CJI says Adani-Hindenburg matter 'not a witch hunt', seeks report on regulatory mechanisms

Highlighting that investors in India are middle-class people these days and may end up facing huge losses, CJI Chandrachud said, "How do we ensure the protection of Indian investors? Because what happened here is a product of short selling as per the allegations and is likely to happen again in absence of strong regulatory mechanisms."

New Delhi: Hearing a plea seeking an inquiry into the Hindenburg Research report on the Adani Group, the Supreme Court on Friday sought a report on regulatory mechanisms in place in order to ensure protection for Indian investors from 'any such thing getting repeated in the future'. Questioning the role of SEBI in the matter, the court also asked the center to 'tell their officers that this is not a witch hunt' and needs to be dealt with in a more robust manner.

A three-judge bench headed by Chief Justice of India D Y Chandrachud began hearing the case, and gradually listed it for the next hearing on Monday. They are hearing a petition filed by advocates Vishal Tiwary and ML Sharma, while the inquiry is being conducted by a committee headed by a retired judge of the apex court.

Highlighting that investors in India are middle-class people these days and may end up facing huge losses, CJI Chandrachud said, "How do we ensure the protection of Indian investors? Because what happened here is a product of short selling as per the allegations and is likely to happen again in absence of strong regulatory mechanisms."

Commenting on the Security and Exchange Board of India's (SEBI) role, the CJI said, "Please tell your officers it's not a witch hunt we are doing. Not casting any doubt on SEBI or regulatory authority, but we need some input from the government. We won't enter into the policy domain, but we can put some mechanisms in place to prevent this from happening." The bench further noted that the above observations of the court are not any reflection of SEBI's statutory functions.

CJI Chandrachud highlighted that the losses suffered in the Adani scam are huge. "It literally takes no more than 3-4 minutes and the trade is done. When such things happen on a small scale, nobody bothers. But as per the newspapers, the total loss suffered by Indian investors has gone into several lakh crores, which is huge."

"So now, how do we ensure that going in the future, this does not happen again? Do we have a robust mechanism in place?" he asked. Solicitor General Tushar Mehta, appearing on behalf of SEBI, said it would be premature to say anything right now, though the center is also equally worried about the investors. The SC bench then asked SG Mehta to file a response by Monday.

Laying down some suggestions over how the matter can be taken forward, the CJI said, "If it would help the process, can we contemplate having an expert committee that can be drawn from SEBI and the international banking sector to ensure a guiding force? Apart from just speaking to SEBI, you can also speak to the Finance ministry. We can also have experts from the bar who can be sort of amicus."

On Monday, the court said it will expect the SG to notify the court about regulatory mechanisms to ensure that Indian investors are protected against volatility, along with a due assessment of the existing regulatory framework as well. A robust mechanism needs to be in place in the interest of the investors to have stable operations, the court noted.