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.