Adani-Hindenburg row: Supreme Court says no ground to transfer probe from Sebi to SIT or CBI

NEW DELHI: In a significant development, the Supreme Court has declined a request for a Special Investigation Team (SIT) or Central Bureau of Investigation (CBI) inquiry into the Adani-Hindenburg controversy. This controversy had previously led to a dramatic meltdown in the share prices of Adani group companies. The apex court said that there was no substantial basis to question the fairness of the ongoing probe by the Securities and Exchange Board of India (SEBI), which has already completed investigations in 22 out of 24 cases.
The bench, led by Chief Justice D Y Chandrachud, emphasized the competence of SEBI in handling the matter. The court has directed SEBI to expedite and conclude its investigation within three months regarding the remaining two cases. These cases involve allegations of violation of SEBI rules and regulations by Adani group companies, specifically concerning the manipulation of share prices.
In its ruling, the Supreme Court also addressed the reports linked to George Soros and the OCCRP (Organized Crime and Corruption Reporting Project) about alleged stock manipulations by the Adani group, as well as the Hindenburg report. The bench noted that these reports could not be independently verified and thus, should not be considered as authentic sources of information for legal proceedings.
This decision comes as a relief to the Adani group, which has been under intense scrutiny following the Hindenburg Research report that accused the conglomerate of stock manipulation and accounting fraud. The controversy had a significant impact on the Indian stock market, leading to a sharp decline in the share values of Adani group companies.
Allegations were made in a report by short-seller Hindenberg Research that Adani had inflated its share prices. After these allegations were published, it led to a sharp fall in the share value of various Adani companies, reportedly to the tune of $100 billion. The Adani Group has dismissed the charges as lies, saying it complies with all laws and disclosure requirements.
Various petitions were filed alleging that changes to the Securities and Exchange Board of India Act (SEBI Act) had provided a shield and an excuse for the Adani Group's regulatory contraventions and market manipulations to remain undetected.
The apex court then asked SEBI to independently probe the matter and also constituted an expert committee headed by retired Supreme Court judge Justice AM Sapre to look into the matter.
In May last year, the expert committee in its report had found no prima facie lapse on the part of the SEBI in the matter.
The bench had said that it has no reason to "discredit" the Securities and Exchange Board of India (SEBI), which probed allegations against the Adani group, as there was no material before it to doubt what the market regulator had done. It said the court does not have to treat what was set out in the Hindenburg report as a "true state of affairs".
It had asked SEBI as to what it intends to do in the future to ensure investors don't lose wealth due to volatility in stock market or short-selling.
"We don't have to treat what is set out in the Hindenburg report as ipso facto (automatically) a true state of affairs. That is why we directed the SEBI to investigate. Because for us to accept something which is in the report of an entity, which in not before us and whose veracity we have no means of testing, would really be unfair," the bench had said.
Senior lawyer Prashant Bhushan had argued that SEBI's role in the matter was "suspect" for several reasons because a lot of information was available to the regulator way back in 2014.
SG Tushar Mehta, appearing for the SEBI, had told the bench that there was "a growing tendency of planting stories outside India to influence things and policies inside India".
Mehta had said that investigation in 22 out of the 24 cases relating to allegations against the Adani group were over.
The Adani Group stocks got bludgeoned on the bourses after the 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.