Supreme Court asks SEBI to probe if Hindenburg report violated law, caused harm to investors

The Supreme Court on January 3 directed the Securities and Exchange Board of India (SEBI) to invoke its powers of investigation and probe if the Hindenburg report on short-selling amounted to a violation of law, causing harm to investors.

The Supreme Court on January 3 directed the Securities and Exchange Board of India (SEBI) to invoke its powers of investigation and probe if the Hindenburg report on short-selling amounted to a violation of law, causing harm to investors.

A three-judge Bench headed by Chief Justice of India D. Y. Chandrachud dismissed the findings of NGO Organised Crime and Corruption Reporting Project (OCCRP) about alleged stock manipulation and accounting fraud against Adani Group.

Chief Justice Chandrachud, reading out the operative part of the judgment, said such unsubstantiated third party reports by media or organisations cannot be relied upon as conclusive proof against a statutory regulator such as SEBI. They do not not amount to cogent evidence.

The judgment said the judiciary’s review of regulatory framework of SEBI was limited to check if there was arbitrariness or violation of fundamental rights.

SEBI probe did not suffer from irregularities. It had completed 22 out of 24 investigations against Adani Group. The court asked the market regulator to complete the remaining two investigations expeditiously, within three months.

The threshold to transfer investigation from SEBI to another agency was not present. Transfer is usually done only on exceptional/extraordinary circumstances. “A situation of willful or glaring apathy/bias had not been shown by SEBI,” the judgment said.

The petitioners’ allegation that SEBI suppressed information received from Directorate of Revenue Intelligence about the Adani group was misconceived. The court upheld SEBI’s argument that DRI had closed the probe against Adani in 2016 and the issue had travelled up to the CESTAT and the Supreme Court.