A civil society group on Friday called for the appointment of a judicial commission to investigate United States-based short-seller Hindenburg Research’s recent allegations against the Securities and Exchange Board of India.

The group demanded that President Droupadi Murmu use her powers under the Constitution to make a reference to the Supreme Court on the matter, and to “and appoint a commission headed by a member of the higher judiciary under the Commissions of Enquiry Act”.

The demand was made by the People’s Commission on Public Sector and Public Services, a group of academicians, jurists, former administrators, trade unionists and social activists.

“The latest accusations made by Hindenburg Research against a possible conflict of interest on the part of the present Chairman of SEBI once again raise similar concerns about capital market regulation in India,” the group said in a statement, referring to SEBI Chairperson Madhabi Buch.

The American short-seller has alleged that Buch and her husband Dhaval Buch had “hidden stakes” in offshore entities tied to stock price manipulation and money laundering by the Adani Group.

The group said that despite the seriousness of the allegations, the Union government had not cared “to order an investigation to dispel any doubt about the role” of Buch.

The academicians and activists said that while looking into the veracity of Hindenburg’s accusations is important, it should not divert attention “from the larger picture of how the present government has systematically and deliberately encouraged and nurtured a shadow economy to flourish overseas for unethical private corporate entities”.

The corporate affairs ministry had set up a task force to identify and define “overseas shell companies” but its proceedings “have not seen the light of the day since 2018”, the group said.

It alleged that many business houses “are exploiting that legislative loophole, offered to them by the government on a silver platter and using their funds in overseas shell companies to play havoc with our economy”.

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Under a section titled “SEBI in cahoots with the NDA government”, the academicians and activists also pointed out that the SEBI (Foreign Portfolio Investors) Regulation had been diluted in December 2018, making it difficult for the markets regulator to “readily investigate the ownership of FPIs in cases such as those relating to the Adani Group”.

The regulation had earlier mandated that “the very ultimate natural person at the end of the chain of every owner of economic interest” had to be disclosed by a foreign portfolio investor.

“It is thus clear that SEBI has deliberately or otherwise disabled itself from conducting a thorough investigation as required by the apex court,” the group said.

The Supreme Court had ordered SEBI to inquire into Hindenburg Research’s allegations against the Adani Group in March 2023.

The group also pointed out that investigations against Adani Group companies, by SEBI and the Directorate of Revenue Intelligence, have been pending for more than six years. It said that this suggests that both the government and its agencies have been deliberately dragging their feet on the matter.

“Since the present government seems to have a direct hand in this, we appeal to the President of India to…appoint a commission headed by a member of the higher judiciary under the Commissions of Enquiry Act to examine the above-referred policy changes, their adverse impact on the economy and people’s savings and their implications from the point of the unholy nexus between big businesses and the political party in power,” the group said.

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