The Supreme Court on Thursday ordered the setting up of a six-member committee headed by former apex court judge Justice A M Sapre to investigate the recent Adani Group shares crash triggered by Hindenburg Research's fraud allegations and other regulatory aspects related to stock markets.
The court asked the panel to submit its report in a sealed cover within two months.
The top court observed that the PILs pertained to "the loss of investors' wealth over the past few weeks due to the steep decline of share prices of Adani group companies, precipitated by the Hindenburg Research report which alleged manipulations and malpractices by the Adani group companies" and also directed market regulator SEBI (Securities and Exchange Board of India) to complete its ongoing probe into the issue in two months and file a status report.
Besides former apex court judge Justice Sapre, the other members of the court-appointed panel will be "O P Bhat (former Chairman of SBI), Justice J P Devadhar (retired judge of the Bombay High Court), K V Kamath, Nandan Nilekani, Somasekharan Sundaresan".
A bench headed by Chief Justice D Y Chandrachud directed the Centre, financial statutory bodies and the SEBI chairperson to render all cooperation to the Justice Sapre panel which will have to submit its report in a sealed cover within two months in the court.
The remit of the Committee shall be to provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past, the court said.
The committee will "suggest measures to strengthen investor awareness and to investigate whether there has been a regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies," it said.
It will suggest measures to strengthen the statutory or regulatory framework, and secure compliance with the existing framework for the protection of investors, it said.
SEBI steps taken
The court directed the SEBI to inform the court-appointed committee of domain experts about the steps taken by it so far during the ongoing probe.
The bench, however, clarified that the constitution of the committee was not an "adverse reflection" on the functioning of the regulatory agencies.
The bench, which also comprised Justices P S Narasimha and J B Pardiwala, in a judgement, said the panel will make an overall assessment of the situation, suggest measures to make investors aware and strengthen existing regulatory measures for stock markets.
The court also asked it to examine if there was a violation of market regulations, short selling norms or stock price manipulations.
Relevant causal factors
On the ambit of the probe to be conducted by the panel, the bench said it would "provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past."
The committee will also suggest measures to increase "investor awareness" besides investigating whether there was any regulatory framework to deal with the recent alleged violations of law in the securities market.
The Justice Sapre panel will be suggesting "measures to strengthen the statutory framework and regulatory framework and secure compliance with the existing framework for the protection of existing investors."
"The Committee is at liberty to seek recourse to external experts. The honorarium payable to the members of the committee shall be fixed by the Chairperson and shall be borne by the Union Government," it said.
The Union Ministry of Finance shall nominate a senior officer to act as a nodal officer to provide logistical support to the panel, it said.
The apex court said in order to protect Indian investors against the volatility of the kind which has been witnessed in the recent past, it was of the view that it is appropriate to constitute an expert committee for the assessment of the extant regulatory framework and for making recommendations to strengthen it.
'Cooperate with the committee'
The top court requested the SEBI Chairperson to ensure that all requisite information is provided to the Committee.
" All agencies of the Union Government including agencies connected with financial regulation, fiscal agencies and law enforcement agencies shall cooperate with the Committee. The Committee is at liberty to seek recourse to external experts in its work.
"The honorarium payable to the members of the Committee shall be fixed by the Chairperson and shall be borne by the Union Government. The Secretary, Ministry of Finance shall nominate a senior officer who will act as a nodal officer to provide logistical assistance to the Committee," it said.
Govt pay for all expenses
The top court said all the expenses incurred in connection with the work of the Committee shall be defrayed by the Union Government.
"The Committee is requested to furnish its report in a sealed cover to this Court within two months," it said.
On February 17, the top court, while reserving its verdict on setting up of the panel, had said that it will maintain "fullest transparency" to protect investor interest and refused to accept the Centre's suggestion given in a sealed cover on it.
Protection of investors
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 Centre had agreed to the apex court's proposal to set up a committee, to be headed by a former Supreme Court judge, to go into the regulatory regimes.
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.
Four PILs till now
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.
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.