'Can’t see Hindenburg report as true state of affairs’, says SC; reserves judgment on Adani-Hindenburg row

While reserving its judgment on a batch of pleas, the apex court said it cannot see the Hindenburg report related to the Adani group and stressed that there is no material to doubt SEBI’s probe, Reports ETV Bharat's Sumit Saxena.

New Delhi:The Supreme Court Friday said that it cannot see the Hindenburg report, against the Adani group, as ipso facto true state of affairs and due to this reason it asked SEBI (Securities Exchange Board of India) to investigate. The apex court stressed that there is no material to doubt SEBI’s probe and the impartiality of expert committee members while reserving its judgment on a batch of pleas seeking a court-monitored investigation into the allegations made by US-based short-selling firm Hindenburg Research against the Adani group.

Advocate Prashant, representing an intervenor, argued before a three-judge bench, led by Chief Justice of India D Y Chandrachud and comprising justices J B Pardiwala and Manoj Misra, that there were many factual revelations in the Hindenburg report and urged the court to see the executive summary for the findings of the report.

CJI said “Mr Bhushan, we do not have to see what is set out in the Hindenburg report as ipso facto as the true state of affairs…that is why we directed SEBI to investigate. Because for us to then accept a report of an entity which is not before us and whose veracity, we have no means of testing…that is why we asked SEBI to treat these as revelations…and exercise your (SEBI's) jurisdiction as an adjudicating body”.

Bhushan claimed the role of SEBI was also suspect as they knew about FPIs made through Mauritius route and cited a letter written then DRI chairman in 2014 to the then SEBI chief U K Sinha.

Bhushan’s allegations against SEBI’s investigation into the matter did not convince the apex court. "SEBI is a statutory body exclusively entrusted with investigating stock market manipulation. Is it proper for a court without any proper material to say that we don't trust SEBI and we will form our own SIT? This has to be done with much calibration…..," CJI told Bhushan.

Bhushan, representing a law student Anamika Jaiswal, argued that his client had filed a plea seeking a direction to constitute a fresh experts committee to probe the Adani group-Hindenburg report controversy, claiming an apparent conflict of interest of members of the panel formed by the apex court. The application cited instances showing a conflict of interest between former SBI chairman O P Bhatt, former ICICI chairman M V Kamath, advocate Somashekhar Sundaresan and the Adani group. The committee also consisted of Justice J P Devadhar, and co-founder Infosys, Nandan Nilekani.

Bhushan said Bhatt is presently working as the chairman of Greenko, a renewable energy company, which is working in a close partnership with the Adani group, since March 2022, for providing energy to Adani groups facilities in India. Bhushan also cited DRI allegation against Adani group and added that unfortunately, SEBI's role in this is suspect. Bhushan said a lot of information was available to it in 2014 and a formal letter was given by the DRI Chairman.

Solicitor General Tushar Mehta, representing SEBI, said SEBI wrote a letter to DRI, and DRI intimated them and DRI concluded the proceedings in 2017. Mehta said an order was passed by the Customs Excise & Service Tax Appellate Tribunal (CESTAT) and the order was confirmed by the apex court. Mehta said SEBI had concluded its probe with regard to 22 transactions while two were still pending as those concerned the assistance received from foreign regulators.

CJI told Bhushan, “You have to be very careful. We're not giving character certificates to anyone. Equally, you must think of fundamental principles of fairness…..You're relying on a DRI communication to SEBI. DRI closed the matter. CESTAT concluded it. Your entire allegation is based on overvaluation which was decided upon. Now you must show what in the report warrants further investigation by SEBI…..”.

Bhushan said Sundaresan, who was appointed as an additional judge of the Bombay High Court on November 23, was Adani’s counsel. CJI told Bhushan, “Mr Bhushan, let's be fair. He was a counsel in 2006. Was he on retainer? Was he an in-house counsel...Someone appeared 17 years ago...There has to be some responsibility about allegations you make….”.

CJI asked, does that disqualifies him? He was on the financial sector law reform committee of the previous government. Mehta said these kinds of allegations must stop. CJI told Bhushan that this is a bit unfair and then people will stop being on committees, which the court appoints and stressed that the court could get retired judges in the matter but then it misses the expertise of domain experts.

The CJI further added that by this logic, no lawyer who has appeared for an accused should become a high court judge.

Bhushan said when he learnt about Mr Sundareshan's conflict an affidavit was filed in May, “but we didn't think it was significant enough to reconstitute committee”, and after learning about Bhat's involvement, “we thought it was significant and filed the application…”.

Mehta said NGO OCCRP prepared a report, when it was reached out for documents, it said the papers can be obtained from an NGO operated by Bhushan, which, in fact, showed a conflict of interest. Bhushan referred to reports published by the Guardian and the Financial Times and argued that “we have come to the conclusion that the SEBI probe is not credible”.

The CJI queried Bhushan, “We don't think you can ask a statutory regulator to take a newspaper source even if it is Financial Times as gospel truth…..this does not discredit SEBI.. Should SEBI now follow journalists?" The apex court asked Bhushan, tell us from the report what additional direction you require to be given to SEBI to improve the regulatory network.

Before reserving its order on additional directions to the SEBI, the bench pulled up a counsel for seeking a probe against SBI and LIC in the matter, and asked him, "If it is some college debate…. and if he realises the implications of his prayer made without any substantial material."

The apex court had nominated all the members and the committee is headed by retired apex court judge, Justice Abhay Manohar Sapre. The apex court had constituted the expert committee in March 2023, on a batch of petitions filed by advocate Vishal Tiwari and others, to investigate the allegations made against the Adani Group in the Hindenburg Report and whether there was a regulatory failure in the same.

The committee, in its report submitted in May, said the allegations of stock price manipulation or violation of MPS norms by Adani Group companies cannot be proved at this stage.