Adani-Hindenburg row: SC notes heavy loss to investors, seeks SEBI’s views on improving regulations
Chief Justice DY Chandrachud also proposed forming an expert committee.
The Supreme Court on Friday expressed concern about the rout in shares of the Adani Group, saying that investors have suffered losses running into several lakh crores, Bar and Bench reported.
“How do we ensure they [investors] are protected?” a bench headed by Chief Justice DY Chandrachud asked. “How do we ensure that this does not happen in future?”
The ports-to-energy conglomerate led by billionaire Gautam Adani has been steeped in a crisis since January 24, when United States-based investment firm Hindenburg Research alleged that the group has amassed substantial debt by pledging overvalued shares. Since the report was released, Adani Group companies have lost nearly Rs 9 lakh crore in the stock market bloodbath.
"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": Supreme Court pic.twitter.com/6bmvNg07Pv
— Bar & Bench (@barandbench) February 10, 2023
In a brutal fallout, Adani Group flagship company Adani Enterprises was also forced to call off its Rs 20,000 crore follow-on public offering that was meant to repay debt. The Adani Group has alleged that the report’s “principal objective” was to derail the share offer.
On Friday, the Supreme Court sought views of the Centre and the Stock Exchange Board of India, or SEBI, on how a more robust mechanism can be installed to protect investors, according to Live Law.
The bench, also comprising Justices PS Narasimha and JB Pardiwala, then directed SEBI to file a response by February 13.
The court was hearing two petitions filed by advocate Manohar Lal Sharma and Vishal Tiwari, respectively.
In his plea, Sharma had sought directions to SEBI and the home ministry to conduct an investigation and register a first information report against Hindenburg Research founder Nathan Anderson and his associates in India.
He also accused Anderson and his associates of hatching a criminal conspiracy by short-selling Adani stocks before releasing their report. Investment research firms like Hindenburg often engage in “activist short selling”, or publicising information about companies to trigger a fall in their share prices.
On the other hand, Tiwari sought the formation of a committee under a retired Supreme Court judge to investigate the Hindenburg Research report.
Formation of a committee
During Friday’s hearing, the chief justice also proposed forming an expert committee for seeking recommendation on strengthening the regulatory framework, reported Live Law.
“We do not want to cast any doubt on the SEBI or the regulatory agencies,” Chandrachud said. “But the suggestion is to have a broader thought process so that some inputs can be obtained. And then the Government can take a call…”
Bench - We can give those powers to SEBI too so that it has better provisions to ensure protection in the future. And also now the stock market is not a place where only large investors invest. Now, investment is made by a wide spectrum of middle class.
— Live Law (@LiveLawIndia) February 10, 2023
Solicitor General Tushar Mehta, who was appearing on behalf of SEBI, argued that the rout in shares of the Adani Group was triggered by the Hindenburg report, which is beyond the territorial jurisdiction of the court.
“SEBI has been looking into [the Adani crisis] from whatever statutory regime is existing,” Mehta said, according to Live Law.
The chief justice then suggested that SEBI should have a consultation with the finance minister and come up with a framework.
“These are just loud thinking,” Chief Justice Chandrachud said. “We are conscious that whatever we say may also affect the stock market. It runs largely on sentiments.”