Hindenburg report on Adani: Supreme Court orders probe by expert committee headed by former judge Justice AM Sapre

The Supreme Court on Thursday formed a committee headed by retired apex court judge, Justice AM Sapre to examine the controversy surrounding the Hindenburg Research report on the Adani Group of companies and allegations against the conglomerate [Vishal Tiwari vs Union of India and ors]..The committee besides Justice Sapre will also comprise OP Bhat, Justice JP Devdhar, KV Kamath, Nandan Nilekani and Somasekhar Sundaresan. The committee will examine the following aspects: .1. To undertake an overall assessment of the situation, including the causal factors which have led to the volatility in the securities market in the recent past;2. Measures to strengthen investor awareness;3. Investigate whether there has been a regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani group or other companies;4. Suggest measures to strengthen the statutory and regulatory framework and secure compliance with existing framework concerning the protection of investors..The committee shall submit its report in a sealed cover before the Supreme Court within 2 months, the Court directed. .A bench of Chief Justice of India (CJI) DY Chandrachud and Justices PS Narasimha and JB Pardiwala also noted that the Securities and Exchange Board of India (SEBI) is already examining the matter and it shall also continue its probe..The Court, however, directed that as part of probe, SEBI shall also look into whether there was violation Rule 19A (related to maintenance of minimum public shareholding) of Securities (Contract) Regulation Rules, whether there has been a failure to disclose transactions with related parties and other information that concerns related parties and whether there was any manipulation of stock prices.The SEBI shall apprise the court of its progress also inform the expert committee of the progress of the probe, the Court said.It also clarified that constituting the committee will not hamper the independence of SEBI and its probe processes. SEBI was also asked to expeditiously conclude its probe within 2 months and to file a status report. Further, the Court directed SEBI to apprise the expert committee of the steps it takes in furtherance of the Court's directions and its probe. .Today's order further issued the following ancillary directions:SEBI chairperson should ensure all requisite information is provided to the expert committee;The Central government agencies concerned should cooperate with the committee;The committee may seek consultation with external experts for its work;Remuneration payable to committee members shall be fixed by chairperson and borne by the Central government;The Union Finance Minister shall nominate a senior officer who will act as a nodal officer to provide logistical assistance to the committee.All expenses of the committee shall be defrayed by the Central government..The order was passed on four petitions concerning the recent report published by short-seller Hindenburg Research alleging fraud on the part of the conglomerate by inflating share prices.The report had led to fall in the share value of various Adani companies and Adani Group reportedly suffered losses crossing $100 billion..The plea by advocate Manohar Lal Sharma sought 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 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..The petition by Congress leader Dr. Jaya Thakur apart from seeking prosecution of the Adani group of companies, questioned the decision of the State Bank of India (SBI) and the Life Insurance Corporation (LIC) to invest in the company's shares at an allegedly inflated prices..During the hearing of thecase, the bench had raised concerns over the fact that Indian investors suffered losses running into several lakh crores.The Central government had told the apex court that the Securities and Exchange Board of India (SEBI) is completely equipped to deal with the fallout of the report.The Supreme Court while reserving its verdict last month had rejected the suggestion made by the Central government in a sealed cover on the way forward in the matter, and said it would instead appoint a committee on its own.The Court had also made it clear that it will not appoint a sitting judge to the committee to examine the issue, while coming down on the Central government for arguing that the impact of the report on market was nil.Pertinently, the bench had said that it would not pass any injunction order against the media in relation to coverage of such financial developments..Read more about the petitions here. .[Read Order]