Monday, October 2, 2023

Adani-Hindenburg effect: Supreme Court to set up committee for review of regulatory mechanism, protection of investors

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The Supreme Court on Friday said that it would pass orders to constitute an expert committee, which would review the regulatory mechanism and suggest ways to protect the investors from incidents such as the recent Hindenburg-Adani issue, which hit the Indian investors, as well as the share market, badly.

The Bench of Chief Justice of India D.Y. Chandrachud, Justice P.S. Narasimha and Justice J.B. Pardiwala made these observations after Solicitor General Tushar Mehta, appearing for the Central government, submitted the remit of the proposed committee and also its members. 

While refusing to accept the names recommended by the Centre, the Apex Court orally observed that the Judges would pick the Committee members themselves, in order to maintain full transparency and to have full (public) confidence in the committee. 

The top court of the country observed that if it took names from the government, it would amount to a government-constituted committee, adding that it cannot start with a presumption of regulatory failure.

The Bench said that it would not entertain suggestions from either the Centre or the petitioners regarding recommendation for the members of the committee. It also refused to accept the suggestions made by SEBI regarding members of the committee on the grounds that nobody would be allowed to question the committee or comment on the merits of its members.

The top court of the country further rejected the suggestion made by some petitioners to include a sitting Supreme Court judge in the committee to monitor.

SG Mehta requested that the remit of the committee should be defined in such a manner so as to not give an impression to foreign and domestic investors that there were inadequacies in the regulatory framework.

Keeping in with the suggestion, the Apex Court asked the petitioners in each case to present their viewpoints. 

On February 10, the Apex Court had directed both the Union government and the Securities Exchange Board of India (SEBI) to suggest measures regarding modification in the regulatory framework and for the protection of Indian investors.

The top court of the country is currently hearing three petitions related to the Hindenburg-Adani issue. 
The first petition was filed by Congress leader Jaya Thakur seeking investigation against the Adani Group over charges of share inflation by way of manipulations and malpractices, as alleged in a report published by US-based short-seller Hindenburg Research.
It further sought probe into the role of the Life Insurance Corporation of India (LIC) and the State Bank of India (SBI) for allegedly investing huge amount of public money in the FPO of Adani Enterprises at the rate of Rs 3200 per share when the prevailing market rate of the shares was around Rs 1800 per share in the secondary market.

Alleging that industrialist Gautam Adani and his associates had ‘swindled’ lakhs of crores of ‘public money,’ the petitioner sought probe by investigating agencies like CBI, ED, DRI, SEBI, RBI and SFIO under the supervision and monitoring of a sitting judge of the Supreme Court.

A PIL was filed by Vishal Tiwari seeking constitution of a committee under the chairmanship of a retired Supreme Court Judge to investigate the contents of the Hindenburg Research Report.

Another petition filed by Advocate M.L. Sharma sought to declare ‘short-selling’ as an offence of fraud. This plea urged the Apex Court to direct probe against Nathan Anderson, founder of Hindenburg, for ‘exploiting’ innocent investors via short selling under the ‘garb’ of artificial crashing.  

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