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A three-judge bench of the Supreme Court has by its order dated 2nd March 2023 set up a committee with certain terms of reference framed by it. This is an off shoot of the court being countenanced with the ongoing stock market imbroglio concerning the precipitous fall in the share prices of the companies forming part of the Adani group in the wake of the charges contained in the now famous Hindenburg revelations. 

It is a fact that in the few weeks since the Hindenburg research report hit the stands that the market capitalization of the various Adani group companies has nosedived significantly and the shares are quoting at a fraction of the prices they commanded earlier. The biggest loser has been the promoter himself, with almost 75% holding in all the companies in the group.

It is not clear whether a typical small investor who suffers the biggest hit in any of the market scams was the victim in this case. Based on public records, mutual funds which the small investors trust their money with, have negligible holdings in Adani group companies. LIC as custodian of the policy holders’ funds has exposure to this group.

It is no secret that the shares of the Adani companies had sky rocketed in the last few years and reached the levels completely at variance with the broader market movements. Little concern was shown when the prices were going up by the minute that uninformed small investors may be buying at such levels.

The Hindenburg report purportedly gave concrete contours to issues that were in the realm of speculation till then. Little evidence exists that these companies have a wide local investor participation or were regarded as entities with governance attributes fit for independent institutions to invest. There was a general sense of unease about the group’ meteoric rise in a fairly short period of time. 

It is a sign of the times we live in that the matter directly went to the highest court even as the events were unfolding. The alleged political patronage enjoyed by the Adani group became the fodder to raise the profile of this rumpus and attribute the debacle to regulatory and governmental inaction.

It is difficult to fix the exact loco standi for the highest court to spare its time, which is so much under stress, to a subject whose entire scope was unclear and still evolving.

There was little in the form of hard material independently investigated to help any court to evaluate and much less understand the exact problem to pass orders on. 

The regulators mainly the department of company affairs which is charged with the oversight of the corporate functioning, NFRA, the more recent creation to look into financial reporting and disclosure failures, and SFIO which has a direct responsibility to look at corporate frauds seem to be completely missing in the picture. The court has seen SEBI as the only relevant agency for investigating this.

The action of the court smacks of a knee jerk response to demonstrate its concern for the orderly functioning of the stock market and score some brownie points in the eye of the general public and small investors who may have been disconcerted by the happenings around.

Not stopping with cracking its whip to seek quick action from the SEBI, the stranger part of the order is the constitution of a committee with certain terms of reference drawn by the court itself. This is like bringing a team of super specialists to treat a patient when the basic diagnosis and pathological reports are still awaited.

The composition of the committee also gives room for disquiet. Besides the chairman, a retired supreme court judge and a retired high court judge, the other members are persons with a strong footing in the corporate sector as Chairman, directors, advisers and lawyer to companies. Two of the former bank chiefs could have engaged with one or more of the companies in question as borrowers.

The committee should have included reputed audit professionals and forensic experts, well known academics in the field of security markets, independent journalists, with the right credentials of having done independent investigation of a similar scams in the past. Of course, the answer would be that the committee has the freedom to take inputs from anyone and the public that feels so concerned by this scam can send their views.

While there is urgency to address the issues under focus, the approach of the court has needlessly embroiled it in the case rather prematurely  than look into it after a credible investigation by the statutory agencies and with the appropriate legal forum below reviewing the same.

Did the anxiety to steal the thunder cause this?

These pieces are being published as they have been received – they have not been edited/fact-checked by ThePrint.


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