Adani-Hindenburg row: SC may grant 3 more months to SEBI to wrap up probe, says it did not talk about regulatory failure

The Supreme Court Friday said it will consider granting three more months to the Securities and Exchange Board of India to wrap up its probe into allegations of stock price manipulation by the Adani group while rejecting suggestions that it had blamed SEBI for regulatory failure.

The apex court said it was to ascertain whether there was a regulatory failure that it had appointed an expert committee whose report it has received. A bench headed by Chief Justice D Y Chandrachud fixed May 15 for hearing a batch of PILs on the Adani-Hindenburg row as also an application by SEBI seeking extension of time to complete the probe into alleged stock price manipulation by the Adani group.

"There has to be some sense of responsibility… You must be conscious of the fact that whatever allegations you make, it affects the stability and volatility of the stock market," Justice Chandrachud said, reacting angrily to submissions made by a petitioner's lawyer about regulatory failure on part of SEBI.

The bench, also comprising Justices PS Narasimha and JB Pardiwala, however, decided not to give much leeway to SEBI, which sought six months to conclude the probe, saying it has to show some alacrity and complete it within three months.

During the hearing, a lawyer appearing for petitioner Jaya Thakur referred to a March 2 order of the Supreme Court to claim there was regulatory failure on the part of SEBI and it cannot be granted extension in view of the fact that it was probing a matter related to shell companies registered in Mauritius since 2016 without any success.

"How can you make such a submission? Sorry, don't just stand up and start making allegations like this. There has to be some sense of responsibility. We have constituted a committee and it has remit whether there was any regulatory failure. It will be unfair for you, particularly without looking at the report of the committee to say that we have said that there was regulatory failure. We never said that.

"We have asked the committee to verify whether there was any regulatory failure. We will see what the committee has to say on this. You must be conscious of the fact that whatever allegations you make, it affects the stability and volatility of the stock market. There has to be some sense of responsibility," the court said.

Advocate Prashant Bhushan, who represented petitioner Anamika Jaiswal, said SEBI should tell the court what it has done so far in its investigation on the complaint about the shell companies registered in Mauritius since 2016.

The bench told Bhushan, "Suppose they (SEBI) were to tell us what they have so far learnt in the investigation. Then to ask them to disclose would affect the investigation. Then for us to look at that…This is not some criminal investigation that we are looking at the case diary. It will not be proper at this stage."

CJI Chandrachud said the court will not give SEBI indefinite time and accord it three months to conclude investigation in the Adani-Hindenburg controversy. Solicitor General Tushar Mehta, appearing for SEBI, said the petitioners have confused the issue and what the market regulator was already investigating was totally different.

"What they are saying about the complaint is totally unconnected to this matter. We have approached international agencies and I have taken instructions from SEBI's highest administrative level. Six months are also a compressed period and I am saying this with a certain sense of responsibility. I must not say something which we also know is not achievable, which is not in our control," he said.

Mehta said SEBI needs bank statements of transactions, both domestic and international, and has sought assistance of offshore regulators which is a time consuming and challenging process. "For that we need six months' time, which is already a compressed time period. We have already approached the offshore regulators and they have to collect the bank statements and transaction details and give them to us," the law officer said.

The bench told Mehta it gave two months to the Justice Sapre committee and two months to SEBI to complete their investigation. "Now, our original remit was two months and to extend it to six months will not be appropriate. What we will do is give you time of three months, because there is a point which they (petitioners) are making that SEBI was in possession of the complaint which it was investigating," the court said.

The bench said the report of the Sapre committee appointed by the SC has been received in the registry but because of the pressure of work it has not been able to peruse it.

"Over the weekend we will have little time to read the report ourselves. We will list this matter on Monday because we are sitting in a combination of three judges on Monday. We will pass orders in pursuance of our earlier orders on Monday. In the meantime, we will read the report. We will pass the order in the open court itself after looking at all the papers," the CJI said.

The apex court had on March 2 asked SEBI to probe within two months the allegations against the Adani group and also set up a panel to look at providing protection to Indian investors after a damning report by US short seller Hindenburg wiped out more than USD 140 billion of the Indian conglomerate's market value.

The scope and ambit of the Sapre panel was to provide an overall assessment of the situation including the relevant causal factors which have led to volatility in the securities market in the recent past. The panel was asked to suggest measures to "(i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors", the court said.

Till now, four PILs have been filed in the top court on the issue including by lawyers M L Sharma and Vishal Tiwari and Congress leader Jaya Thakur. Adani Group stocks had taken a beating on the bourses after Hindenburg Research made a litany of allegations, including those about fraudulent transactions and share-price manipulation, against the business conglomerate.

The Adani Group dismissed the charges as lies, saying it complies with all laws and disclosure requirements.