Adani row: SC says no to Centre's 'expert names in sealed cover' plan

The Supreme Court Friday refused to accept in a sealed cover the Centres suggestion on a proposed panel of experts for strengthening regulatory measures for stock markets in the wake of the recent Adani Group shares crash triggered by Hindenburg Research’s fraud allegations.

Observing that it wanted full transparency for protection of investors, the top court also ruled out the possibility of any sitting judge overseeing the functioning of the proposed panel.

We are closing it for orders, said the bench headed by Chief Justice D Y Chandrachud after hearing brief submissions by Solicitor General Tushar Mehta and PIL petitioners, including lawyers Prashant Bhushan and M L Sharma.

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S-G’s submission

At the outset, the law officer said he had given a note on the names and remit (scope) of the committee in a sealed cover. This has been given with two intentions in mind – one, a holistic view is taken and the truth comes out; two, no unintended message goes out having an impact on the security market, which is an emotion driven market, Mehta said.

The bench referred to the losses suffered by the investors.

The law officer said he has no issues with regard to any judge supervising the committee.

“We would rather not accept the sealed cover suggestions. We want to ensure transparency. In case we take your suggestions from sealed cover, it automatically means the other party won’t know,” said the bench, which also comprised Justices P S Narasimha and J B Pardiwala .

“We want full transparency for the protection of investors. We will form a committee. There will be a sense of confidence in the court,” the bench said.

“Sitting (SC) judges can hear the matter and they cannot be the part of the committee,” the CJI said, adding he has been facing difficulties in setting up benches everyday.

Investors’ interest

On February 10, the top court had said the interest of Indian investors need to be protected against market volatility in the backdrop of the Adani Group stocks rout and asked the Centre to consider setting up a panel of domain experts headed by a former judge to look at strengthening the regulatory mechanism.

The crucial hearing on the PILs on Friday assumed significance in the wake of the recent developments like the Centre agreeing to the apex courts proposal to set up a committee, likely to be headed by a former Supreme Court judge, to go into the regulatory regimes.

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Stressing that statutory bodies like market regulator Securities and Exchange Board of India (SEBI) are fully equipped and are on job, the central government had expressed apprehension that any unintentional message to the investors that regulatory bodies in India needed monitoring by a panel may have some adverse impact on the flow of money into the country.

The Centre had told the bench that it wanted to provide details such as names and the scope of the panels mandate in a sealed cover.

SEBI, in its note filed in the top court, had indicated it is not in favour of banning short-selling or sale of borrowed shares, and said it is investigating allegations made by a short-seller against the Adani Group as well as its share price movements.

Four PILs

Till now, four PILs have been filed in the top court on the issue by lawyers M L Sharma, Vishal Tiwari, Congress leader Jaya Thakur and Mukesh Kumar, who claim to be a social activist.

Tiwari, in his PIL, sought a direction to the Centre to constitute a committee monitored by a retired apex court judge to inquire into the Hindenburg Research report which has made a slew of allegations against the business conglomerate led by industrialist Gautam Adani.

Another PIL filed by advocate ML Sharma sought prosecution of short-seller Nathan Anderson of the US-based Hindenburg Research and his associates in India and the US for allegedly exploiting innocent investors and the “artificial crashing” of the Adani Groups stock value in the market.

Congress leader Thakur, in his plea, has sought an investigation under the supervision of a sitting apex court judge against the Adani Group of companies in light of the allegations.

The fourth PIL seeks a probe by multiple central government agencies under the supervision of a panel or a former apex court judge against the Adani Group following allegations of fraud and share price manipulation.

Investigation sought

Direct appropriate audit (transactional and forensic audits), inquiry and investigation by appropriate agencies such as Serious Frauds Investigation Office (SFIO); Registrar of Companies (RoC); SEBI; ED on money-laundering aspect; I-T on aspects of offshore transactions and tax-havens involved and DRI (Department of Revenue Intelligence), the fourth plea said.

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Besides seeking a direction to the Centre and its agencies to render cooperation in the probe, the PIL has sought a direction to appoint a retired judge of the apex court or a committee to oversee and monitor the inquiry and investigation.

Adani Group stocks have taken a beating on the bourses after the Hindenburg Research made a litany of allegations, including fraudulent transactions and share-price manipulation, against the business conglomerate. The Adani Group has dismissed the charges as lies, saying it complies with all laws and disclosure requirements.

(With Agency inputs)