Adani Hindenburg : No Material To Doubt SEBI Probe & Impartiality Of Expert Committee Members –

Adani Hindenburg : No Material To Doubt SEBI Probe & Impartiality Of Expert Committee Members

The Supreme Court on Friday (November 24) reserved its judgment in a batch of Public Interest Litigations (PILs) seeking a Court-monitored investigation into the allegations made by US-based short-selling firm Hindenburg Research against the Adani group of companies regarding violations of stock market regulations.

A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Justices Manoj Misra heard the matter for nearly two hours on the Friday afternoon.

During the hearing, CJI Chandrachud orally said that the SEBI must take steps to protect the stock market from volatility caused by instances like short-selling. CJI also expressed disapproval of the allegations made by petitioners against the impartiality of the members of the Expert Committee, which was constituted by the Court in March to examine if there was any regulatory framework in the matter.

The allegations made against the investigation of the Securities and Exchange Board of India(SEBI) also did not seem to impress the CJI.

“SEBI is a statutory body exclusively entrusted with investigating stock market manipulation. Is it proper for a court without any proper material to say that we don’t trust SEBI and we will form our own SIT? This has to be done with much calibration,” CJI told Advocate Prashant Bhushan.

SEBI should regulate short-selling: CJI

When the matter was taken up, Solicitor General of India Tushar Mehta, on behalf of the Securities and Exchange Board of India (SEBI), said that the agency is not seeking any extension of time. He informed that out of the 24 cases of suspected transactions, the investigation of 22 was over. He added that the quasi-judicial process for inquiry into these cases had started and fot the remaining 2 cases, information from foreign regulators was needed. Thus, the SEBI haf been in consultation with them.

Chief Justice of India DY Chandrachud said that the concern which led the Court to intervene was the extreme volatility caused in the stock market, resulting from short-selling, and asked what the SEBI is doing with respect to the tightening of regulations.

“What is SEBI planning to do for this kind of volatility in the investor market? What is it planning to do to protect investors?”, CJI asked. SG said that these are larger issues which are under the consideration of the SEBI. He added that the SEBI was not objecting to the suggestions given by the Court-constituted Expert Committee on improving the regulatory framework.

“SEBI has to take steps in the future to ensure that the loss of investor wealth due to instances of short-selling is obviated”, CJI told the SG. CJI also asked how much of the regulatory changes will fall within the framework of the Ministry of Finance and the SEBI. SG replied that some aspects of rule-making will be within the domain of the Union Government and some others will be within the SEBI’s domain.

SG then pointed out that one of the petitioners had filed an application questioning the neutrality of certain members of the expert committee constituted by the Court. Saying that the application was not at all justified, the SG said that a “conscious decision was taken not to dignify the application by filing a reply.

He also said that the petitioner also sought an investigation into a report by OCCRP (Organized Crime and Corruption Reporting Project), which the SG called a “local NGO“. The SG said that though the OCCRP was asked to share the details, the organization refused to do so saying that sources cannot be disclosed.

Regarding the contempt petition filed by another petitioner against SEBI, the SG said that the regulator had sought for extension of 15 days and since the SEBI has initiated the quasi-judicial process, the non-compliance is only for just 10 days.

Can’t proceed by assuming Hindenburg report to be correct: CJI

When Advocate Prashant Bhushan, for petitioner Anamika Jaiswal, referred to the “factual revelations” in the Hindenburg report, CJI categorically said that the Court could not proceed on the assumption that the report was true, as it was a matter for investigation.

“We don’t have to accept the Hindenburg report as ipso facto factually correct. That is why we asked SEBI to investigate…” CJI said.

In response, Bhushan said that the SEBI’s role was “suspect” as it was aware of the violations of the Adani group since 2014 when the DRI sent it a letter flagging the issue. He referred to a letter written in January 2014 by Najeeb Shah, Director of Revenue Intelligence, to the then SEBI director UK Sinha about siphoning off of funds by Adani power group by over invoicing the import of coal.

“SEBI feigns ignorance of this letter which was received way back in 2014. They don’t conduct any formal investigation on this letter by the DRI….” he said.

CJI then asked if overvaluation was related to the present subject matter. “Investigation into an allegation of overvaluation of imports would pertain to DRI itself?” CJI asked.

At this juncture, SG intervened and said that DRI ultimately concluded the inquiry in 2017 in that matter, finding no element of evidence against the Adani group.

“When you take information from random public platforms or Twitter, you should at least check what happened. DRI concluded the proceedings in 2017. In any case, overvaluation is not a subject matter of this,” SG said.

“Mr. Bhushan, it is very easy to make allegations. Equally, you must think of fundamental principles of fairness. You’re relying on a DRI communication to SEBI. DRI closed the matter. CESTAT concluded it. Your entire allegation is…” CJI told Bhushan.

Allegations against expert committee members unfair: CJI

Bhushan then referred to allegations made by the petitioner regarding the conflict of interest on the part of some of the members of the Expert Committee. He said that OP Bhatt is a Chairman of Greenko which has a close partnership with Adani group.

Bhushan then said that Advocate Somasekharan Sundaresan was a counsel for the Adani group in some cases. He cited an appearance made by Sundaresan.

“Mr Bhushan, it is not as if he was an in-house counsel of the Adani group or a retainer. Lawyers make appearances in various cases. And you cite an appearance made by him 17 years ago! There has to be some responsibility about allegations you make”, CJI responded. Bhushan then stated that Sundaresan was present in many SEBI committees.

“So? That disqualifies him? He was on the financial sector law reform committee of the previous government!” CJI said. CJI then pointed out that the application was filed in September, though the committee was formed in March and it submitted its report in May.

“Mr Bhushan, this is a bit unfair. Because that way people will stop being in committees we appoint? If we wanted to have retired HC judges we would have. But we wanted domain experts. We wanted a more robust analysis…”CJI said. “And you say he appeared in 2006, 17 years ago!”

Though only one order relating to the 2006 appearance was cited in the application, Sundaresan has made many such appearances for the Adani group, asserted Bhushan.

“Why should we take these unsubstantiated allegations?…by that logic, no lawyer who has appeared for an accused should become a High Court judge!…It is a 2006 appearance and you say something in 2023!” CJI said.

At this point, SG made another intervention to say that when the SEBI sought details from OCCRP, they responded that the details could be collected from an NGO operated by Mr.Prashant Bhushan.

“You appear in this so-called public interest litigation, get some report prepared and ask this without disclosing the source. I didn’t want to embarrass you. But this is conflict of interest” SG said.

“When we came to know about Mr Sundareshan’s conflict we filed an affidavit in May. But we didn’t think it was significant enough to reconstitute the committee. It was only when we got to know of Mr Bhat’s involvement, that we thought it was significant and filed the application. These people should have disclosed to the court and then it was for the court to decide.” Bhushan said.

“You should have disclosed that you got a report prepared based on which your client is relying… so-called public-spirited individual,” SG stated.

Court refuses to doubt SEBI probe

Referring to certain reports published by The Guardian and Financial Times, Bhushan said that SEBI has not undertaken a proper investigation and sought the constitution of a Special Investigation Team.

In response, the CJI said :

“SEBI is a statutory body exclusively entrusted with investigating stock market manipulation. Is it proper for a court without any proper material to say that we don’t trust SEBI and we will form our own SIT? This has to be done with much calibration.”

“Mr.Bhushan, I don’t think you can take something written in a newspaper, whether Guardian or Financial Times, to be gospel truth. We are not saying that we doubt them but we can’t say it is evidence enough to discredit the statutory regulatory. What should SEBI do? Go to journalists not subject to their jurisdiction and underline material they used as sources?”, CJI asked.

“If the journalists can get hold of the relevant documents, how is it that SEBI, with all its powers under its command, are not able to?” Bhushan asked.

He referred to the Expert Committee’s report that the SEBI investigation hit a wall because of the amendments made by itself to the regulations.

“The Expert Committee is saying this is a chicken and egg situation. But this chicken and egg situation arose because of the amendment SEBI made about beneficial owner. And now Adani can declare some clerk as the beneficial owner,” Bhushan said.

Court refuses enquiry against LIC and SBI

Congress leader Jaya Thakur’s petition seeking enquiry against the State Bank of India and the Life Insurance Corporation for investments into the Adani group was taken up by the Court next.

Expressing disapproval of the petition, CJI asked: “Is this some debate in a college? You’re before a court. You realise the consequence of a direction against SBI and LIC? Absolutely no material by you and you’re alleging this. Surely there must be some responsibility.”


On January 24, US-based short-selling firm Hindenburg Research published a scathing report accusing the Adani Group of widespread manipulations and malpractices aimed at inflating its stock prices. In response, the Adani Group vehemently refuted the allegations by publishing a comprehensive 413-page reply.

Subsequently, a group of Public Interest Litigations (PILs) was filed in the Supreme Court by Advocates Vishal Tiwari, ML Sharma, Congress leader Dr. Jaya Thakur, and activist Anamika Jaiswal. These PILs sought a court-monitored probe into the matter. On March 2, the Supreme Court constituted a committee to investigate and examine if there is any regulatory framework in the matter. The SEBI was also directed to probe into the allegations against the Adani group. The expert committee was composed of Mr OP Bhat (former Chairman of SBI), retired Justice JP Devadhar, Mr KV Kamath, Mr Nandan Nilekani, and Mr Somasekharan Sundaresan, with former Supreme Court judge Justice AM Sapre heading the committee.

The two months’ time originally allowed by the apex court for SEBI as per its March 2 order ended on May 2.

However, in May, the SEBI filed an application in the Supreme Court, requesting a six-month extension to complete its probe. In its affidavit, SEBI had stated that the transactions in the matter were complex and required more time to examine. SEBI also informed the apex court bench that it had already approached eleven overseas regulators under the Multilateral Memorandum of Understanding (MMOU) with the International Organisation of Securities Commissions (IOSCO) with respect to its investigation into Minimum Public Shareholding (MPS) norms the investigation required more time.

The Supreme Court initially refused to grant a full six-month extension but extended the deadline to August 14, 2023. The bench had passed the extension order on May 17. As the second deadline was set to end, SEBI requested an additional 15 days to complete its investigation. In its application, SEBI informed the court that “it has progressed substantially”. The market regulator further said that in one matter, an interim report had been prepared based on the materials available and that it had sought information from agencies and regulators in foreign jurisdictions, etc. and upon receipt of such information, it would evaluate the same to determine further course of action, if any.

Case Title: Vishal Tiwari v. Union of India & Ors. | Writ Petition (Civil) No. 162 of 2023 and other connected matters

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