Hindenburg: Supreme Court rejects pleas to hand over Adani probe from SEBI to SIT

Tribune News Service

Satya Prakash

New Delhi, January 3

The Supreme Court on Wednesday dismissed PILs seeking to transfer the probe into allegations of stock price manipulation levelled by Hindenburg Research Report against Adani Group from SEBI to an SIT.

Editorial: Hindenburg row

“The facts of this case do not warrant a transfer of investigation from SEBI,” said a three-judge Bench led by CJI DY Chandrachud, which had reserved its verdict on November 24 last year, rejecting the PILs. The Bench, however, said, “In an appropriate case, this court does have the power to transfer an investigation being carried out by the authorised agency to an SIT or CBI. Such a power is exercised in extraordinary circumstances when the competent authority portrays a glaring, wilful and deliberate inaction in carrying out the investigation. The threshold for the transfer of investigation has not been demonstrated to exist.”

Noting that SEBI had completed 22 of the 24 investigations into the allegations levelled against the Adani Group and taking into account the assurance given by Solicitor General Tushar Mehta on behalf of SEBI, the top court directed SEBI to complete the two pending investigations expeditiously,

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preferably within three months. It also directed the Centre and SEBI to take into consideration the recommendations of the expert committee to protect the interests of Indian investors.

“This court has not interfered with the outcome of the investigations by SEBI. SEBI should take its investigations to their logical conclusion in accordance with law,” said the Bench, which also included Justice JB Pardiwala and Justice Manoj Misra.

The top court directed that “SEBI and the investigative agencies of the Union Government shall probe into whether the loss suffered by Indian investors due to the conduct of Hindenburg Research and any other entities in taking short positions involved any infraction of the law and if so, suitable action shall be taken”. It also rejected allegations of conflict of interest against the expert committee appointed by it to look into the matter, saying these were “unsubstantiated”.

The Bench directed the Centre and SEBI to “constructively consider the suggestions of the expert committee in its report... and take any further actions as are necessary to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market”.

While reserving the verdict, the top court had on November 24 said that it had no reason to “discredit” SEBI, which probed allegations against the Adani Group, as there was no material before it to doubt what the market regulator had done and the court did not have to treat what was set out in the Hindenburg report as a “true state of affairs”.

Alleging conflict of interest against members of an expert committee set up by the Supreme Court to probe into allegations of accounting fraud and stock price manipulation against the Adani Group in the Hindenburg report, a petitioner had in September urged it to constitute a new expert panel to look into the allegations afresh.

Acting on PILs, the Supreme Court had in its March 2, 2023, order also asked SEBI to investigate if there was any manipulation of stock prices in contravention of existing laws and if there was any failure to disclose transactions with related parties and other relevant information concerning related parties to the market regulator.

The Bench also rejected the reliance placed by the petitioner on the OCCPR (Organised Crime and Corruption Reporting Project) report to suggest that SEBI was lackadaisical in conducting the investigation, saying, “A report by a third-party organisation without any attempt to verify the authenticity of its allegations cannot be regarded as conclusive proof. Further, the petitioner’s reliance on the letter by the DRI is misconceived as the issue has already been settled by concurrent findings of DRI’s (Directorate of Revenue Intelligence) Additional Director General, the CESTAT (Customs Excise and Service Tax Appellate Tribunal) and this court”.

3rd party report no conclusive proof

• The Bench also rejected the reliance placed by the petitioner on the Organised Crime and Corruption Reporting Project report to suggest that SEBI was lackadaisical in conducting the investigation, saying, “A report by a third-party organisation without any attempt to verify the authenticity of its allegations cannot be regarded as conclusive proof.”
• The Bench directed the Centre and SEBI to “constructively consider the suggestions of the expert committee in its report... and take any further actions as are necessary to strengthen the regulatory framework, protect investors.

Calls for assessing losses to investors

• The SC asked SEBI, other agencies to probe possible loss suffered by investors due to the conduct of Hindenburg Research rejects conflict of interest allegation
• The SC rejected allegations of conflict of interest against the expert committee appointed by it to look into the matter, saying these were “unsubstantiated”

Won’t interfere

This court has not interfered with the outcome of the SEBI probe. SEBI should take its investigations to their logical conclusion as per law. — Supreme Court

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