Adani-Hindenburg Case: Supreme Court Upholds Confidence In SEBI, Reserves Ruling

The Supreme Court on Friday reserved its judgement on a series of public interest lawsuits alleging contempt of court against SEBI in relation to the Adani-Hindenburg investigation.

The allegations specifically concern violations of stock market regulations. The bench, consisting of Chief Justice of India DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, presided over the matter.

During the proceedings, Advocate Prashant Bhushan, representing petitioner Anamika Jaiswal, referred to the "factual revelations" in the Hindenburg report. In response, Chief Justice Chandrachud emphasised that the court could not proceed under the assumption that the report was inherently true, stressing the necessity for an investigation.

"We don't have to accept the Hindenburg report as ipso facto factually correct. That is why we asked SEBI to investigate," he said.

However, Bhushan raised concerns about the Securities and Exchange Board of India's role, alleging that it was "suspect" due to its awareness of Adani group violations since 2014. He pointed to a letter from January 2014 by Najeeb Shah, director of revenue intelligence, indicating fund syphoning by Adani Power Ltd. through over-invoicing coal imports.

Bhushan criticised SEBI for purportedly feigning ignorance of this letter and failing to conduct a formal investigation.

In response, Chief Justice Chandrachud questioned the relevance of the 2014 letter, specifically asking if the overvaluation of imports was directly linked to the present subject matter and whether an investigation into this allegation would pertain to the Directorate of Revenue Intelligence itself. 

During the court proceedings, the Chief Justice of India expressed a cautious approach regarding the trustworthiness of SEBI, emphasising that it is a statutory body with a specific mandate to investigate stock market manipulation.

The CJI questioned the appropriateness of the court's declaration of a lack of trust in SEBI without substantial evidence, suggesting that such a decision should be made with careful consideration.

In response, advocate Prashant Bhushan raised various points, including those unearthed by the Hindenburg, Guardian, and Financial Times, and implied that SEBI should have considered these in its investigation.

CJI countered, stating that a statutory regulator cannot solely rely on newspaper sources, even reputable ones like the Financial Times, as gospel truth. He clarified that while the court doesn't doubt the sources, they cannot be considered evidentiary for SEBI.

As the proceedings neared a conclusion, the CJI asked Bhushan about the relief sought, to which Bhushan emphasised the disclosure of beneficial owners and expressed doubts about SEBI's due diligence in the investigation.

Bhushan proposed that another Special Investigation Team or a group of experts conduct the investigation.