Adani-Hindenburg row: Supreme Court forms 5-member committee headed by retired judge [2.3.2023]

The Supreme Court on Thursday formed an expert committee of five members headed by a retired judge to review regulatory mechanisms and protect investor interests in the light of the report by American short-seller Hindenburg Research against the Adani Group of companies.

The committee will consist of OP Bhatt, Justice JP Devadhar (retired), Nandan Nilakeni, KV Kamath, and Somasekharan Sundaresan as members, and former Supreme Court Judge AM Sapre will head the committee.

The committee was directed to submit its report in a sealed cover before the court within two months. "This court noted that there was a need for the committee for regulatory mechanisms to ensure the safety of investors," Chief Justice of India (CJI) DY Chandrachud said while delivering the order.

A bench, also comprising Justices PS Narasimha, and JB Pardiwala, directed the Securities and Exchange Board of India (Sebi) to investigate the allegations in the Hindenburg Research Report against the Adani Group. The regulatory body must also probe whether there has been a failure to disclose related party transactions.

Sebi shall file a status report on its investigation before the Court within two months.

"Sebi shall also investigate whether there has been a violation of Section 19 of Sebi rules(Sebi power to issue directions), or whether there was any manipulation of stock prices," the CJI said.

At the end of the dictation of the order, Solicitor Tushar Mehta requested the court to include a line saying that the constitution of the expert committee does not reflect on the functioning of any regulatory bodies.

Replying to this, the CJI said that this has been made clear in the order.

The bench noted that Sebi is already investigating the allegations made by American short-seller Hindenburg Research against the Adani Group. “Sebi said it was enquiring into market activities immediately “preceding and post the publication of the report”, to detect if there were violations of its regulations,” said the CJI.

The Supreme Court on February 17 (last hearing) said it will not accept the sealed cover suggestion by the Centre to form an expert committee to examine the report by Hindenburg Research against the Adani Group and its impact on the markets.

A bench headed by CJI DY Chandrachud said, “We will select the experts and maintain full transparency. If we take names from the government, it would amount to a government-constituted committee. There has to be full (public) confidence in the committee."

Meanwhile, the Centre, represented by Solicitor General Tushar Mehta, submitted a report in a sealed cover before the top court, suggesting names for an expert committee. The Centre urged the court that there should be no delay in setting up the committee. However, the apex court refused to accept suggestions by the Centre in the interest of ‘full transparency’. “If we accept suggestions, we should disclose it to the other side so that there is transparency,” the court clarified.

Commenting on the verdict, Tushar Agarwal, advocate, Supreme Court of India said, “It is expected that this committee will uphold the trust of Indian Investors by suggesting few measures to strengthen the Security Market and reduce the volatility factor in the market to discourage speculation which ultimately affects the entire market as well as economy.”

“The Supreme Court has kept the interests of investors as paramount. SEBI, which is the protector of investors' interests, has been directed to expedite the investigation. This, coupled with the fact that SEBI is already investigating the Adani group, shows the Supreme Court has faith in SEBI,” said Shashank Agarwal, advocate, Delhi HC.

02 Mar 2023