On Thursday, the Supreme Court of India formed an expert committee led by former Supreme Court judge Abhay Manohar Sapre to investigate if there was a regulatory failure in addressing investor losses following the release of an adverse report by American short-seller Hindenburg Research on the Adani group of companies. The committee includes former State Bank of India chairman O P Bhatt, retired judge J P Devadhar, Infosys co-founder Nandan Nilekani, banking veteran K V Kamath, and Mumbai-based advocate Somashekhar Sundaresan as members. The Adani Group welcomed the verdict and stated that the truth would prevail. The committee has been asked to submit its report to the court within two months.
The committee’s remit is to provide an overall assessment of the situation, including the relevant causal factors leading to the recent volatility in the securities market. It will suggest measures to strengthen investor awareness, investigate whether there was a regulatory failure in dealing with the alleged contravention of laws about the securities market concerning the Adani Group or other companies, and recommend measures to strengthen the statutory and/or regulatory framework and ensure compliance with the existing framework for the protection of investors.
The Securities and Exchange Board of India (SEBI) is already investigating the allegations of Hindenburg Research. The court has asked SEBI to probe whether there was a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957; whether there was a failure to disclose to SEBI the transactions with related parties and other relevant information concerning related entities; and whether there was any manipulation of stock prices in contravention of existing laws.
Samudra Sarangi, partner at Panag & Babu, believes that the Supreme Court has identified important issues that it expects SEBI to look into so that they do not get lost in the larger investigation being done by the regulator. This positively reflects the court’s intentions to not only identify key issues promptly but also find solutions to insulate the market from such volatility in the future.
Solicitor General Tushar Mehta requested the court to include a line stating that the constitution of the expert committee did not reflect on the functioning of any regulatory bodies. In reply, the Chief Justice of India clarified that this had been made clear in the order, stating that the constitution of the expert committee does not divest SEBI of its powers or responsibilities in continuing with its investigation into the recent volatility in the securities market. The court also requested that SEBI assist the expert committee.
On February 17, the Supreme Court stated that it would not accept the government’s names in committee formation. Tushar Agarwal, advocate, hopes that this committee will uphold the trust of Indian investors by suggesting measures to strengthen the securities market. Abhinay Sharma, managing partner, ASL Partners, stated that wealth creation is a must for the development of the economy but should not be at the cost of innocent investors’ hard-earned money.
The Supreme Court’s formation of an expert committee to investigate the alleged regulatory failure in addressing investor losses following the release of an adverse report on the Adani group of companies is a significant step in strengthening the securities market and protecting investors’ interests. The committee’s recommendations, along with SEBI’s ongoing investigation, are expected to ensure that such incidents do not occur in the future.
