Supreme Court Verdict on Adani-Hindenburg Saga: SEBI to Probe Hindenburg Report While Dismissing SIT Demand

The Indian corporate landscape witnessed a seismic tremor in January 2023 with the publication of a scathing report by Hindenburg Research, a short-selling firm, accusing the Adani Group, a conglomerate spanning energy, infrastructure, and commodities, of “brazen stock manipulation and accounting fraud.” This explosive accusation triggered a dramatic and swift plunge in the share prices of Adani Group companies, erasing over $100 billion in market value within days. The reverberations of this market turmoil reached the doorstep of the Supreme Court of India, prompting a flurry of petitions seeking comprehensive investigations and regulatory scrutiny.

Petitions and Regulatory Concerns on Hindenburg report:

One petition, spearheaded by advocate Prashant Bhushan, cast a spotlight on potential regulatory lapses and demanded a deeper probe into the allegations against the Adani Group. It further contended that recent amendments to the SEBI Act had inadvertently shielded the conglomerate from proper regulatory oversight, creating a fertile ground for potential malpractices. Others raised concerns about the adequacy of existing investor protection mechanisms in the face of such volatile market scenarios.

A Two-Pronged Approach:


Recognizing the gravity of the situation and the need for a nuanced response, the Supreme Court adopted a two-pronged approach. Firstly, it acknowledged SEBI’s existing mandate and inherent powers to investigate such matters and directed the regulatory body to conduct a thorough and independent investigation into the Hindenburg report’s allegations. This approach underscored the court’s faith in SEBI’s capabilities while acknowledging the need for a focused and rigorous inquiry.

Expert Scrutiny and Public Confidence:

Secondly, to instill public confidence and ensure a comprehensive examination of the issue, the court constituted an expert committee led by former Supreme Court Judge A.M. Sapre. This committee comprised eminent individuals from diverse fields, including law, finance, and accounting, tasked with delving deeper into the allegations, analyzing potential regulatory failures, and suggesting robust measures to strengthen investor protection mechanisms.

The Court’s Verdict: Key Takeaways

Supreme Court Verdict on Adani-Hindenburg Saga

On January 3rd, 2024, the Supreme Court delivered its much-anticipated verdict, bringing a degree of clarity and direction to the unfolding saga. Here are the key takeaways:

  • SEBI Investigation Upheld: Rebuffing calls for a separate Special Investigation Team (SIT), the court upheld SEBI’s competence and investigative authority in this matter. It acknowledged the regulatory body’s ongoing investigations in 22 out of 24 cases related to the Adani Group and directed SEBI to expedite the remaining two within three months. This decision affirmed SEBI’s role as the primary watchdog of the Indian securities market while simultaneously urging expedited completion of its probes.
  • Hindenburg Report under Scrutiny: Recognizing the potentially far-reaching impact of the Hindenburg report, the court directed SEBI to specifically investigate whether the short-selling firm’s accusations constituted any violation of Indian laws and caused harm to investors. This directive ensured a dedicated and focused examination of the Hindenburg allegations within the broader SEBI investigation, highlighting the court’s concern for potential investor losses and market manipulation.
  • Caution over Third-Party Reports: While acknowledging the importance of diverse sources of information, the court exercised caution against automatically relying on reports from third-party organizations like the Organised Crime and Corruption Reporting Project (OCCRP) as conclusive proof. This stance emphasized the need for thorough and rigorous regulatory investigations by SEBI, with third-party reports serving as supplemental information rather than definitive evidence.
  • Dismissal of Conflict of Interest Claims: Concerns were raised about potential conflicts of interest within the expert committee, particularly regarding one member’s ties to a renewable energy company with business partnerships with the Adani Group. However, the court thoroughly examined these claims and found them unsubstantiated, upholding the committee’s integrity and commending its work.
  • Roadmap for Stronger Investor Protection: Recognizing the need for continuous improvement and robust investor protection mechanisms, the court directed the Union government and SEBI to consider and implement the expert committee’s recommendations. These recommendations focused on various aspects like enhancing disclosure norms, strengthening whistle-blower protection, and streamlining communication channels between regulators and investors.

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