ADANI FALLOUT: SC ASKS CENTRETO TIGHTEN REGULATORY S

The Supreme Court on Friday sought the Securities and Exchange Board of India›s (Sebi) response on 2 PILs accusing the market regulator of inaction in regulating the share markets in the face of Hindenburg report which resulted in crash of Adani Group company’s share prices and massive loss to small investors. The court said there should be a robust mechanism to ensure that the interests of Indian investors are protected in the stock market and sought views of the Centre and market regulator SEBI on PILs alleging exploitation of innocent investors and ‘’artificial crashing’’ of the Adani Group’s stock value. The apex court has fixed 13 February as the date for hearing Sebi’s response. The bench, also comprising justices P. S. Narasimha and J.B. Pardiwala, suggested forming a committee of domain experts and others, besides putting in place ‘’robust practices to protect investors’’.

The apex court asked Sebi to apprise it on how to ensure investors protection in future, amid persistent rout in stocks of Adani Group companies after a report by US short seller Hindenburg Research alleged stock manipulation and fraud. “What really bothers us is how do we protect the interest of the Indian investors?” a bench headed by Chief Justice D.Y. Chandrachud said. The SC asked Sebi about the existing structure of regulatory framework and how to strengthen it. SC asked solicitor general Tushar Mehta, who appeared for Sebi, to consult the Ministry of Finance and inform the court about what robust mechanism the Centre is contemplating to prevent such blood-bath in future stock that happened after Hindenburg report on Adani group company. The Solicitor General then said the market regulator and other statutory bodies were doing the needful.

The court responded that it was “just thinking aloud” and not making any observation on the merits of the case as “the stock markets usually run on sentiments”. One of the PILs, filed by lawyer Vishal Tiwari, has sought a direction to the Centre to constitute a committee monitored by a retired apex court judge to inquire and investigate into the Hindenburg Research report which has made a slew of allegations against the business conglomerate led by industrialist Gautam Adani. Another PIL, filed by advocate M.L. Sharma, seeks prosecution of short-seller Nathan Anderson of the USbased Hindenburg Research and his associates in India and the US for allegedly exploiting innocent investors and the “artificial crashing” of the Adani Group’s stock value in the market. Sharma has sought directions for declaring short selling an offence of fraud against the investors, to be prosecutable under section 420 (cheating) of the Indian Penal Code (IPC), read with provisions of the Sebi Act.