Hindenburg report on Adani: SC suggests panel on widening Sebi’s powers

The Supreme Court on Friday asked the Securities and Exchange Board of India (Sebi) to respond by Monday on measures that can be taken to protect Indian investors in crises like the market crashing after a US short-seller’s report on the Adani Group.

“It is said the total loss by Indian investors is several lakh crores. How do we ensure they are protected? It is said to be 10 lakh crores. How do we ensure that this does not happen in future? What role should be envisaged for Sebi in the future,” said Chief Justice of India (CJI) D Y Chandrachud, who was part of a bench of justices.

The court asked Sebi to detail in its reponse how a strong framework can be put in place to prevent instances like these from happening.

“The response can contain the existing regulatory framework, the relevant causal factors, and the need for putting into place robust mechanisms to protect investors. If the union is ready to accept the suggestion, the necessary recommendation of the committee may be made. A brief note on legal and factual matrix may be filed by the Solicitor General(SG) by next Monday,” it said.

The court suggested an expert committee that could confer wider powers to Sebi. “You can show us what is the existing structure and how to strengthen the existing regime and can we contemplate having an expert committee which can have experts? Experts can be from the securities area, wise guidance of a former judge, international financial law expert, etc. We can give a wider role to Sebi also and SEBI can analyze powers which exist and how it can be improved since the capital flow will become more seamless,” it said.

“Today there is seamless capital flow. How do you ensure that investors are protected? Everybody is an investor now, small or big,” Chandrachud said.

SG Tushar Mehta, who appeared for Sebi, told the court that the epicentre of the issue is beyond India’s jurisdiction.

The court agreed to hear a petition seeking a direction to the government to form a committee headed by a retired Supreme Court judge to probe Hindenburg Research’s report.

Advocate Vishal Tiwari, who has filed the petition, mentioned the matter on Thursday for urgent hearing before a bench headed by Chandrachud and comprising Justices P S Narasimha and J B Pardiwala.

Tiwari told the bench that another plea, on the issue, was scheduled for a hearing on February 10.

“A similar petition is coming up tomorrow (Friday). This pertains to the Hindenburg Research report which has tarnished the image of the country and caused the loss,” he told the bench. He urged the bench to tag his plea along with the other one on Friday.

“All right. Tag it,” the CJI said.

Tiwari’s public interest litigation (PIL) sought the court’s directions to set up a special committee to oversee a policy for sanctioning loans more than Rs 500 crore given to big corporations.

The other PIL was filed last week by advocate M L Sharma seeking prosecution of Nathan Anderson of Hindenburg Research and his associates in India and the US for allegedly exploiting investors and the “artificial crashing” of Adani Group’s stock.

The Adani Group stock value plummeted after Hindenburg Research made a slew of allegations against the conglomerate, which included fraudulent transactions and share-price manipulation.

The Adani Group has rejected Hindenburg Research’s claims, saying it complies with all laws and disclosure requirements.

The Centre, the Reserve Bank of India, and the Securities and Exchange Board of India have been made respondents in Tiwari’s plea.