Adani-Hindenburg: SC Rules Out SIT Probe, Sets 3-Month Deadline For SEBI In Pending Cases

The top court said there was no ground to transfer the case from SEBI to an SIT adding that the former has already probed 20 out of 22 matters.

SC pronounces verdict on Adani-Hindenburg row. ( Image Source :Getty )

Adani Hindenburg Case Verdict: The Supreme Court on Wednesday rejected the OCCRP report on the Adani group saying that it cannot be taken into account to doubt the SEBI investigation and held that there was no ground to transfer the investigation from SEBI to SIT. A bench comprising Chief Justice D Y Chandrachud and justices J B Pardiwala and Manoj Misra pronounced its verdict on a batch of petitions on the Adani-Hindenburg row over allegations of stock price manipulation by the Indian corporate giant.

"The reliance on OCCPR report is rejected and reliance on a third party organisation report without any verification cannot be relied upon as a proof," the SC bench noted, reported Bar and Bench.

While reading the conclusions, the CJI said, "The power of this court to enter the regulatory framework of SEBI is limited.  No valid grounds raised to direct SEBI to revoke its amendments on FPI and LODR regulations. The regulations do not suffer from any infirmities."

"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," the CJI added.

The top court also rejected petitioners's arguments regarding conflict of interest on the part of the members of the Expert Committee. CJI Chandrachu said the Centre and SEBI shall take into consideration the recommendations of the committee to strengthen the interest of the Indian investors.

"The Govt 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," the CJI said, quoted Live Law.

The bench had reserved a verdict on the PILs on November 24 last year that were filed by lawyers Vishal Tiwari, M L Sharma and Congress leaders Jaya Thakur, and Anamika Jaiswal, reported PTI.

Addressing the issue of transferring of the case, the CJI said the power to transfer investigation must be exercised in exceptional circumstances. "Such powers cannot be exercised in the absence of cogent justifications," he added. 

He also said that relying 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," he was quoted as saying by Live Law.

The bench further noted that SEBI had used the term opaque to describe the FPI which was misconstrued by the expert committee. 

"SEBI says FPI regulations did not prohibit opaque structure and could in fact locate the beneficial owners. mandatory upfront disclosures meant that opaque structure was omitted in 2019...we find merit in sebi arguments and do not find reason to interfere in delegatory legislative powers. The current regulations are not tainted with illegality," it added.

The bench said petitioner have not challenged the vires of regulations but there is regulatory failure and thus it is a prayer "which is unknown to this court and this is an after thought based on value judgment and is thus rejected."

"This court cannot take over the role of the delegatory legislation of SEBI. This court has the power under article 32 and 142 to transfer the probe to CBI etc but such powers can only be used sparingly and this court will not ordinarily supplant this role.. and the petitioners must put forth strong evidence to show that the investigative agency acted in a biased manner," the bench said while rejecting the pleas.

"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 concluded.

Meanwhile, advocate and petitioner Vishal Tiwari said: "The Supreme Court has very clearly said that whatever report, given by any third party, cannot be taken as a conclusive proof and there must be an evidence that may support (the case)."

Here's What The PILs Said

The petitions claimed the allegations that the Adani Group, considered close to the Modi government, inflated its share prices and the share value of various group entities fell sharply after the report of the short seller Hindenburg Research came into light, the news agency mentioned in its report.

Senior lawyer Prashant Bhushan had said that SEBI's role in the matter was "suspect" as a lot of information was available to the regulator way back in 2014.

One of the pleas alleged that changes to the Securities and Exchange Board of India Act (SEBI Act) provided a 'shield and an excuse' for the Adani Group's regulatory contraventions and market manipulations to remain undetected.