NEW DELHI: The Supreme Court on Wednesday refused to order inquiries into Adani Group by a special investigation team (SIT) or the Central Bureau of Investigation (CBI) — a major relief to the business house — over US short-seller Hindenburg Research’s allegations of fraud, misgovernance and stock price manipulation.
It said the Securities and Exchange Board of India (Sebi) was conducting a “comprehensive investigation” that “inspires confidence.”
It asked the regulator to complete investigation within three months. Sebi has, so far, completed its Supreme Court-ordered probe into 22 of 24 items.
The apex court also asked the Centre and Sebi to constructively consider suggestions of the six-member expert committee headed by former Supreme Court judge AM Sapre, and take further action to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market.
That panel was set up on March 2 by the court to check for any regulatory failures by Sebi or breach of laws by Adani Group.
Adani Group chairman Gautam Adani welcomed the court’s decision. “Truth has prevailed… Satyameva Jayate,” he posted on social media platform X. “I am grateful to those who stood by us… Our humble contribution to India’s growth story will continue.”
A bench comprising chief justice DY Chandrachud and justices JB Pardiwala and Manoj Misra said the case does not warrant a transfer of the investigation from Sebi to an SIT or CBI, as such powers must be exercised sparingly. The regulator’s investigation does not suffer from any infirmities, the judges observed.
“Such a power (transfer of probe) is exercised in extraordinary circumstances when the competent authority portrays a glaring, willful and deliberate inaction in carrying out the investigation,” the top court said in its 46-page judgment. “The threshold for the transfer of investigation has not been demonstrated to exist.”
It said the market regulator’s status report and details of the 24 investigations do not indicate inaction.
“In fact, to the contrary, the course of conduct by Sebi inspires confidence that Sebi is conducting a comprehensive investigation,” it said, while delivering the verdict on a batch of petitions on the Hindenburg Research report, which was published in January last year and sent Adani Group stocks tumbling. The conglomerate has rejected the report’s accusations and said it hadn’t indulged in any wrongdoing.
Writing for the bench, the chief justice said the court must refrain from substituting its own wisdom for the regulatory policies of Sebi, and should not interfere with the outcome of the investigation. The regulator should take the probe to its logical conclusion in accordance with law.
“No valid grounds have been raised for this court to direct Sebi to revoke its amendments to FPI (foreign portfolio investor) and LODR (listing obligations and disclosure requirement) regulations which were made in exercise of its delegated legislative power,” it said. “The procedure followed in arriving at the current shape of regulations does not suffer from irregularity or illegality. FPI and LODR regulations have been tightened by the amendments in question.”
The court rejected reports by the Organized Crime and Corruption Reporting Project (OCCRP) and others, cited by the petitioners to suggest that Sebi was lackadaisical in conducting its investigation. “A report by a third-party organization, without any attempt to verify the authenticity of its allegations, cannot be regarded as conclusive proof,” the apex court said.
The bench noted as “misconceived” the petitioners relying on a January 31, 2014, letter sent by the Directorate of Revenue Intelligence (DRI) to the then Sebi chairperson, that purportedly alerted the market regulator about potential stock market manipulation by Adani Group through overvaluation of the import of power equipment from a UAE-based subsidiary.
“The issue has already been settled by concurrent findings of DRI’s additional director general, the CESTAT (Customs, Excise & Service Tax Appellate Tribunal) and this court,” the bench said.
The top court also rejected allegations of conflict of interest levelled against some members of the court-appointed expert committee, saying these are “unsubstantiated and are rejected.”
The opposition Congress party was critical of the ruling. “The Supreme Court judgment… has proven extraordinarily generous to Sebi — not least by extending its original investigation deadline of August 14, 2023, by another three months to April 3, 2024,” party spokesperson Jairam Ramesh said in a statement.
“It is noteworthy that Sebi has failed to complete its investigation into violation of securities laws and stock manipulation by Adani Group and its associates 10 months after the Supreme Court’s expert committee asked it to do so,” he added. “It is unclear what will change in the next three months, other than the Model Code of Conduct for the Lok Sabha elections coming into effect.”
The apex court on May 17 asked Sebi to complete its probe into Hindenburg’s allegations and the subsequent crash that wiped out billions of dollars from the market capitalization of Adani Group’s listed companies.
Source: The Economic Times
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