New Delhi: Hearing petitions for enquiry into findings of the Hindenburg Research report, the Supreme Court Friday asked the central government and the Securities and Exchange Board of India (SEBI) to suggest measures to protect Indian investors in the future. The court took note of losses suffered by Indian investors running into several lakh crores owing to the fall in share prices of Adani Group companies in the face of allegations.
A bench comprising Chief Justice of India (CJI) D.Y. Chandrachud and Justices P.S. Narasimha and J.B. Pardiwala said, “It is said total loss by Indian investors is several lakh crores….How do we ensure they are protected? How do we ensure that this does not happen in future. What role should be envisaged for SEBI in future?”
The court also expressed concerns over “ensuring that regulatory mechanism within the country is duly strengthened so that Indian investors are protected against sudden volatility which has been witnessed in recent 2 weeks.”
It then directed SEBI to file a detailed response on how a more robust mechanism can be put in place, and suggested that its response “contain existing regulatory framework, the relevant causal factors, the need for putting into place a robust mechanism to protect investors”. The bench also proposed setting up an expert committee to give suggestions on strengthening the existing regulatory framework and giving wider powers to SEBI.
The matter has now been posted to 13 February, with the bench clarifying that its observations shall not be considered a reflection on the discharge of the statutory functions of SEBI or any other regulatory authority.
The controversy relates to a report released last month by Hindenburg Research titled ‘Adani Group – How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History’. In the report, the New York-based short-seller accused the Adani Group of engaging in “brazen stock manipulation and accounting fraud scheme over the course of decades”.
Publication of the report resulted in the Adani Group’s seven listed companies losing an estimated $110 billion in cumulative stock market value.
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Petitions on Adani-Hindenburg row
Relying on its two-year-long probe, Hindenburg Research said it had evidence of various irregularities in the conglomerate’s finances.
It further accused the Adani Group of operating multiple shell companies, often offshore, “to serve several functions, including stock parking/manipulation, and laundering money through Adani’s private companies onto the listed companies’ balance sheets in order to maintain the appearance of financial health and solvency”.
The conglomerate responded by publishing a 413-page reply, refuting the allegations and terming the report a “calculated attack on India”.
Against this backdrop, the Supreme Court made the observations while hearing two public interest litigations on the findings in the report.
One of the petitions was by advocate M.L. Sharma, seeking directions to SEBI and the Ministry of Home Affairs (MHA) to conduct an enquiry and register a First Information Report (FIR) against the founder of Hindenburg Research, Nathan Anderson, and his associates in India. It also demanded that the act of ‘short-selling’ be declared a fraud.
The second petition was filed by advocate Vishal Tiwari, seeking the constitution of a committee headed by a retired Supreme Court judge to probe the allegations made in the report.
This petition highlighted the fact that the publication of the report led to huge losses for various Indian investors. It also asserted that in the aftermath of the “unprecedented attack on billionaire Gautam Adani’s vast empire by Hindenburg”, the market value of all 10 Adani stocks halved, leaving investors with a colossal loss of Rs 10 lakh crore.
(Edited by Amrtansh Arora)
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