The Supreme Court (SC), hearing a batch of pleas on the Adani-Hindenburg dispute, on Friday, November 24, asked the Union government and the Securities Exchange Board of India (SEBI) to explain what steps they taking to prevent investors’ loss in future. A bench, headed by Chief Justice of India DY Chandrachud, said, "One of the principal reasons which led us to intervene – was because of this extreme volatility of the stock market which had caused loss to investors' wealth."
"Now, what is SEBI intending to do to protect this kind of volatility due to short selling which leads to a loss of investor value," asked the bench, also comprising Justices JB Pardiwala and Manoj Misra. It asked if any element of wrong-doing has been found in SEBI’s investigation as far as short-selling is concerned. In response, Solicitor General Tushar Mehta, appearing for the SEBI, said that in cases involving short-selling, the market regulator is taking legal action in accordance with the law.
"Wherever we found short selling, we will take action and we are taking action," he said. Mehta added that the government is considering "constructively with open mind" the suggestions made by the court-appointed expert committee.
The SEBI, in an affidavit filed before the apex court, had opposed various suggestions made by former SC judge Justice AM Sapre-headed expert committee, including prescribing timelines for initiation of investigation and proceedings and said that "prescribing specific timelines to complete the investigation may compromise the quality of investigation". Further, SG Mehta said that SEBI is not seeking any extension of time and 22 out of 24 investigations have already been finalised.
In relation to the remaining two cases, he said that the reports are interim in nature and the SEBI has sought information from foreign agencies and has no "control on time limit". Mehta added that the application seeking contempt action against the SEBI should not be entertained because the market regulator in August had filed an application before the apex court seeking extension of 15 days to conclude the investigation process and thereafter, a fresh status report was filed within a period of ten days.
In relation to another application alleging that the SEBI brought amendments to benefit the Adani group, Mehta said that he made a "conscious call" to not reply to it. In her application, applicant Anamika Jaiswal had alleged that not only has the SEBI suppressed important facts from the Supreme Court and slept over DRI (Directorate of Revenue Intelligence) alerts, but there is also an apparent conflict of interest in the SEBI conducting the Adani investigation.
Advocate Prashant Bhushan, arguing on petitioner’s behalf, claimed that a formal letter was addressed to the SEBI by DRI Chairman in 2014 relating to alleged siphoning of money and over valuation by Adani Group. Interjecting, SG Mehta said that the proceedings were concluded in 2017 and the decision was confirmed by the CESTAT and the Supreme Court. He added that the aspects relating to overvaluation were also considered by the court-appointed expert committee.
At this, CJI Chandrachud said: "Mr Bhushan, you have to be very careful. We are not giving a character certificate to anyone…. You must show what in the report warrants further investigation by the SEBI." Bhushan said that OP Bhatt, who is a member of the court-appointed expert committee, has partnered with Adani group as per the press release issued by Greenkop group.
Despite objections by SG Mehta, Bhushan further said that advocate Somasekhar Sundaresan, who is again, a member of court-appointed expert panel, appeared before the SEBI on behalf of the Adani group. At this, CJI Chandrachud said that Sundaresan appeared for Adani group in 2006 and "there has to be some responsibility of the allegations being levelled". "A lawyer who appeared 17 years ago can now not be appointed to the committee?.... How do we take these unsubstantiated allegations on record?" he asked.
Mehta claimed that responding to an official government correspondence, the Organized Crime and Corruption Reporting Project (OCCRP), in a letter, said that the global NGO could not provide documents as per its policy but the same could be taken by an NGO operated by Bhushan. In substance, Bhushan pleaded that some other SIT or group of experts should conduct the investigation in Adani-Hindenburg controversy.
The apex court had earlier ordered the SEBI to probe into the allegations of stock price manipulation by the Adani group within two months and had formed an expert committee with an objective to review and strengthen the existing financial regulatory mechanisms.
The controversial Hindenburg Research's report, inter alia, alleged that the Adani Group of companies has 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 the SEBI, and violated other provisions of securities laws.
The report about Indian billionaire Gautam Adani had led to a stock rout, erasing over $100 billion from his empire and pushing him down on the global rich list.