The Securities and Exchange Board of India (SEBI) is completely equipped to deal with the fallout of the Hindenburg Research report on the Adani Group of companies, the Supreme Court wastold on Monday. [Manohar Lal Sharma v. Union of India and anr]
Solicitor General (SG) Tushar Mehta made a submission to this effect before a Bench of Chief Justice of India DY Chandrachud and Justices PS Narasimha and JB Pardiwala.
SG Mehta also informed the Court that the Central government has no objection to the constitution of a committee to examine related issues, provided that the SEBI’s expertise is not undermined in the process.
“I have instructions that SEBI is completely equipped to deal with what has happened. But government has no objection to committee. But remit of committee is important since it has an effect internationally and if we can suggest remit of committee in sealed cover. We don’t want to undermine the expertise of the regulator,” Mehta told the Court.
“Please come on Friday and inform us about the remit of the committee so that we have something in front of us,” Chief Justice Chandrachud replied.
Mehta assured the Court that the same would be circulated by Wednesday, February 15.
“Solicitor General Mehta informs that a note from Union of India will be submitted to the court by Wednesday. Let the remit be submitted to the court by court master and the submission note to the petitioner in person as well,” the Court recorded in its order.
The Court was hearing two petitions concerning the report published by short-seller Hindenburg Research on the Adani Group, alleging fraud on the part of the conglomerate, as a result of which it suffered losses crossing $100 billion.
In its affidavit filed before the apex court in the matter, SEBI added that the regulator has been enquiring into the allegations made in the Hindenburg report as well as the market activity preceding and following the publication of the report, to identify any legal violations. Since this examination is in its early stages, it may not be appropriate to list details about the same for the present, the affidavit stated.
Earlier, the Court had raised concern that Indian investors have suffered losses running into several lakh crores due to the fall in share prices of the Adani Group companies after the publication of Hindenburg report. As such, the Court had asked SEBI to suggest measures that can be taken to protect Indian investors in the future.
In response, the SEBI has now asserted that it is strongly and adequately empowered to ensure stable operations and development of the securities markets and the protection of investors. Notably, SEBI has also submitted that the events in focus “have not had any significant impact at the systemic level.”
“While the shares of the Group have seen significant decline in prices on account of selling pressure, the wider Indian market has shown full resilience. The combined weight of the Group companies in Sensex is zero and in Nifty is below 1%…
…Indian markets have seen far higher turbulent times in the past, especially during the Covid pandemic period…
…the subject of the PIL relates to events that are localized to a single Group of companies and that there is no significant impact at a market wide level or at a system wide level, that might warrant a system level review of the regulatory frameworks in operation,” the affidavit stated.
The affidavit also touched upon short-selling and detailed the manner in which the practice is regulated in India.
“Even during such turbulent times, SEBI did not resort to banning short selling, even though there were demands for banning it; and the markets continued to function in a robust manner, recovering far faster that other global markets,” it added.
Earlier this month, Advocate Manohar Lal Sharma moved a plea seeking directions to the SEBI and the Union Home Ministry to conduct an inquiry and register a First Information Report (FIR) against founder of Hindenburg Research, Nathan Anderson, and his associates in India. Sharma also filed an application for a gag order to halt media reports concerning listed companies including the Adani group of companies, unless such reports are first filed with and verified by the SEBI.
The second petition on the issue was filed by Advocate Vishal Tiwari, who sought an inquiry into the Hindenburg report by a committee headed by a retired judge of the top court. Tiwari had also sought the setting up of a special committee to oversee a sanctioning policy for loans of more than ₹500 crore. He further prayed for an inquiry into the Hindenburg Research report by a committee headed by a retired judge of the Supreme Court.
