India’s Supreme Court appointed a panel of experts to investigate whether the country’s securities regulator failed to act on allegations against the Adani Group leveled by short-seller Hindenburg Research.
The highest court of the country on Wednesday ordered a panel of six people to investigate “regulatory failure in dealing with the alleged contravention of the law pertaining to the securities market in relation to the Adani Group”, according to the court order.
The Supreme Court asked the panel to provide an “overall assessment of the situation”, including assessing the causes of recent market volatility. The court ordered the panel to submit its findings within two months.
Adani shares lost more than $145bn in a wipeout following the January release of the Hindenburg report, which accused infrastructure group Gautam Adani of share manipulation and accounting fraud. Adani has denied the allegations.
Political pressure is mounting on the Securities and Exchange Board of India, with opposition politicians criticizing the regulator for not doing enough to protect retail investors. Adani is considered close to Prime Minister Narendra Modi and has largely aligned its business with the government’s growth agenda.
Headed by former Supreme Court judge Abhay Manohar Sapre, the six-member panel included former State Bank of India chairman OP Bhatt, Infosys chairman Nandan Nilekani, veteran banker KV Kamath, lawyer Somasekhar Sundaresan and retired judge JP Devadhar.
The Supreme Court ordered SEBI to expand its probe into Adani and look into possible illegal share price manipulation.
The top court also asked Sebi to investigate the alleged violation of rules related to related party transactions and minimum share market with Adani Group listed companies. Last month, global index provider MSCI changed its weighting for some Adani Group shares after reviewing the number of freely tradable shares.
The bench asked SEBI to report the proceedings to the court and complete its inquiry within two months. However, the two-month period is not necessarily binding as SEBI can ask for an extension.
Adani said it welcomed the Supreme Court’s order. “The Adani Group welcomes the Supreme Court order,” Adani tweeted on Thursday. “It will bring finality in due time. Truth will prevail.”
Senior Supreme Court lawyer Sanjay Hegde cautioned that the Supreme Court committee had mixed results.
“There have been committees in the past that have done effective work and there are others whose response has been less than satisfactory,” Hegde said.
“In Adani’s case, the committee consists of eminent people, but not many have knowledge of stock market manipulation,” Hegde added.
“This committee is not unlike FDR’s appointment of Joseph Kennedy to the SEC to set things right after the Wall Street crash.” Kennedy, John F Kennedy’s father, was the first SEC chairman in the 1930s.