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Supreme Court seeks views of Centre, Sebi on Hindenburg report on Adani firms

The SC has listed the two PILs, seeking various reliefs including a probe into the Hindenburg report, for hearing on February 13
Last Updated 10 February 2023, 14:29 IST

The Supreme Court on Friday asked the Centre to respond on Monday on the question of whether strengthening of the regulatory regime is required to protect small investors, who suffered massive losses in lakhs of crores in the stock market, following the Hindenburg report on the Adani Group.

Hearing two PILs by advocates Vishal Tiwari and M L Sharma for a probe into American shotseller Hindenburg's report on the Adani Group, a bench presided over by Chief Justice D Y Chandrachud asked Solicitor General Tushar Mehta to consult the Finance Ministry if the Centre is contemplating a robust mechanism to protect investors from such a blood bath in the future.

The bench, also comprising Justices P S Narasimha and J B Pardiwala, sought to know if improvements were required in the statutory and regulatory framework.

"We are looking at a broader perspective, but we will tread with great caution," the bench said.

"We don't want to interfere in policy domain, but can it be considered if policy change required? May be Sebi can come back on Monday and give us report on the existing situation? Also, how can we strengthen existing regime," the bench told Mehta.

The bench asked if it was possible to contemplate having an expert committee, possibly from the banking and investment area, headed by a wise guiding force in the form of a retired judge.

"We are just thinking out aloud. It's a new world, capital inflows are seamless. It can happen again," the bench cautioned.

"You may consult the Finance Ministry too. We want an amicus. Give us a framework of the government, what areas needs to be worked on? The petition is not well thought-out but sometimes we have to go beyond this. Come back to us on Monday after instructions," the bench told Mehta.

The bench further said it does not want to cast any doubt about Sebi but its primary concern was to protect investors.

"You have financial law reform committees. Can you take a call on whether modification or monitoring of regulatory frameworks is required," the bench asked Mehta who said the trigger point was Hindenburg report which is outside our jurisdiction.

The Union government's counsel Mehta also assured the court that Sebi was on top of the matter and would respond to the PILs.

The plea before the court claimed a USA resident Nate Anderson of Hindenburg Research and his Indian entities hatched a criminal conspiracy and did a short sale worth hundreds of billion dollars prior to and thereafter on January 25, 2023 when they released concocted news as a research report qua to the Adani Group of companies, and squared up their short sell position at the lowest rate.

The petitioner raised legal questions about whether Sebi was not duty-bound to suspend trading in the short selling stock to protect investors and whether intentionally short selling to crash a stock in share market to square up through concocted artificial means is not a fraud punishable under Sections 420 and 120-B of the IPC along with the provisions of the Sebi Act.

Hindenburg Research's report about Indian billionaire Gautam Adani has led to a stock rout, erasing over $100 billion from his empire and pushing him down on the global rich list.

In its report, five-year-old Hindenburg Research accused the Adani Group conglomerate of being involved in accounting fraud and "brazen stock manipulation". The Adani Group rubbished the allegations.

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(Published 10 February 2023, 10:51 IST)

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