Hindustan Times ST (Mumbai) - Live
No ‘sealed cover’, SC to set up panel for Adani probe
Court rejects Centre’s sealed cover suggestions for committee
NEW DELHI: The Supreme Court on Friday rejected the Union government’s suggestions on the remit and composition of an expert committee to look into all aspects of the Adani-Hindenburg saga that were submitted in a sealed envelope and said that in the interests of “transparency” it would appoint the committee itself.
A bench headed by Chief Justice of India (CJI) Dhananjaya Y Chandrachud reserved orders on the remit and composition of the committee .
The release of short-seller Hindenburg Research’s report on January 24 let to a meltdown in the Adani Group’s listed stocks and also created a political controversy over the alleged proximity of the group’s head Gautam Adani with Prime Minister Narendra Modi. The first half of the budget session of Parliament saw heated exchanges on this front. Among Hindenburg’s allegations against the conglomerate was that it had inflated the worth of its stocks using offshore vehicles belonging to Gautam Adani’s elder brother Vinod Adani. The Adani Group has denied all allegations.
The court was hearing four public interest litigations or PILs seeking a probe against Hindenburg for causing significant loss to investors, on regulatory lapses, and an investigation of the Adani Group on the basis of the Hindenburg report.
After examining a note submitted by Solicitor General Tushar Mehta in a sealed cover, the bench, also comprising justices PS Narasimha and JB Pardiwala said, “If we have to accept these suggestions, we must disclose it to the other side. There has to be transparency and confidence in the process.”
The government’s note proposed a six-member committee headed by a retired Supreme Court judge comprising the Union Home Secretary and Director, Enforcement Directorate. The note required the committee to submit a report in eight weeks with the initial report to be filed in sealed cover considering the “volatile and emotion driven” nature of the securities market. However, the note clarified that the constitution of the committee would not be a reflection on the ability or competence of stock market regulator Sebi or any other statutory agencies.
The bench said, “If it is in a sealed cover, the petitioners will not know which names we accepted and which we have not and they will get to say it is a government-appointed committee.” Embarking upon a course of action that it adopted in the past of choosing a committee of its own to examine the Pegasus spyware row where the phones of prominent individuals were allegedly placed under surveillance, the bench said, “We’d rather not accept the sealed cover suggestions in constituting a committee as we want to follow full transparency. We will appoint a committee in which there will be more confidence.”
The Court did not wish to put those names in public domain either: “It will not be good for the individuals. We will do it on our own.”
The note by the Centre also dealt with the proposed terms of reference for the committee with the primary task being “to ascertain the truthfulness of allegations against the Adani Group of companies in the Hindenburg report.” The probe, the note added, would also focus on Hindenburg’s Admission of acquiring a “short position” in Adani group debt and derivatives, gathering details of all its transactions undertaken prior to publication of report,, and assessing whether the transactions fall foul of the penal, statutory and regulatory framework in India.
The remit of the committee, the note said, would also include suggestions to strengthen the regulatory framework for better protection of investors in future. In addition, the note suggested examination of all short selling in Adani group shares “prior to and in near proximity of the Hindenburg report”.
The court also disagreed with Mehta’s submission that there was no larger market impact of the report.
“You have said in your submissions that the market impact was zero. There cannot be denial of the fact that investors have lost money worth lakhs of crores of rupees.”
To be sure, given the low public float of the stock of Adani companies, much of the loss was in the notional wealth of the promoters.
Advocate ML Sharma who was the first to file the PIL sought an investigation against Hindenburg for a “conspiracy” to inflict loss on the market and the economy and blamed Securities Exchange Board of India (SEBI) for failing to protect investors.