Indian Supreme Court orders probe into Adani-Hindenburg report

The Indian Supreme Court on Thursday ordered a probe into the Adani-Hindenburg episode and set up an experts committee to be headed by its retired judge AM Sapre. It also sought a status report from SEBI on its ongoing investigation into the matter within two months.

Other members of the panel include OP Bhat, JP Devdhar, KV Kamath, Nandan Nilakeni and adv Somasekhar Sundaresan. The SC panel will examine causal factors leading to the episode, suggest measures to strengthen investors' awareness and investigate whether there was a regulatory failure. The panel will also suggest measures to strengthen the statutory and regulatory framework and secure compliances within the existing framework for the protection of investors.

A bench, comprising Chief Justice of India Dhananjaya Y Chandrachud and justices PS Narasimha and JB Pardiwala, pronounced its order on a batch of four petitions that sought the intervention of the court and an investigation into different aspects of the issue.

On 17 February, the CJI-led bench reserved its order on the composition and remit of a committee, which is expected to look into the recent episode that witnessed a massive slide in Adani Group's stock prices after US firm Hindenburg Research came out with a report alleging fraud and stock manipulation by the Gautam Adani-led group. The Adani Group has denied the charges.

On that day, the bench turned down the Centre's "sealed cover" nominees for a probe committee, asserting the court will instead name its own panel. The bench underlined that the process must inspire transparency and confidence without an impression being given of the committee being a "government-appointed" panel.

The Centre's note, submitted in the court through solicitor general Tushar Mehta, had suggested that the proposed panel should be entrusted with the primary task of ascertaining the truthfulness of allegations against the Adani Group of companies in the Hindenburg report.

The probe, the note added, should also focus on Hindenburg's admitted position of acquiring a "short position" in the Adani group, and gather details of all its transactions undertaken by it and its linked companies, besides exploring ways to strengthen the statutory and regulatory framework in India. The note also submitted a few names for the proposed panel in a sealed cover envelope.

The Hindenburg's report, released on 24 January, claimed "brazen accounting fraud" and "stock manipulation" by the Gautam Adani-led group. Though the conglomerate rejected the report as "unresearched" and "maliciously mischievous", it triggered a massive rout of Adani Group stocks, with the flagship firm losing over $120 billion in days, and forcing the cancellation of a ₹20,000 crore secondary share sale after it had scraped through.

As HT reported earlier, the decline in the market value of a share by lakhs of crores does not always mean investors have lost that much money. The losses are a function of the price at which the investors bought the shares (and even then, till they sell the shares, this is notional) and also correspond to the extent of their holding. In the case of the Adani Group's listed companies, their low free-float (proportion in the hands of public investors) means this was likely low.