The Supreme Court on Wednesday (January 3) said that the court had limited jurisdiction when it comes to the Security and Exchange Board of India’s (SEBI’s) regulatory domain, and so the Board should be allowed to conclude its probe into the allegations into the Adani group as has been promised.

The bench also said that there is no ground to either transfer the probe from SEBI to an SIT or to order SEBI to revoke its regulations. “SEBI has completed investigation in 20 out of 22 matters. Taking into account the assurance of Solicitor General, we direct the SEBI to complete the investigation in the other two cases within 3 months,” Chief Justice of India D.Y. Chandrachud said, while reading out the conclusions of the court order.

The court also mentioned the investigation carried out by the Organised Crime and Corruption Reporting Project after the release of the Hindenburg Research report, saying that it was rejecting reliance on it, as “Reliance on newspaper reports and third party organisations to question the statutory regulator does not inspire confidence. They can be treated as inputs but not conclusive evidence to doubt SEBI probe.”

The court also rejected the claim made by petitioners that there was a conflict of interest in members of the court-appointed expert committee, calling it “unsubstantiated”. “The Government of India and SEBI shall take into consideration the recommendations of the committee to strengthen interest of the Indian investors,” CJI Chandrachud said.

“The Government of India and the SEBI to look into if there is any infraction of law by the Hindenburg report on short selling and if so, take action in accordance with law,” he continued.

The court also accused the petitioners of relying on “unsubstantiated” reports and thus misusing the public interest litigation instrument. “PIL as a tool was invented so that legitimate causes are brought to this court by ordinary citizens. However, plea with unsubstantiated reports should not be pursued and thus members of the bar must be conscious of this,” the bench said.

A bench comprising Chief Justice of India D.Y. Chandrachud and Justices J.B. Pardiwala and Manoj Misra was hearing a batch of PILs seeking a court-monitored probe into the allegations against the Adani group raised by US-based short-seller Hindenburg Research in January last year. The bench had reserved judgment in the case on November 24, 2023.

The background

Hindenburg Research had accused the Adani group of “brazen stock manipulation” and “accounting fraud scheme” in January last year. It said that the company is “pulling the largest con in corporate history”. The Adani group had rejected all these allegations.

Since the publication of the Hindenburg Research report, several investigations, including by the OCCRP and Financial Times, have highlighted alleged malpractices by the Adani group, particularly in its use of offshore havens.

In early March, the Supreme Court had constituted the committee headed by former Supreme Court judge, Justice A. M. Sapre, to look into whether a regulatory failure had led to investors losing money after the short seller Hindenburg Research’s report pointed to fraud and manipulation by the Adani Group.

The committee also has former bankers K.V. Kamath and O.P. Bhatt, Infosys cofounder Nandan Nilekani, securities lawyer Somasekhar Sundaresan and retired high court judge J.P. Devadhar. This committee was formed after the apex court rejected the names suggested by the Union government in a sealed cover as members of the committee, and announced the formation of its won expert committee.

The six-member panel had submitted its report in a sealed cover to the apex court on May 8, 2023. However, a petitioner in the case had alleged in September that many in the panel have conflicts of interest and so the court should reconstitute the committee. This was not done.

Meanwhile, SEBI is also carrying out its own investigation. It was expected to submit its report to the panel on August 14, but had been given more time to complete its probe.

SEBI submitted its status report on August 25. But the Supreme Court hearing on SEBI’s status report has been deferred. The status report said that 22 out of 24 investigations are final. In oral remarks, the bench had said that there is no reason to doubt SEBI’s probe into the matter.

(Only the headline and picture of this report may have been reworked by the LatestLaws staff; the rest of the content is auto-generated from a syndicated feed.)

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