January 6, 2024 In Uncategorized


A three Judge Bench of the Supreme Court, comprising of present Chief Justice of India, Dr. D.Y Chandrachud, Justice J.B Pardiwala and Justice Manoj Misra, passed a judgement dated 03.01.2024 in Vishal Tiwari V. Union of India and Ors. W.P (C) No. 162 of 2023 wherein the Bench held that Securities and Exchange Board of India (SEBI) did not lack efficiency while conducting the investigation in the Adani-Hindenburg Case and also upheld the Regulations made by SEBI.


A batch of Writ Petitions were filed before the Supreme Court under Article 32 of the Constitution of India (Remedies for enforcement of rights conferred by this Part) which raised concerns over the stark decline in investor wealth and volatility in the share market due to the rapid fall in the share prices of the Adani Group of Companies. The cause of the collapse of share prices was the report published by ‘Activist Short Seller’ named Hindenburg Research. The Report by Hindenburg Research alleged that the Adani Group manipulated its share prices and failed to disclose transactions with related parties and other relevant information that were in violation of the regulations framed by SEBI and also other securities legislation.

The Petitioner sought the following reliefs from the Apex Court-

a) To constitute a committee to investigate the Hindenburg Report

b) To order a Court-monitored investigation by the Special Investigation Team (SIT) or by the Central Bureau of Investigation (CBI) regarding the alleged violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957 (Continuous Listing Requirement).

c) To investigate the transactions of Adani Group along with Life Insurance Corporation of India (LIC) and State Bank of India (SBI) which were alleged to be part of transactions with Adani Group.

d) To register an F.I.R against the founder of Hindenburg Research i.e. Mr. Nathan Anderson and his associates for short-selling and also requested for directions to recover the profits yielded by short-selling, to compensate the Indian investors.

The Apex Court, directed Securities and Exchange Board of India (SEBI) to continue with the investigation regarding the following points raised by the Petitioners-

I) Whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957.

II) Whether there has been a failure to disclose transactions of Adani Group with related parties and any other relevant information.

III) Whether there was any manipulation of stock prices in contravention of existing securities laws.

The Petitioner contended that there was a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957 which requires a minimum 25% public shareholding in all public-listed companies to which the Adani Group did not comply. Also, the Directorate of Revenue Intelligence (DRI) had addressed a letter dated 31.01.2014 to the then SEBI Chairperson alerting them about possible stock market manipulation but SEBI did not take any adequate action regarding the same.

On the other hand, Solicitor General of India, appearing on behalf of SEBI made the following submissions before the Court-

i) SEBI has been taking various steps in the areas identified by the Expert Committee and will also take into consideration the suggestions of the Committee to improve its practices and procedures.

ii) That in 2014, after receiving the letter from DRI, SEBI started its examination and the Additional Director of DRI himself found the allegations of over-valuation to be incorrect.


A) Whether the Court could transfer the investigation from SEBI to any other agency?

B) Whether SEBI was negligent in conducting investigation as per the Organised Crime and Corruption Reporting Project Report (OCCRP)?

C) Whether the delay in filing the Report by SEBI was done deliberately?

D) Whether SEBI should revoke its amendments in Foreign Portfolio Investments (FPI) and Listing of Obligations and Disclosure Requirements (LODR) Regulations?

Decision by the Supreme Court:

1) The Supreme Court refused to transfer the ongoing investigation being carried out by SEBI to any other agency such as CBI or SIT, saying that the Court must refrain from replacing its own knowledge/wisdom over the regulatory policies of SEBI. Moreover, the Court stated that such a power to transfer a case is used only in exceptional circumstances, such as when the competent authority exhibits intentional, and purposeful inactivity in carrying out the investigation.

2) The Court rejected the reliance on OCCRP Report which was a third party organisation report and was without any verification and thus cannot be relied upon as a proof.

3) The Supreme Court held that as SEBI sought an extension of time in filing the Report and later submitted the Report dated 25.08.2023, providing comprehensive details about all the investigations carried out by SEBI. Therefore, there was a delay of only 10 days in filing the Report. Thus, the Apex Court was of the view that such a delay did not prima facie indicate deliberate inaction by SEBI.

4) The Apex Court held that the amended FPI and LODR Regulations were completely valid and legal. Moreover, there was no regulatory failure by SEBI in the above matter.

5) The Apex Court held that SEBI has completed 22 out of the 24 investigations in the allegations levelled against the Adani Group and the Court directed that the pending 2 investigations must be completed as expeditiously as possible preferable within 3 months.

6) The Supreme Court also directed SEBI as well as other investigative agencies to probe into the matter regarding the loss suffered by Indian investors due to the conduct of Hindenburg Research and any other entities in taking short positions. Consequently, the contentions made by the Petitioners were disposed of by the Court and the investigations by SEBI were upheld as valid.


The Supreme Court, while examining the role of independent regulatory bodies such as SEBI in the Adani Hindenburg issue, upheld the importance of India’s principal capital market regulator and regarded it as the medium to adjudicate the violations that arise in the market. The Apex Court upheld the validity of FPI and LODR Regulations and provided that the Regulations do not suffer from any infirmities. The Court also directed SEBI to complete the pending investigations in an expeditious manner and also conclude its findings regarding whether there were some irregularities under Rule 19A of the Securities Contracts (Regulation) Rules 1957 on behalf of Adani Companies.

Editor’s Comments:

Manipulation of the Stock Market is a common practice by very big companies who reduce or increase the price significantly by using unfair means and irregular practices thereby, promoting their vested interests. The Adani Group has been under the scanner for some time and has been pulled up SEBI for irregularities which has finally culminated into an investigation directed by the Apex Court. The Court by supporting such investigations and subsequently upholding SEBI’s investigations has worked towards protecting innocent investors who are victims of such malpractices. However, the Apex Court’s power of Judicial Review does not enable it to conduct investigations directly and they are dependent on bodies like SEBI. Though the Supreme Court has upheld the SEBI’s preliminary Report, SEBI as well as other investigative agencies are yet to probe into the losses suffered by Indian investors due to the conduct of Hindenburg Research and any other entities in taking short positions.










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