New Delhi: The Supreme Court on Thursday constituted an expert committee under the supervision of former top court judge, Justice A.M. Sapre, to review the market regulatory mechanism in the light of the Adani-Hindenburg controversy and also fixed a two-month deadline for the Securities and Exchange Board of India (SEBI) to complete its probe into the allegations made in a report by the American investment research firm.
The order by a three-judge bench, led by Chief Justice D.Y. Chandrachud, was pronounced on a batch of petitions, with some of them seeking a court-monitored probe into the alleged irregularities pointed out in the Hindenburg Research report.
The bench noted that SEBI was already inquiring into the matter as well as looking at the market activity — immediately preceding and post the report’s publication — to ascertain if there were any kind of violations.
While fixing a two-month timeline for the market regulator to conclude its probe, the court asked SEBI to file a status report before it upon the completion of its task.
The court also expanded the scope of SEBI’s investigation and asked it to determine if there was a violation of the Securities Contract Regulation Rules; whether there was a failure to disclose transactions with related parties and if there was any manipulation of stock prices in contravention of existing laws.
It was specified by the bench that the new remit for SEBI does not mean that it would limit the existing contours of SEBI’s ongoing investigation. “SEBI shall expeditiously conclude its investigation within two months and file a status report,” the bench ordered.
The committee members nominated by the court are former SBI chairman O.P. Bhat, retired justice J.P. Devdatt, veteran banker K.V. Kamath, co-founder of Infosys Nandan Nilekani and Bombay-based advocate Somasekharan Sundaresan.
The collegium, headed by CJI Chandrachud in January this year, endorsed the judges’ appointment panel’s previous recommendation to appoint Sundaresan as a judge. The government had objected to his candidature because the lawyer had aired his views on social media on several matters which were sub-judice.
This expert committee too has to submit its report in a sealed cover to the court in two months. SEBI was directed to inform the expert panel about its action taken in furtherance of court’s direction as well as the steps taken as part of its investigation.
In its order the bench also noted the loss suffered by the investors in the past few weeks due to the steep decline of share prices of the Adani Group, as a result of the Hindenburg Research report that claimed the conglomerate had indulged in malpractices.
During a hearing on 17 February, the court had made its intention clear to have a committee to look into the existing regulatory mechanism, after it shared its concern over the alleged impact the report had on the wealth of investors. While the Centre had agreed to the court’s suggestion, it wanted the judges to consider including government nominees in the panel as well as the latter’s proposal on which areas should the expert committee look into.
The present committee’s remit is to provide an overall assessment of the situation including relevant factors that led to the volatility in the market in the recent past. Apart from examining if there was a regulatory framework in dealing with alleged violations of law pertaining to the securities market, the committee also has to increase investor awareness and suggest measures to strengthen the statutory and regulatory framework to protect the interests of existing investors.
All government agencies have to provide assistance to the panel and the SEBI chairperson has been requested by the court to provide all information to it as well. It can seek recourse to external experts and the honorarium payable to the members of the committee shall be fixed by the Chairperson, which shall be borne by the Centre. The court asked the Secretary of Union Finance Ministry to appoint a nodal officer to coordinate and provide logistical support to the committee.
The Adani Group, meanwhile, lauded the Supreme Court order, saying that “truth would prevail”.
Group Chairman Gautam Adani tweeted: “The Adani Group welcomes the order of the Hon’be Supreme Court. It will bring finality in a time-bound manner. Truth will prevail.”
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