Professing complete faith in the Securities and Exchange Board of India (SEBI), the Supreme Court has neatly passed the Adani-Hindenburg case into the stock market regulator’s hands. Noting that SEBI’s investigations were “comprehensive” and “inspire confidence” , the apex court has said that “SEBI should take its investigations to their logical conclusion in accordance with law” and given the regulator a further three months to complete its job. This faith in the regulator is born out of the Justice AM Sapre committee’s report which found no evidence of regulatory failure by SEBI in handling the case.

By emphatically stating that “SEBI’s wide powers, coupled with its expertise and robust information-gathering mechanism, lend a high level of credibility to its decisions as a regulatory, adjudicatory and prosecuting agency,” the Court has effectively brushed aside the doubts raised by the petitioners regarding the amendment of the FPI regulations in 2018 and 2019. It was alleged that these helped conceal the ultimate beneficial owners.

Following the publication of the Hindenburg research, SEBI was directed by the Supreme Court to investigate whether there has been a violation of the minimum public shareholding rules, failure to disclose transactions with related parties and whether there has been any manipulation of stocks in the Adani group. In August 2023, SEBI submitted a status report in which it stated that out of 24 investigations, 22 are complete and two are in the interim stage. It is noteworthy that the Court did not inquire into SEBI’s inability to complete the two pending investigations even after four months. Significantly, the two pending matters relate to violations of minimum public shareholding norms. It is surprising indeed that the regulator is unable to prise out details from tax haven jurisdictions where these FPI entities related to the Adani group are located but independent journalists and Hindenburg were able to do so. This is especially so given that in recent times there is greater global cooperation in information sharing. .

The Court’s emphatic stand that it will not act as appellate authority over policies framed by a regulator unless the policy violates constitutional or statutory rules is a reiteration of its stance in earlier cases, though some may argue that there were enough grounds for the court to intervene. The allegation regarding the conflict of interest against the members of the Expert Committee, obviously didn’t stand because the petitioners could not prove the issue conclusively. The order to probe whether Hindenburg Research has violated any law in publishing the report on Adani and to take action against it, appears needless. There are many such research and brokerage houses which publish reports on specific companies with an intention to profit from the fall or rise in prices. Seasoned investors are also well aware of these risks.

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