The Supreme Court on Thursday set up a six-member committee headed by one of its former judges, AM Sapre, to suggest measures to protect investors against the kind of market volatility seen after the Hindenburg report against Adani Group.
The committee will assess the regulatory framework and recommend measures to strengthen it.
The other members of the committee include OP Bhatt, former State Bank of India
The SC also asked the Securities and Exchange Board of India (Sebi) to probe within two months allegations of stock price manipulation by Adani Group and any lapses in regulatory disclosures.
Reacting to the apex court’s directions, Adani Group chairman Gautam Adani tweeted: “The Adani Group welcomes the order of the Hon’ble Supreme Court. It will bring finality in a time bound manner. Truth will prevail.”
The committee will be provided assistance by the Centre and other statutory agencies, including the Sebi chairperson, the bench comprising Chief Justice DY Chandrachud and Justices PS Narasimha and JB Pardiwala said in its nine-page order.
Laying down the remit of the panel, the SC said it will 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 panel will also suggest measures to strengthen investor awareness and investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to Adani Group or other companies. It will also suggest measures to strengthen the statutory and/or regulatory framework; and secure compliance with the existing framework for the protection of investors.
Apart from Sebi, all other agencies of the Union government have been asked to cooperate with the committee. “The committee is at liberty to seek recourse to external experts in its work,” the SC order stated.
The SC bench took note of the ongoing probe in the matter by Sebi and said the markets regulator has not expressly referred to an investigation into the alleged violation of the Securities Contracts (Regulation) Rules 1957, which provide for the maintenance of minimum public shareholding in a public limited company. “Similarly, there may be various other allegations that Sebi must include in its investigation,” it said, directing Sebi to also investigate whether there was any violation of the Securities Contracts (Regulation) Rules.
Sebi will also probe “whether there has been a failure to disclose transactions with related parties and other relevant information which concerns related parties to Sebi, in accordance with law”, it ordered, adding that the probe will also look into whether there was any manipulation of stock prices in contravention of existing laws.
The SC also made it clear that Sebi can go beyond its directions with regard to the contours of the ongoing investigation. It further said that Sebi shall apprise the expert committee of the action it has taken in furtherance of the directions during the ongoing investigation. The setting up of a panel of domain experts does not divest Sebi of its powers or responsibilities in continuing with its investigation into the recent volatility in the securities market, it added.
On February 10, the SC had said the interest of Indian investors needs to be protected against market volatility against the backdrop of the Adani Group stocks’ rout and had 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, but had suggested that it would submit the names of domain experts in a sealed cover, which the court rejected on February 17. It had then said it would go ahead and set up a committee.