Supreme Court Seeks Transparency On Adani Expert Panel

The release of short-seller Hindenburg Research’s 24 January report accusing the Gautam Adani- led conglomerate of corporate malfeasance sparked a crash in shares of Adani Group companies and created a political furore over the billionaire’s alleged proximity with Prime Minister Narendra Modi. The Adani Group has dismissed all allegations as baseless and discredited.

After hearing four public interest litigations (PILs) seeking a probe against Hindenburg for causing significant loss to investors, on regulatory lapses, and an investigation of the Adani Group on the basis of the Hindenburg report, a bench headed by Chief Justice of India Dhananjaya Y. Chandrachud reserved orders on the remit and composition of the committee.

After examining a note submitted by solicitor general Tushar Mehta in a sealed cover, the bench, also comprising justices P.S. Narasimha and J.B. Pardiwala said, “If we have to accept these suggestions, we must disclose it to the other side. There has to be transparency and confidence in the process."

The government proposed a six-member committee headed by a retired Supreme Court judge, comprising the Union home secretary and director, Enforcement Directorate. The note required the committee to submit a report in eight weeks with the initial report to be filed in sealed cover considering the “volatile and emotion driven" nature of the securities market. However, the government’s note clarified that the constitution of the committee would not be a reflection on the ability or competence of the Securities Exchange Board of India (Sebi) or any other statutory body.

The bench said, “If it is in a sealed cover, the petitioners will not know which names we accepted and which we have not and they will get to say it is a government-appointed committee." Following a course of action that it adopted in the past of choosing a committee of its own to examine the Pegasus spyware row where the phones of prominent individuals were allegedly placed under surveillance, the bench said, “We’d rather not accept the sealed cover suggestions in constituting a committee, as we want to follow full transparency. We will appoint a committee in which there will be more confidence." The court did not wish to put those names in public domain either: “It will not be good for the individuals. We will do it on our own."

The Centre’s note also dealt with the proposed terms of reference for the committee with the primary task being “to ascertain the truthfulness of allegations against the Adani Group of companies in the Hindenburg report." The probe, the note added, would also focus on Hindenburg’s admission of acquiring a “short position" in Adani group debt and derivatives, gathering details of all its transactions undertaken prior to publication of report, and assessing whether the transactions fall foul of the penal, statutory and regulatory framework in India.

The remit of the committee, the note said, would also include suggestions to strengthen the regulatory framework for better protection of investors in future. In addition, the note suggested examination of all short-selling in Adani Group shares “prior to and in near proximity of the Hindenburg report".

The court also disagreed with Mehta’s submission that there was no larger market impact of the report.

“You have said in your submissions that the market impact was zero. There cannot be denial of the fact that investors have lost money worth lakhs of crores of rupees."

To be sure, given the low public float of the stock of Adani companies, much of the loss was in the notional wealth of the promoters.

Advocate M.L. Sharma, who was the first to file a PIL, sought an investigation against Hindenburg for a “conspiracy" to inflict loss on the market and the economy and blamed Sebi for failing to protect investors.

Another petitioner Vishal Tiwari said his prime concern was to protect investors while seeking a court-monitored probe into the revelations made in the Hindenburg report. The other two petitions by Congress leader Jaya Thakur and law student Anamika Jaiswal sought probes against the Adani Group on allegations in the report.

The bench said, “Your prayer presumes guilt. Proper investigation is what you are seeking. We will close it for orders."

The solicitor general suggested having statutory investigating agencies and Sebi as part of the committee.

Advocate Prashant Bhushan representing Jaiswal, said, “What is the point of having those people against whom there are allegations." The court remarked: “We cannot start with the presumption of lapse of regulatory framework."