Shielding SEBI: On Supreme Court’s ruling and SEBI probe

SC should have pushed it to do more while not reviewing policy actions 

The Supreme Court of India’s ruling on a batch of petitions (A formal letter to a law court asking for a particular legal action), filed in the wake of a U.S.-based short seller’s allegations (a statement, made without giving proof, that someone has done something wrong or illegal) of malfeasance (An example of dishonest and illegal behaviour, especially by a person in authority) including stock price manipulation (controlling someone or something to your own advantage, often unfairly or dishonestly) at the Adani group of companies, has squarely tossed the ball back to the markets regulator’s court. The Court has opted to subordinate (having a lower or less important position) petitioners’ (a person who is asking for action from a law court) entreaties (an attempt to persuade someone to do something)  to protect larger public interest to its chariness (the trait of being cautious and watchful) to substitute “its own wisdom over the regulatory policies” of the Securities and Exchange Board of India. In its 46-page order, the Bench headed by Chief Justice of India D.Y. Chandrachud is emphatic (strongly expressive) in observing that “SEBI has prime facie conducted a comprehensive (complete and include everything that is necessary) investigation” that “inspires confidence”, and that “the facts of this case do not warrant a transfer of investigation from SEBI” given that “prima facie no deliberate (intentional or planned) inaction or inadequacy (the fact that something is not good enough or is too small in amount)” was found in the regulator’s conduct of its probe. Strikingly, the Bench has completely skirted (to go around the edge of something) the fundamental (forming the base, from which everything else develops) questions that the Court-appointed Expert Committee in its May 2023 report had opted to leave as a ‘matter between SEBI and the Court’ — the determination of possible violations pertaining (to be connected with a particular subject, event, or situation) to minimum public shareholding and related party transactions. The Bench has instead seized upon prayers urging the Court to direct SEBI to revoke its amendments (a change to a law that is not yet in operation and is still being discussed) to the Foreign Portfolio Investors Regulations and Listing Obligations (the condition of being morally or legally bound to do something) and Disclosure Requirements — amendments that were at the heart of petitioners’ submissions of regulatory failure — and roundly denied them on grounds that there was neither “any illegality”, nor were the norms “capricious (changing mood or behaviour suddenly and unexpectedly), arbitrary or violative of the Constitution”.

The ruling has also done little to assuage investors’ concerns about SEBI’s approach to getting to the bottom of the allegations raised by Hindenburg Research in its January 2023 report. Without elaboration (the addition of more information to or an explanation of something) on any of the regulator’s findings, the Court has blandly observed that “SEBI has completed 22 out of the 24 investigations into the Adani group” and that completion of the remaining two “are pending due to inputs being awaited from foreign regulators”. The Bench has directed SEBI to complete these “expeditiously”. While the Court’s reluctance (an unwillingness to do something) to review the policy actions of a ‘specialised regulator’ is understandable, the decision to leave the crucial question of SEBI’s perceived tardiness (the quality of being late or slow) in investigating allegations of corporate malfeasance and market manipulation by a large conglomerate (a company that owns several smaller businesses whose products or services are usually very different) back to the remit of the very same watchdog hints at a degree of judicial abstinence (the act or practice of refraining from some action or from the use of something) that may only undermine the larger public good. The Court is surely aware of past instances where it has found SEBI wanting in alacrity (speed and eagerness) of enforcement, a facet flagged by the experts’ panel appointed in this case as well. After all, ‘justice must not only be done, but it must also be seen to be done’.

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