BREAKING | Adani-Hindenburg : Supreme Court Extends Deadline For SEBI Probe Till August 14

The Supreme Court on Wednesday extended the time for the Securities and Exchange Board of India (SEBI) till August 14, 2023 to complete its probe into allegations made by US-based short seller firm Hindenburg Research against Adani group companies about stock price manipulations. 

A bench comprising Chief Justice of India DY Chandrachud, Justice PS Narasimha and Justice JB Pardiwala passed the order in an application filed by the SEBI seeking a further time of 6 months to complete the probe. The two months’ time originally allowed by the apex court as per its March 2 order ended on May 2.

The bench also requested the expert committee, which was constituted by the Court, to continue assisting the Court and directed that the copies of the report submitted by the expert committee headed by former SC judge Justice AM Sapre to be shared with the parties of the case and their counsels.

The bench further directed the SEBI to submit a status report regarding the investigation carried out so far. Solicitor General of India Tushar Mehta, appearing for SEBI, requested for at least 6 months extension. However, the bench declined, saying that it cannot grant "indefinite extension". "We granted 2 months and now extended it till August which makes it 5 months. If you have any genuine difficulty, tell us then", CJI Chandrachud told the SG.

Two days ago, SEBI filed a rejoinder affidavit in the Supreme Court giving additional reasons for seeking more time to probe into the Adani-Hindenburg issue. SEBI has stated that the transactions are complex and require more time to examine. The securities board has also denied the allegation made by the petitioner that it had been investigating Adani since 2016. It has been claimed that the investigation actually pertained to the issuance of Global Depository Receipts by 51 Indian listed companies, which did not include any listed company of Adani Group. SEBI has informed the apex court bench that it has already approached eleven overseas regulators under the Multilateral Memorandum of Understanding (MMOU) with International Organisation of Securities Commissions (IOSCO) with respect to its investigation into Minimum Public Shareholding (MPS) norms.

During the hearing today, Advocate Prashant Bhushan, appearing for the petitioner seeking probe into the Hindenburg report, questioned the SEBI's claim that it has not been investigating Adani group companies since 2016. Bhushan contended that SEBI's claim is contrary to a reply given by the Union Government to the Parliament. On the last date of hearing, Bhushan had questioned the SEBI's need for more time by saying that the regulator had been investigating Adani companies since 2016. Advocate Vishal Tiwari, another petitioner in the case, also opposed the SEBI's plea.

Solicitor General submitted that the 2016 investigation by SEBI was on a different issue having no nexus with the allegations in the Hindenburg report.

"In 2016, SEBI passed an order pertaining to 51 listed companies of India. No company of this group was a part of those 51 companies. My learned friend wants an enquiry on everything that happened to this company since 2016 or even 2008. That's not the remit of this petition. This petition concerns the Hindenburg report", SG said. He undertook that an affidavit will be filed explaining this position.

"We are on the Hindenburg report and remit of the proceeding is not have a roving enquiry against the company. It is stated that 2016 investigation related to Global depository receipts and 2020 is relating to Minimum Public Shareholding norms...", CJI Chandrachud told Bhushan.

Background

It was on January 24 that US-based Hindenburg published its report accusing Adani group of widespread manipulations and malpractices to inflate its stock prices. Adani Group refuted the allegations by publishing a 413-page reply.

On March 2 2023, the court constituted a committee and appointed the following persons as the members of the committee– Mr OP Bhat (former Chairman of SBI), retired Justice JP Devadhar, Mr KV Kamath, Mr Nandan Nilakeni, Mr. Somasekharan Sundaresan. The Committee was held to be under the head of former Supreme Court judge Justice AM Sapre. The court directed the committee to submit its report in a sealed cover before this court within 2 months. However, the court remarked that the constitution of the expert committee did not divest SEBI of its powers or responsibilities in continuing with its investigation into the volatility in the securities market in India. SEBI was also directed to submit a status report within a period of two months.

Later, the SEBI filed an application in the Supreme Court seeking a six-month extension to complete its probe into allegations.

The SEBI in its application said that examinations/investigations for which further time would be required would fall into three broad categories :

(i) Those where prima facie violations have been found and a period of 6 months would be required to arrive at conclusive finding.

(ii) Those where prima facie violations have not been found, a period of 6 months would be required to revalidate the analysis and arrive at conclusive finding.

(iii) In cases where, further examination/investigation is required and most of the data that is required for this purpose is expected to be reasonably accessible, a conclusive finding is expected to be arrived at in 6 months.

Case Title: Vishal Tiwari v. Union of India & Ors. | Writ Petition (Civil) No. 162 of 2023 and other connected matters

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