Adani-Hindenburg Row | Supreme Court Refuses To Transfer Of Investigation From SEBI; Says Allegations Against Expert Committee Unsubstantiated [Read Judgment]

The bench further said that the allegations of conflict of interest against the court-appointed members of the Expert Committee were unsubstantiated and accordingly were rejected.

The Supreme Court had reserved its judgment in the batch of petitions seeking an investigation against SEBI by an expert committee constituted by the Court into the allegations made by the Hindenburg alleging stock price manipulation by the Adani group. The hearing of the batch of cases had witnessed sharp accusations against members of the Expert Committee constituted by the Court in the matter.

A three-judge bench comprising Chief Justice of India D.Y. Chandrachud, Justice J.B. Pardiwala and Justice Manoj Misra observed, “The facts of this case do not warrant a transfer of investigation from SEBI. In an appropriate case, this Court does have the power to transfer an investigation being carried out by the authorized agency to an SIT or CBI. Such a power is exercised in extraordinary circumstances when the competent authority portrays a glaring, willful and deliberate inaction in carrying out the investigation. The threshold for the transfer of investigation has not been demonstrated to exist”.

The bench even rejected the reliance placed on OCCPR report to suggest that SEBI was lackadaisical in conducting the investigation, saying, “A report by a third-party organization 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 Additional Director General, the CESTAT and this Court”.

The court also opined that it must refrain from substituting its own wisdom over the regulatory policies of SEBI. While also considering the assurance the bench noted that SEBI had completed 22 out of the 24 investigations into the allegations levelled against the Adani group. Accordingly, directed SEBI to complete the two pending investigations expeditiously preferably within three months.

The Court further observed that “No valid grounds have been raised for this Court to direct SEBI to revoke its amendments to the FPI Regulations and the LODR Regulations which were made in exercise of its delegated legislative power. The procedure followed in arriving at the current shape of the regulations does not suffer from irregularity or illegality. The FPI Regulations and LODR Regulations have been tightened by the amendments in question”.

The petition was filed by Vishal Tiwari saying that despite the deadline given to the SEBI it has failed to comply with the direction of the court and has not submitted the final conclusion/report as was directed by the court.

In the matter, the directions that were sought by the petitioner were to constitute an SIT to oversee the SEBI investigation into the Adani group and that all such investigations be court-monitored; and a direction to SEBI to revoke certain amendments made to the SEBI (Foreign Portfolio Investments) Regulations, 20143 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Earlier, the bench took note of the allegations against the members of the Exert Committee appointed in the matter while doubting the veracity and legitimacy of the Hindenburg Report itself. It said that everything that is published in the Newspapers (The Guardian, Financial Times) cannot be taken as a gospel truth by the Court and cannot discredit SEBI. The CJI did not take the allegations against the Judge lightly, as he reprimanded the manner and Bhushan’s reasoning.

Cause Title: Vishal Tiwari v. Union of India & Ors. 

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