The Supreme Court on Wednesday directed the Securities and Exchange Board of India (SEBI) to invoke its powers of investigation and probe if the Hindenburg report on short-selling amounted to a violation of law, causing harm to investors.

A three-judge Bench headed by Chief Justice of India DY Chandrachud dismissed the findings of NGO Organised Crime and Corruption Reporting Project (OCCRP) about alleged stock manipulation and accounting fraud against Adani Group.

Chief Justice Chandrachud, reading out the operative part of the judgment, said such unsubstantiated third party reports by media or organisations cannot be relied upon as conclusive proof against a statutory regulator like SEBI. They do not not amount to cogent evidence.

The judgment said the judiciary’s review of regulatory framework of SEBI was limited to check if there was arbitrariness or violation of fundamental rights. SEBI probe did not suffer from irregularities. It had completed 22 out of 24 investigations against Adani Group. The court asked the market regulator to complete the remaining two investigations expeditiously, within three months.

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The threshold to transfer investigation from SEBI to another agency was not present. Transfer is usually done only on exceptional/extraordinary circumstances. A situation of willful or glaring apathy/bias had not been shown by SEBI, the judgment said.

The petitioners’ allegation that SEBI suppressed information received from Directorate of Revenue Intelligence about the Adani group was misconceived. The court upheld SEBI’s argument that DRI had closed the probe against Adani in 2016 and the issue had travelled up to the CESTAT and the Supreme Court.

The court had heard claims that SEBI had “concealed” an alert received from the Directorate of Revenue Intelligence (DRI) about “Adani having siphoned off money and invested them in Adani listed companies through entities based in Dubai and Mauritius”.

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According to Bhushan, the DRI letter to the then SEBI chairperson, UK Sinha, on January 31, 2014, alerting that “there may be stock market manipulation being committee by the Adani group of companies using the money siphoned off through overvaluation in the import of power equipment by Adani group”.

The DRI was at the time investigating a case of overvaluation of import of equipment and machinery by various entities of Adani group from a UAE-based subsidiary.

The court dismissed allegations by petitioners that Justice AM Sapre Committee members were in a position of conflict of interest.

A petition filed through advocate Prashant Bhushan, who had argued that the committee led by Justice Sapre was hit by “conflict of interest”.

Bhushan had contended that one of the committee members, OP Bhatt, a former chairman of State Bank of India, was working as the Chairman of Greenko, a leading renewable energy company. Since March 2022, Greenko and Adani Group were working in a close partnership to provide energy to Adani Groups facilities in India, he submitted.

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The senior lawyer had also trained his guns on advocate Somasekhar Sundaresan, another committee member who was recently appointed an Additional Judge of the Bombay High Court. Mr. Bhushan said Mr. Sundaresan had appeared for the Adani Group in 2006 and had been on “several SEBI committees”.

The Justice Sapre Committee was constituted by the Supreme Court on March 2 to investigate the causal factors and existence, if any, of regulatory failure which led to investors losing crores due to volatility in the securities market following Hindenburg Research’s report accusing the Adani Group of manipulation of share prices and account fraud.

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