Observing that it will maintain the ”fullest transparency” to protect investor interest, the Supreme Court on Friday refused to accept the Centre's suggestion given in a sealed cover and said it will appoint a panel of experts on its own for strengthening regulatory measures for stock markets in the wake of the recent Adani group shares crash triggered by Hindenburg Research's fraud allegations.
A bench headed by Chief Justice D Y Chandrachud said the sealed cover means the other side will not have access to the contents and it may give the impression that the government appointed the committee and the top court accepted it.
Giving primacy to investors' interest, the bench, also comprising justices P S Narasimha and J B Pardiwala ruled out the possibility of any sitting judge overseeing the functioning of the proposed panel.
”We are closing it for orders,” it said after the hearing which lasted for nearly an hour.
After receiving the note from the solicitor general on the members and remit (scope) of the proposed panel, the bench said, ”Just one thing.., you know, if we accept the set of suggestions from you in a sealed cover, that means the other side has not seen them. Even if we don't accept your suggestion, they will not know which of your suggestions we have accepted and which we have not. Then there may be an impression that well, this is a government appointed committee which the Supreme Court has accepted...”
”So we want to maintain the fullest transparency in the interest of protecting the investors. We will appoint a committee of our own which might be altogether better and that will promote the sense of transparency and confidence in the process,” the bench said.
The court said if it were to accept the suggestions then the contents of the sealed cover report will have to be disclosed to the other side so that there is a sense of transparency and confidence in the process.
This is what we have suggested in the remit which we have made absolutely objectively so as to ensure that the whole thing is holistically looked into and examined, said the SG.
At the outset, the law officer said there were two intentions in his mind. ”A. Truth comes out and a holistic view is presented before your Lordships. And, B. No unintended impact on the securities markets etc because your lordships are aware that it is an emotion driven market,” he said.
Referring to the SEBI reports, the bench said it has been averred that the market impact of the Adani issue is ”almost zero”.
”Irrespective of the status of the impact, there can't be any denial of the fact that there has been losses suffered (by the investors),” the bench said.
The law officer said so far as the suggestion that the functioning of the panel must be supervised by a former Supreme Court judge, the government has no objection and it leaves it to the discretion of the court.
”Only concern which I share with the Lordships is this that by its very nature, it may not be advisable to delay the entire exercise for a long period and any Hon'ble judge who can devote time, your lordships can select,” the solicitor general said, adding that he has given the suggestions on members of the proposed panel.
The bench, however, refused to accept the suggestions made in a sealed cover.
The bench then went on to hear the submissions on behalf of PIL petitioners Vishal Tiwari, M L Sharma and others including Prashant Bhushan.
”We want this entire thing to be probed by a high powered committee,” Tiwari said.
”I am against the short selling used to crash the markets,” said Sharma, which led the CJI to ask him as to what constitutes short selling.
Bhushan, appearing for a petitioner, said an SIT probe was needed into the Adani group companies and the role of banks.
There was a need to probe the excessive rise in the prices of shares and the diversion of funds, he added.
”My first prayer is a court monitored committee or CBI probe into the market manipulation,” he said, adding the Hindenburg report shows that offshore funds were used and this effectively meant that the percentage of shares held by promoters exceeded the SEBI regulations.
”If the court is planning to have a committee, then I would also like to suggest names of some retired judges who have impeccable integrity,” Bhushan said.
”Don't give us names,” the CJI said while wrapping up the proceedings for the day.
On February 10, the top court had said the interest of Indian investors need to be protected against market volatility in the backdrop of the Adani group stocks rout and asked the Centre to consider setting up a panel of domain experts headed by a former judge to look at strengthening the regulatory mechanism.
The crucial hearing on the PILs on Friday assumed significance in the wake of the recent developments like the Centre agreeing to the apex court's proposal to set up a committee, likely to be headed by a former Supreme Court judge, to go into the regulatory regimes.
Stressing that statutory bodies like market regulator Securities and Exchange Board of India (SEBI) are ”fully equipped” and are on job, the central government had expressed apprehension that any ”unintentional” message to the investors that regulatory bodies in India needed monitoring by a panel may have some adverse impact on the flow of money into the country.
The Centre had told the bench that it wanted to provide details such as names and the scope of the panel's mandate in a ”sealed cover”.
Stock market regulator SEBI, in its note filed in the top court, had indicated it is not in favour of banning short-selling or sale of borrowed shares, and said it is investigating allegations made by a tiny short-seller against the Adani Group as well as its share price movements.
Till now, four PILs have been filed in the top court on the issue by lawyers M L Sharma, Vishal Tiwari, Congress leader Jaya Thakur and Mukesh Kumar, who claims to be a social activist.
Tiwari, in his PIL, sought a direction to the Centre to constitute a committee monitored by a retired apex court judge to inquire 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 sought 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.
Congress leader Thakur, in his plea, has sought an investigation under the supervision of a sitting apex court judge against the Adani group of companies in light of the allegations.
The fourth PIL seeks a probe by multiple central government agencies under the supervision of a panel or a former apex court judge against the Adani group following allegations of fraud and share price manipulation.
Adani group stocks have taken a beating on the bourses after the Hindenburg Research made a litany of allegations, including fraudulent transactions and share-price manipulation, against the business conglomerate. The Adani group has dismissed the charges as lies, saying it complies with all laws and disclosure requirements.
