Supreme Court Constitutes Expert Committee in Adani Case

A Divisional bench of the Supreme Court pronounced constitution of an expert committee to protect interest of investors in the falling market off late and look into SEBI measures to strengthen the statutory and/or regulatory framework in the famous Adani case.

Key Insights

• It may be recalled that earlier the Supreme Court suggested to the Government the formation of an expert committee to look into the loss of wealth by the investors in the securities markets over past several weeks . Later on, not agreeing with the composition of the expert committee suggested by the Government in sealed envelope, it said to go for a neutral and transparent expert committee to be appointed by itself. [News]. The Supreme Court heard the matter several times in the case of Vishal Tiwari v. Union of India on 02-03-2023 , 17-02-2023, 13-02-2023 and 10-02-2023. And issued orders as above.
• The Divisional Bench consisting of Hon’ble Dr Dhananjaya Y Chandrachud, Chief Justice of India Hon’ble Mr Justice Pamidighantam Sri Narasimha and Hon’ble Mr Justice J B Pardiwala constituted the Expert Committee headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court of India. The other members are Mr. O P Bhatt; Justice J P Devadhar (retired), Mr. KV Kamath; Mr. Nandan Nilekani and Mr. Somashekhar Sundaresan.
• The Terms of Reference of the Committee includes:-
  1. To provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past;
  2. To suggest measures to strengthen investor awareness;
  3. To investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies; and
  4. To suggest measures to (i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors.

• SEBI will provide the information and other assistance. The Secretary, Ministry of Finance shall nominate a senior officer who will act as a nodal officer to provide logistical assistance to the Committee.
• All the expenses incurred in connection with the work of the Committee shall be defrayed by the Union Government. The honorarium payable to the members of the 3 Committee shall be fixed by the Chairperson and shall be borne by the Union Government.  The Committee is requested to furnish its report in sealed cover to this Court within two months. (Order available at the following link)
• Petitions filed: Earlier Mr Vishal Tiwari filed a Writ Petition (Civil) No.162/2023 on the subject. Mr Tushar Mehta, appeared for the Government. There are three other writ petitions Writ Petition (Crl) No. 39 of 2023, Writ Petition (C) No. 201 of 2023 and Writ Petition (Crl) No. 57 of 2023.
  • WP(C) No. 162 of 2023 states that public money amounting to thousands of crores is at risk because public institutions like the State Bank of India and the Life Insurance Corporation of India  are exposed to the Adani Group. It inter alia seeks the issuance of directions to the Union of India and the Union Ministry of Home Affairs to constitute a committee headed by a retired judge of the Supreme Court to investigate the contents of the report published by Hindenburg Research;
  • WP(Crl) No. 39 of 2023 is for the issuance of directions to the Union Ministry of Home Affairs to register an FIR against Mr. Nathan Anderson (founder of Hindenburg Research) and his associates for short selling, and for directions to recover the profits yielded by the short selling to compensate investors.
  • WP(C) No. 201 of 2023 inter alia states that “the Adani Group has been in flagrant violation of … Rule 19A of the Securities Contracts (Regulation) Rules by surreptitiously controlling more than 75% of the shares of public listed Adani group companies, thereby manipulating the price of its shares in the market.” It inter alia seeks a court monitored investigation by a Special Investigation Team or by the Central Bureau of Investigation into the allegations of fraud and the role played by top officials of leading public sector banks and other lender institutions.
  • WP(Crl) 57 of 2023 is for directions to any investigative authority to: (i) investigate the Adani Group companies under the supervision of a sitting judge of this Court; and (ii) investigate the role of LIC and SBI in these transactions.
  • Hindenburg report on Adani may be seen at the link. It alleges Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.