Adani-Hindenburg row: Supreme Court reserves verdict, says SEBI cannot be asked to decide based on media reports

The Supreme Court on Friday reserved its verdict in a batch of petitions seeking probe into allegations of fraud made against Adani Group of companies in the Hindenburg Research report..The judgment was reserved by a bench of Chief Justice of India (CJI) DY Chandrachud with Justices JB Pardiwala and Manoj Misra..The hearing today also saw the Court remark that the Securities Exchange Board of India (SEBI) cannot be expected to go by what newspapers have reported. .Appearing for a petitioner, advocate Prashant Bhushan argued today that SEBI's conduct in the matter had not been credible. "We have come to the conclusion that the SEBI probe is not credible. They say 13 to 14 entries are linked to Adani but they cannot look into it because the FPI guidelines were amended," he said. This led the Court to point out that the securities market regulator cannot be asked to go by what the media has to say on the subject. "Mr. Bhushan, I do not think you can ask a financial regulator to take something printed in the newspaper.. This does not discredit SEBI.. Should SEBI now follow journalists?" the CJI asked."If journalists are getting these documents, how can SEBI not get it? Which shows that Mr. Vinod Adani was controlling these funds? How could they not get these documents for so many years? The OCCRP, The Guardian etc have shown that most of these offshore companies investing in Adani stocks were controlled by Vinod Adani," Bhushan replied. However, the Court pointed out that the SEBI cannot simply act against entities only based on such newspaper reports. "How can this be of any evidentiary value, complying with the principles of natural justice? How can a show cause be there in such a case? We cannot make an assumption that it is credible or lacking in credibility," the CJI said. The case before the Court is tied to allegations that Adani had inflated its share prices. After these allegations (part of a report by short-seller Hindenberg Research) were published, it led to a sharp fall in the share value of various Adani companies, reportedly to the tune of $100 billion.This led to a batch of petitions being filed before the top court, including a plea that alleged that changes to the SEBI Act had provided a 'shield and an excuse' for the Adani Group's regulatory contraventions and market manipulations to remain undetected.Earlier this year, the Supreme Court asked SEBI to independently investigate the matter, apart from constituting an expert committee headed by retired Justice AM Sapre to also look into the matter.The expert committee in its report released in May, found no prima facie lapse on the part of the SEBI in the matter.Solicitor General Tushar Mehta today contended that media reports were now being "planted" to influence India's actions. "There is a growing tendency of planting stories outside India to influence decisions within India. One example is the OCCRP report," Mehta alleged.Bhushan, however, maintained that the SEBI's role remains suspect as it did not act on relevant information, despite it being available back in 2014. A reference was also made to a Directorate of Revenue Intelligence (DRI) report. SG Mehta replied that allegations were being made based on "random information" available on Twitter or online. The Court orally remarked that it is "easy to make allegations" although it proceeded to ask Bhushan to show whether there was an area of the report which warranted a further probe. .Notably, the hearing today also witnessed sharp exchanges over the impartiality of the SEBI and the members of an expert committee constituted by the Court. One of the petitioners, Anamika Jaiswal, had alleged a conflict of interest and concealment of facts by SEBI. Jaiswal had highlighted that the SEBI's Corporate Governance committee had Cyril Shroff as a member, whose daughter is married to Gautam Adani's son."I did not want to give it credibility by replying to it ... If we start looking at such self-serving reports, then SEBI will be rendered meaningless," Solicitor General Mehta today said while referring to Jaiswal's affidavit..Meanwhile, Bhushan also raised concerns over the inclusion of advocate Somasekhar Sundaresan (now appointed a Bombay High Court judge) and Justice OP Bhatt in the expert committee.Sundaresan had represented Adani before the SEBI during the course of his legal practice while Justice Bhat was the chairperson was a company that partnered with the Adani group, he said. Therefore, there was a conflict of interest, Bhushan submitted.The Court, however, was not convinced."He (Sundaresan) was not an in-house counsel, he was a lawyer. He appeared in 2006. This conflict arises 17 years later. You have not even attached any more instances. Then how do we take these unsubstantiated allegations on record?" the CJI asked..Meanwhile, the SEBI today informed the Court that it is almost done with its investigation in the matter. "We are not seeking any extension of time. There were 24 cases identified for investigation. Out of this, 22 probes are already over by SEBI. For the remaining two we need information from foreign regulators," Solicitor General Mehta said.