Monday, October 2, 2023

Hindenburg-Adani issue: Supreme Court constitutes 6-member Committee to review regulatory mechanism, issues notice

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The Supreme Court on Thursday set up an expert committee headed by retired Supreme Court judge, Justice Abhay Mohan Sapre, to review the regulatory mechanism and suggest ways to protect the Indian investors from incidents such as the Hindenburg-Adani issue in future. 

The Bench of Chief Justice of India (CJI) D.Y. Chandrachud, Justice P.S. Narasimha and Justice J.B. Pardiwala, while issuing notice in the matter, appointed five persons as members of the committee.

These include former SBI Chairman Om Prakash Bhatt; former judge of the Bombay High Court, Justice J.P. Devadhar; former chairman of Unique Identification Authority of India (UIDAI) Nandan Nilakeni; former Chairman of Infosys Limited K.V. Kamath and Advocate Somasekharan Sundaresan. 

As per the Supreme Court order, the Committee would undertake an overall assessment of the situation, including the causal factors which led to volatility in the securities market in the recent past, measures to strengthen the investor awareness and investigate whether there has been a regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani group or other companies.

The committee would further suggest measures to strengthen the statutory and regulatory framework and secure compliance with existing framework concerning the protection of investors.

The Apex Court directed the Securities and Exchange Board of India (SEBI) to investigate the allegations made by the Hindenburg Research report against the Adani group of companies.

SEBI was also directed to investigate whether there has been a violation of Rule 19A (related to maintenance of minimum public shareholding) of Securities (Contract) Regulation Rules, whether there has been a failure to disclose transactions with related parties and other information that concerns related parties and whether there was any manipulation of stock prices.

The regulatory body was asked to file a status report on its investigation before the Court within a period of two months in a sealed cover.

It was further directed to apprise the court, along with the expert committee, regarding the progress of the probe.

The CJI today observed that the decline in share price belonging to the Adani Group was precipitated by a report published by US-based short selling firm Hindenburg Research on January 24 this year.

The report had alleged that the group, headed by industrialist Gautam Adani, had manipulated and violated security laws.

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 the Hindenburg Research report.

Second 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.

Third petition was filed by Advocate M.L. Sharma seeking to declare ‘short-selling’ as an offence of fraud. It further sought a probe against Nathan Anderson, founder of Hindenburg, for ‘exploiting’ innocent investors via short selling under the ‘garb’ of artificial crashing.  

Industrialist Gautam Adani welcomed the Supreme Court order concerning the Hindenburg Research report and said that it would bring “finality in a time-bound manner”.

Taking to micro-blogging site Twitter, the businessman posted,

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