SC orders probe by committee headed by ex-SC judge in Adani-Hindenburg controversy

The Supreme Court on Thursday ordered a probe into the Adani-Hindenburg controversy and set up an expert committee headed by its retired judge A.M. Sapre.

The apex court noted that it appears that SEBI is seized of the investigation into the allegations made against the Adani Group companies and sought a status report from it on its ongoing investigation into the matter within two months.

A bench headed by Chief Justice of India D.Y. Chandrachud and comprising Justices P.S. Narasimha and J.B. Pardiwala said in order to protect Indian investors against volatility of the kind which has been witnessed in the recent past, "we are of the view that it is appropriate to constitute an expert committee for the assessment of the extant regulatory framework and for making recommendations to strengthen it".

The bench said the expert committee will be headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court, and it will comprise: O.P. Bhatt, Justice J.P. Devadhar (retired), K.V. Kamath, Nandan Nilekani, and advocate Somashekhar Sundaresan.

The bench said: "The remit of the committee shall be as follows: To provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past; To suggest measures to strengthen investor awareness."

It further added, "To investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies; and To suggest measures to (i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors."

The bench said SEBI chairperson is requested to ensure that all requisite information is provided to the committee and all agencies of the Centre, including agencies connected with financial regulation, fiscal agencies, and law enforcement agencies shall cooperate with the committee. "The Secretary, Ministry of Finance shall nominate a senior officer who will act as a nodal officer to provide logistical assistance to the Committee...The Committee is requested to furnish its report in sealed cover to this court within two months."

The bench also noted that SEBI has not expressly referred to an investigation into the alleged violation of the Securities Contracts (Regulation) Rules 1957 which provide for the maintenance of minimum public shareholding in a public limited company.

The bench added that SEBI should also investigate the following aspects of the issues raised in the present batch of petitions: "a. Whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957; b. Whether there has been a failure to disclose transactions with related parties and other relevant information which concerns related parties to SEBI, in accordance with law; and c. Whether there was any manipulation of stock prices in contravention of existing laws."

The top court directed SEBI to expeditiously conclude the investigation within two months and file a status report and it will apprise the expert committee of the action that it has taken in furtherance of the directions of this court as well as the steps that it has taken in furtherance of its ongoing investigation. "The constitution of the expert committee does not divest SEBI of its powers or responsibilities in continuing with its investigation into the recent volatility in the securities market," said the bench.

On February 17, the top court had reserved its order on the composition and remit of a committee, to examine the massive slide in Adani Group's stock prices after Hindenburg Research came out with a report alleging fraud and stock manipulation by the Gautam Adani-led group. The Adani Group has denied the charges.

The top court's order came on a batch of petitions filed by advocates Vishal Tiwari, M.L. Sharma, Congress leader Jaya Thakur and one Anamika Jaiswal.