The Supreme Court on Friday reserved its judgment in a batch of public interest litigations (PILs) seeking a court-monitored investigation into the allegations made by US-based short-selling firm Hindenburg Research against the Adani group of companies regarding violations of the stock market. The Court quizzed the market regulator about measures to protect investors from volatility in the stock market.

A three-judge bench headed by Chief Justice India (CJI) DY Chandrachud concluded its hearing in the case pertaining to allegations about Adani Group having inflated its share prices. After these allegations (part of a report by short-seller Hindenberg Research) were published, it led to a sharp fall in the share value of various Adani companies, reportedly to the tune of $100 billion. This led to a batch of petitions being filed before the top court, including a plea that alleged that changes to the SEBI Act had provided a ’shield and an excuse’ for the Adani Group’s regulatory contraventions and market manipulations to remain undetected.

During the hearing, the bench observed that one of the principal reasons that led the apex court to intervene in these petitions was the extreme volatility of the stock market.

SEBI quizzed

“Now what does SEBI intend to do to protect this kind of volatility, which leads to a loss of investor value,” the bench asked Solicitor General Tushar Mehta, who was representing SEBI. Later, SG told the bench about various steps.

“We do not have to consider the Hindenburg report as an ipso facto determination of facts. We don’t have to stick to the Hinderburg report as it is and don’t know the veracity of the report, and that is why we asked SEBI to investigate the matter,” said Chief Justice DY Chandrachud.

Advocate Prashant Bhushan, appearing for one of the petitioners, also argued in the matter and questioned the credibility of SEBI’s probe. “We have come to the conclusion that the SEBI probe is not credible. They say 13 to 14 entries are linked to Adani, but they cannot look into it because the FPI guidelines were amended,” he said.

This led the Court to point out that the securities market regulator cannot be asked to go by what the media has to say on the subject. “Mr. Bhushan, I do not think you can ask a financial regulator to take something printed in the newspaper. This does not discredit SEBI. Should SEBI now follow journalists?” the CJI asked.

Earlier this year, the Supreme Court had asked SEBI to independently investigate the matter, apart from constituting an expert committee headed by retired Justice AM Sapre to also look into the matter. The expert committee, in its report released in May, found no prima facie lapse on the part of the SEBI in the matter. On Friday, Mehta contended that media reports were now being “planted” to influence India’s actions. “There is a growing tendency of planting stories outside India to influence decisions within India. One example is the OCCRP report,” Mehta alleged.

He also apprised the bench that the investigation into 22 out of the 24 cases relating to allegations against the Adani group was over. “For the remaining two, we need information from foreign regulators, etc., and some others,” he said.

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