SC gives Sebi 3 months for Adani probe in Hindenburg saga, rejects transfer plea

The Supreme Court on Wednesday rejected petitioners’ demands to transfer the investigation into US short-seller Hindenburg’s allegations of stock price manipulations by Adani Group firms, while ordering market regulator Sebi to complete its probe in three months.

Delivering its judgment on a batch of petitions seeking examination of allegations of fraud made against Adani Group in short-seller Hindenburg Research’s report, a bench comprising Supreme Court Chief Justice D.Y. Chandrachud, and justices J.B. Pardiwala and Manoj Misra said the scope of power of the court to enter into the regulatory domain of the Securities and Exchange Board of India (Sebi) is limited. 

The court noted that Sebi has completed its probe in 22 of 24 cases relating to the allegations against Adani Group and ordered the regulator to complete its probe into pending matters within three months.

Adani group stocks surged on the Supreme Court’s verdict on Wednesday, compared with a 0.75% decline in the benchmark Sensex.

Shares of Adani Enterprises Ltd rose 2.45%, while those of Adani Total Gas Ltd jumped 9.8%, and those of Adani Ports and Special Economic Zone Ltd advanced 1.39% on Wednesday.

“The Hon’ble Supreme Court’s judgement shows that:  Truth has prevailed. Satyameva Jayate. I am grateful to those who stood by us. Our humble contribution to India’s growth story will continue. Jai Hind,” Adani Group chairman Gautam Adani posted on X (formerly Twitter).

The Supreme Court, while refusing to issue any other direction to Sebi, said the scope of judicial review is only to see whether any fundamental right has been violated.

“No valid ground invoked for us (in this case) to direct Sebi to revoke its regulations and the current regulations are tightened by amendments in question,” the apex court said.

The Supreme Court also rejected allegations of regulatory failure by Sebi.

“Investigative reports by the press can act as inputs for Sebi but cannot be taken as credible evidence or a proof of regulatory failure by Sebi and it cannot cast doubt on the investigation being carried on by a statutory body,” the court held.

The bench also turned down the plea to transfer the probe to the Central Bureau of Investigation (CBI) or any other agency.

“This court has the power under Articles 32 and 142 to transfer the probe to CBI…but such powers can only be used sparingly, and this court will not ordinarily supplant this role and the petitioners must put forth strong evidence to show that the investigative agency (Sebi) acted in a biased manner,” the bench said.

The court had on 24 November reserved its verdict on a batch of petitions alleging stock price manipulation by Adani Group firms.

The public interest litigations were filed in the Supreme Court after a report by short-seller Hindenburg Research claimed that the Indian conglomerate manipulated stock prices through fraudulent means. Adani Group refused the allegations and maintained that it complied with all laws and disclosure requirements.