) into the allegations levelled in the Hindenburg Research report regarding stock price manipulations by the Adani group of companies.

A three-Judge bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra held that there was no ground to doubt the investigation being carried out by the Securities and Exchange Board of India (SEBI). The Court also held that there were no valid grounds raised to direct the SEBI to revoke its amendments on FPI and LODR regulations. The Court held that these regulations do not suffer from any infirmities. "The FPI Regulations and LODR Regulations have been tightened by the amendments in question," CJI pronounced.

The Court also noted that the SEBI has completed its investigation in 22 out of 24 cases. Taking into account the assurance of the Solicitor General, the Court directed the SEBI to complete the investigation in the remaining 2 cases within a period of three months.

The Court refused to accept the reliance placed by the petitioners on newspaper reports and the report of the Organized Crime and Corruption Reporting Project (OCCRP) to doubt the SEBI probe.

The reliance on unsubstantiated news reports and third-party organisations cannot be accepted to doubt the probe by a statutory regulator, the Court said.   "Such reports by independent groups or investigative people by newspapers may act as inputs before the SEBI or the Expert Committee. However, they cannot be relied upon as conclusive proof of the inadequacy of the investigation by SEBI," CJI read out from the judgment.

The Court rejected the arguments of petitioners regarding conflict of interest on the part of the members of the Expert Committee. However, it was added that the Govt of India and SEBI shall take into consideration the recommendations of the Expert Committee to strengthen the regulatory framework to protect the interests of the Indian investors.

"The SEBI, and the investigative agencies of the Union government, shall probe into whether the loss suffered by Indian investors due to the conduct of the Hindenburg research and any other entities in taking short position involved any infraction of law, and if so, suitable action shall be taken," the Court further directed.

On a parting note, the Court issued a word of caution against lawyers filing Public Interest Litigations without adequate research and by relying on unverified reports.

A three-Judge bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra had reserved the judgment on November 24 last year on the PILs, which sought a court-monitored probe into the allegations levelled in the Hindenburg Research report regarding stock price manipulations by the Adani group of companies. During the hearing of the matter, the Bench had orally remarked that there was no material to doubt the investigation carried out by the Securities and Exchange Board of India ("SEBI"). The Bench had also expressed reluctance to accept the arguments against the impartiality of the members of the expert committee constituted by the court to examine the issue.