In a major relief to the Adani Group, the Supreme Court ruled on Wednesday (3rd January) that it could not interfere with the regulatory framework or use the Hindenburg report or anything similar as justification for launching a new investigation. The SEBI will proceed with its investigation in accordance with the law, the court said.
The Supreme Court further added that there is no evidence that SEBI was negligent in taking action and no reason to suggest any conflict of interest on SEBI’s part. The Supreme Court also refused to order an SIT probe on the allegations made by short-seller Hindenburg.
Supreme Court directs SEBI to complete its probe of two pending cases out of 24 in the Adani-Hindenburg issue within 3 months.
— ANI (@ANI) January 3, 2024
Government and SEBI to consider acting on recommendations made by the court-appointed panel
The court stated in its ruling that the Supreme Court’s jurisdiction to enter the regulatory framework of SEBI is restricted. There are no valid grounds for directing SEBI to withdraw its revisions to the FPI and LODR regulations. “SEBI has concluded investigations in 20 of 22 cases. The investigation into the remaining two cases will be completed within three months,” the order stated.
“Allegations of conflict of interest of expert committee members are unsubstantiated and rejected,” a bench led by Chief Justice of India DY Chandrachud said.
The order stated that the Organized Crime and Corruption Reporting Project (OCCRP) report could not be used to cast doubt on the SEBI probe. It stated that reliance on the OCCRP report is rejected and that reliance on a third-party organization report without any verification cannot be relied on as proof.
[BREAKING] No regulatory failure by SEBI in Adani-Hindenburg row, reliance on unverified press reports cannot stand: Supreme Court
— Bar & Bench (@barandbench) January 3, 2024
report by @DebayonRoy #SupremeCourt #AdaniHindenburgCase #AdaniGroup https://t.co/gTMjvveOns
“Reliance on newspaper reports and third-party organizations to question the statutory regulator does not inspire confidence. They can be treated as inputs but not conclusive evidence to doubt the SEBI probe,” the order said.
In March of last year, the Supreme Court formed a six-member committee to “investigate if there was a regulatory failure in dealing with the alleged violation of securities market laws about the Adani Group or other companies.” It also requested the SEBI to investigate whether there was a violation of the minimum public shareholding standards in public limited companies, a failure to report transactions with linked parties, and stock price manipulation.
On November 24, 2023, a panel of three judges consisting of Chief Justice of India D Y Chandrachud, Justices J B Pardiwala, and Manoj Misra reserved its verdict on the petitions, objecting to claims of conflict of interest leveled against members of the committee it had constituted.
It is notable here that during the hearing the SC bench had rejected advocate Prashant Bhushan’s attempts to take Hindenburg’s claims as gospel truth on face value. “We don’t have to accept the Hindenburg report as ipso facto factually correct. That is why we asked SEBI to investigate…” CJI had said.
“Mr. Bhushan, I do not think you can ask a financial regulator to take something printed in the newspaper. This does not discredit SEBI. Should SEBI now follow journalists?”, the CJI had asked Bhushan during the hearing.
In January this year, Hindenburg Research accused the Adani Group of fraud and stock price manipulation. The charges were denied by Gautam Adani who claimed in July that no regulatory failure was found by the expert committee which was constituted by the Supreme Court.
In May this year, a 6-member expert panel had failed to find any wrongdoing on SEBI’s part regarding Adani Group. The committee concluded that the Adani Group has disclosed the information of all the beneficial owners of the business. The report also lists all the details of these beneficial owners as obtained from the SEBI.
The Adani Group has already trashed the Hindenburg Research report as a ‘malicious combination of selective misinformation and stale, baseless and discredited allegations’. The Group stocks lost Rs 46,000 crores in market cap after Hindenburg claimed that the Indian giant had participated in a clear stock manipulation and accounting fraud scheme over decades. The report was published on 24th January 2023.
