Adani-Hindenburg Controversy | Judgement Pronouncement

The Court refused to transfer SEBI’s probe into Adani’s stock manipulation and accounting fraud to the CBI or a Special Investigation Team

Yesterday, the Supreme Court rejected a petition to order a Central Bureau of Investigation (CBI) or constitute a Special Investigative Team (SIT) to probe allegations of financial mismanagement against the Adani Group.

A three-judge Bench comprising Chief Justice of India (CJI) D.Y. Chandrachud and Justices J.B. Pardiwala and Manoj Misra delivered its judgement on a petition filed by Advocate Vishal Tiwari. The Bench had reserved its judgement on 24 November 2023.

The Bench stated that though it has the power to transfer the probe from the Securities and Exchange Board of India (SEBI) to the CBI or an SIT, such power can only be exercised upon proving that SEBI has portrayed a glaring, willful and deliberate inaction in carrying out the investigation.

An affidavit filed by SEBI in August 2023 had stated that the market regulator had completed its investigation in 22 of the 24 cases filed against the Adani Group. The Court ordered the SEBI to conclude its investigation in the remaining two cases within three months.

The Court directed SEBI and the investigative agencies of the Union to probe whether the activist short-seller Hindenburg Research’s report on the Adani Group caused any loss to Indian investors and whether the group’s actions amounted to a violation of Indian law.

The Union government and SEBI were directed by the Court to “constructively consider” the suggestions of the Court-appointed Expert Committee. Based on this consideration, it asked them to “take any further actions as are necessary to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market.” 

Following the allegations made by Hindenburg Research, the Supreme Court in March 2023 had formed a five-member committee headed by retired Supreme Court Justice Abhay Manohar Sapre to review existing regulatory mechanisms and protect the interests of Indian investors.. 

Through its judgement, the Court rejected the petitioner’s allegations of conflict of interest against the members of the Expert Committee, calling them  “unsubstantiated”.

The Court also dismissed the findings of the Organised Crime and Corruption Reporting Project (OCCRP), a network of investigative journalists, on alleged stock manipulation and accounting fraud against the Adani Group. The Court stated that such reports by third-party organisations cannot be relied upon as conclusive proof of the inadequacy of the SEBI’s investigation. However, they may be presented before SEBI or the Expert Committee.

“Petitions that lack adequate research and rely on unverified and unrelated material tend to, in fact, be counterproductive,” the Bench observed, “This word of caution must be kept in mind by lawyers and members of civil society alike.”