The Supreme Court today constituted a five-member expert committee, headed by a former judge, to probe into the Hindenburg Research report against Adani group companies that defrauded investors of crores of rupees and probe into any regulatory lapses in the matter. The committee, headed by former Supreme Court Justice Abhay Manohan Sapre, includes OP Bhatt, retired justices JP Deodhar, Nandan Nilekani, KV Kamat and Somashekar Sundaresan.
The committee has been directed to submit its report to the court in a sealed cover within two months. Chief Justice DY Chandrachud said in his order, “The court feels that there is a need to set up a committee for regulatory mechanism to ensure that the interests of the investors are protected.” The court said the committee would also examine whether there was any regulatory lapse on the part of Adani Group or other companies in dealing with the allegations relating to the securities market.
The decision said, ‘The committee will evaluate the overall situation and also see what were the reasons for the recent volatility in the stock market. It will suggest measures to raise awareness among investors and also look into whether the regulator has failed to deal with any alleged violations of stock market regulations in the case of Adani Group or other companies. The committee will also suggest ways to strengthen the regulatory framework to protect the interests of investors and ensure compliance under the existing framework.
The court noted that the Securities and Exchange Board of India (SEBI) has already initiated an investigation into the allegations made by Hindenburg on Adani group companies. The Chief Justice said, “Sebi has informed that it is examining the market movements before and after the publication of the report to ascertain whether there has been any violation of the rules.”
The bench hearing the matter also included Justice PS Narsingh and Justice JB Pardiwala. The bench said that along with the ongoing probe into Hindenburg’s allegations against Adani group companies, SEBI should also look into whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules, 1957, related party transactions And there has been no negligence in giving other types of information. Along with this, the possibility of rigging the prices of shares should also be checked.
Rule 19A of the Securities Contracts (Regulation) Rules, 1957 deals with the minimum public shareholding to be maintained and achieved within a stipulated time. Samudra Sarangi, partner, Panag & Babu, said, “The apex court hoped that Sebi would investigate the matter thoroughly and not deviate from the important issues in the lengthy investigation.
Along with this, the court has directed SEBI to complete the investigation and submit the report within the stipulated time. This shows that the apex court not only wants to identify the major problems immediately, but also wants to find a solution to save the market from such volatility in future. At the end of writing the order, Solicitor General Tushar Mehta requested the court to also write in his order that the constitution of the expert committee does not reflect the functioning of any regulatory body.
The Chief Justice noted that the order clarified that the constitution of the expert committee does not deprive SEBI of its powers or responsibilities to continue with the investigation into the recent volatility in the securities market. The court also directed the market regulator to assist the expert committee. Welcoming the court’s decision, Adani Group Chairman Gautam Adani tweeted, ‘Adani Group welcomes the decision of the Supreme Court. This will clear everything in due time and truth will prevail.
