SC Directs SEBI To Inquire Into Allegations Of Stock Price Manipulation & Related Parties Transactions By Adani Group, Gautam Adani Welcomes Order [Read Order]

The Supreme Court has directed the Securities and Exchange Board of India (SEBI) to conclude within two months the investigation into the allegations made against the Adani Group including stock price manipulation and related parties transactions.

In order to protect Indian investors against market volatility, the Court has also constituted an Expert Committee for the assessment of the extant regulatory framework and for making recommendations to strengthen it.

In a tweet, the Chairman of Adani Group, Gautam Adani welcomed the Order of the Supreme Court.

The Adani Group welcomes the order of the Hon'ble Supreme Court. It will bring finality in a time bound manner. Truth will prevail.

— Gautam Adani (@gautam_adani) March 2, 2023

The Expert Committee is to be headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court.

The bench of CJI Dhananjaya Y Chandrachud, Justice Pamidighantam Sri Narasimha and Justice J.B. Pardiwala passed the Order on pleas concerning the loss of investor wealth in the securities market over the last few weeks because of a steep decline in the share price of the Adani Group of companies.

The decline in the share price was precipitated by a report published by Hindenburg Research on 24 January 2023. As per this report, Adani Group of companies allegedly manipulated its share prices; failed to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI; and violated other provisions of securities laws.

Senior Counsel Prashant Bhushan appeared for the petitioners and Solicitor General Tushar Mehta appeared for the Union of India.

The Court observed that SEBI is already investigating into the allegations made against the Adani Group companies.

The Court directed SEBI to also investigate the following aspects of the issues –

“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 Court directed SEBI to expeditiously conclude the investigation within two months and file a status report.

The Court ordered that SEBI shall apprise the expert committee of the action that it has taken in furtherance of the directions of the Court as well as the steps that it has taken in furtherance of its ongoing investigation.

The Expert Committee headed by Justice Abhay Manohar Sapre also includes O P Bhatt; Justice J P Devadhar (retired), KV Kamath; Nandan Nilekani; and Somashekhar Sundaresan.

“The remit of the Committee shall be as follows:

a. 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;

b. To suggest measures to strengthen investor awareness;

c. 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

d. 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 Court said.

The Court has directed the Committee to furnish its report in a sealed cover within two months.

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

Click here to read/download Order