NEW DELHI: The Supreme Court found that “no apparent regulatory failure can be attributed to Sebi” based on the material placed before it to draw a conclusion that the markets regulator did not act with alacrity to investigate the controversy arising from the Hindenburg report in January last year which led to Gautam Adani-led group companies tanking in the stock market.
“There is prima facie no deliberate inaction or inadequacy in the investigation by Sebi,” the SC said after perusing the material placed before it by solicitor general Tushar Mehta. The court noted that while investigations were complete in 22 cases of alleged stock manipulation, two were still pending. Sebi had told the court that the probe in the two cases was awaiting inputs from foreign regulators. The CJI-led bench said, “Sebi cannot keep the investigation open-ended and indeterminate in time. Hence, Sebi shall complete the pending investigations preferably within three months.”
Importantly, the SC considered the huge loss suffered by investors, estimated at Rs 12 lakh crore within a month of publication of the Hindenburg report, and ordered a multi-pronged probe into the role of Hindenburg Research. “Sebi and the investigating agencies of the Union government shall probe whether the loss suffered by Indian investors due to the conduct of Hindenburg and any other entities in taking short positions involved any infraction of the law and, if so, suitable action shall be taken,” the SC said.
After the SC-appointed expert committee headed by Justice A M Sapre presented its first report to the SC, the petitioners, especially advocate Prashant Bhushan, had raised several instances of alleged conflict of interest against certain members. The court dismissed these as unsubstantiated allegations.
On the petitioners’ demand for quashing certain regulatory measures and amendments to regulations on FPI and Listing Obligations and Disclosure Requirements (LODR) undertaken by Sebi on the insinuation that these helped the Adani Group manipulate stock prices, the bench said the SC’s power to enter the regulatory domain of Sebi in framing delegated legislation was limited.
“No valid grounds have been raised for this court to direct Sebi to revoke its amendments to the FPI regulations and the LODR regulations which were made in exercise of its delegated legislative power. The procedure followed in arriving at the current shape of the regulations does not suffer from irregularity or illegality. The FPI regulations and LODR regulations have been tightened by the amendments in question,” CJI D Y Chandrachud and Justices J B Pardiwala and Manoj Misra said before disposing of the petitions.
However, it asked Sebi and the Union government to constructively consider the Justice Sapre committee’s suggested regulatory measures. “The government of India and Sebi will peruse the report of the expert committee and take any further actions as are necessary to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market,” the SC said.
“There is prima facie no deliberate inaction or inadequacy in the investigation by Sebi,” the SC said after perusing the material placed before it by solicitor general Tushar Mehta. The court noted that while investigations were complete in 22 cases of alleged stock manipulation, two were still pending. Sebi had told the court that the probe in the two cases was awaiting inputs from foreign regulators. The CJI-led bench said, “Sebi cannot keep the investigation open-ended and indeterminate in time. Hence, Sebi shall complete the pending investigations preferably within three months.”
Importantly, the SC considered the huge loss suffered by investors, estimated at Rs 12 lakh crore within a month of publication of the Hindenburg report, and ordered a multi-pronged probe into the role of Hindenburg Research. “Sebi and the investigating agencies of the Union government shall probe whether the loss suffered by Indian investors due to the conduct of Hindenburg and any other entities in taking short positions involved any infraction of the law and, if so, suitable action shall be taken,” the SC said.
After the SC-appointed expert committee headed by Justice A M Sapre presented its first report to the SC, the petitioners, especially advocate Prashant Bhushan, had raised several instances of alleged conflict of interest against certain members. The court dismissed these as unsubstantiated allegations.
On the petitioners’ demand for quashing certain regulatory measures and amendments to regulations on FPI and Listing Obligations and Disclosure Requirements (LODR) undertaken by Sebi on the insinuation that these helped the Adani Group manipulate stock prices, the bench said the SC’s power to enter the regulatory domain of Sebi in framing delegated legislation was limited.
“No valid grounds have been raised for this court to direct Sebi to revoke its amendments to the FPI regulations and the LODR regulations which were made in exercise of its delegated legislative power. The procedure followed in arriving at the current shape of the regulations does not suffer from irregularity or illegality. The FPI regulations and LODR regulations have been tightened by the amendments in question,” CJI D Y Chandrachud and Justices J B Pardiwala and Manoj Misra said before disposing of the petitions.
However, it asked Sebi and the Union government to constructively consider the Justice Sapre committee’s suggested regulatory measures. “The government of India and Sebi will peruse the report of the expert committee and take any further actions as are necessary to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market,” the SC said.
