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Expressing concerns over protecting the interests of Indian investors, the Supreme Court on Friday observed on creating a robust mechanism to regulate the stock market and sought views of the Centre and market regulator SEBI on PILs alleging exploitation of innocent investors and “artificial crashing” of the Adani Group‘s stock value. The bench headed by Chief Justice D Y Chandrachud allayed the apprehension and told Solicitor General Tushar Mehta to convey to the officials of the Securities and Exchange Board of India (SEBI) that it was not “planning any witch hunt”. The Supreme Court asked SEBI to file a detailed report by February 13.
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The bench, also comprising justices P S Narasimha and J B Pardiwala, sought inputs from the Finance Ministry and others on various issues, including on making the regulatory mechanism robust to protect the interests of investors in the market where capital flow is seamless in modern times. “This is just an open dialogue. They have brought an issue before the court. What is of concern is how do we ensure the protection of Indian investors? What happened here was short-selling. Probably SEBI is also doing its investigation. Please tell your officers also this is no witch hunt that we are planning to do…,” asked the Bench headed by Chief Justice of India.
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“How do we ensure that going in future, we have robust mechanisms? Because today, capital is moving in and out of India seamlessly. How do we ensure in future that Indian investors are protected? Everybody is in the market now,” said the Bench, adding that need of experts and Amicus Currie to handle the chaos in Adani shares fluctuation issue. The court observed that the PILs say that the loss is of over Rs.10 lakh crore. “How do we ensure that they are protected? How do we ensure that this does not happen in future? What role do we envisage for SEBI? For example, in a different context, you have circuit breakers,” it said.
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The bench suggested forming a committee of domain experts and others, besides putting in place “robust practices to protect investors”. The Solicitor General, appearing for SEBI, said the market regulator and other statutory bodies were doing the needful. The court said it was “just thinking aloud” and not making any observation on the merits of the case as the “stock markets usually run on sentiments”.
“We have indicated to the Solicitor General the concerns with regard to ensuring that the regulatory mechanisms within the country are duly strengthened so as to ensure that Indian investors are protected against certain volatility, the kind of which was witnessed in the recent two weeks,” it said in the order. It would require due assessment of existing regulatory framework and the need for strengthening regulatory framework in the interest of the investors and the stable operations of the securities market, the bench said.
“We have also suggested to the Solicitor General if they (Centre, SEBI and others) are willing to accede to the suggestion for a committee. If the Union of India is inclined to accept the suggestion, necessary submissions can be urged on the constitution of the committee,” it said. The law officer assured that SEBI was closely monitoring the situation.
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“We clarify that the above are not intended to be any reflection on the discharge of its statutory functions by the SEBI or any statutory authority,” the bench said. It then listed the two PILs, seeking various reliefs including a probe into the Hindenburg report, for hearing on February 13.
One of the PILs, filed by lawyer Vishal Tiwari, sought a direction to the Centre to constitute a committee monitored by a retired apex court judge to inquire and investigate into the Hindenburg Research report which has made a slew of allegations against the business conglomerate led by industrialist Gautam Adani.
Another PIL, filed by advocate M L Sharma, seeks prosecution of short-seller Nathan Anderson of the US-based Hindenburg Research and his associates in India and the US for allegedly exploiting innocent investors and the “artificial crashing” of the Adani Group’s stock value in the market. Sharma has sought directions for declaring short selling an offence of fraud against the investors, to be prosecutable under section 420 (cheating) of the Indian Penal Code (IPC), read with provisions of the SEBI Act.
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SEBI and NSE are headed by corrupt officials. Both need complete reorganizations with some capable and honest technocrats as in charge. The current babu establishment will never allow such change. As the result the SEBI and NSE will make some noice and after a while it will be business as usual.
It’s clear that the crisis exists because of the failure of SEBI, the NSE and RBI.
To permit a share with over 200 PE to trade without checking on the antecedents and basis and what’s more adding it to the Nifty index is akin to being hand in glove.
As for RBI their lack of duty – the source of funds. It’s apparent they have been compromised like they were with Demo.
I hope my comments are not taken as contempt of court
I feel that SC is needlessly getting into this issue. The short selling was done in foreign stock exchanges through Adani bonds issued there and non-India traded derivatives. Short selling is an accepted market practise there but not in India. We can`t ban short selling in other countries. Secondly what can a committee of experts as being suggested by SC do that SEBI can not handle.
Volatility in the stock market is a hall mark of stock markets . Tesla shares fell 65% in 2022 due to rising interest rates and Elon Musk buying Twitter. In 2023 they are up 63% already! Nobody had asked for a committee in 2022 or there were howls in their Parliament.
Let SEBI and RBI come out with their reports , instead of talking about setting up SIT. SC should let them do their jobs. As the saying goes `Fools rush in where angels fear to tread`.