The Supreme Court of India, after extensive hearings in October-November 2023, reserved judgment in the batch of petitions arising from the Adani-Hindenburg controversy, which had sought directions for an independent investigation into alleged stock price manipulation, regulatory failure, and related party transaction violations by the Adani Group. The Bench of Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra considered the report of the Court-appointed expert committee headed by former Justice A.M. Sapre and SEBI's submissions on its ongoing investigations.
Background
In January 2023, US-based short seller Hindenburg Research published a report alleging stock price manipulation, accounting fraud, and regulatory violations by the Adani Group of companies. The report triggered a significant decline in Adani Group stock prices, with investors collectively losing billions in market value. Multiple petitions were filed before the Supreme Court seeking an independent investigation into the allegations and SEBI's role as market regulator.
In March 2023, the Court constituted a six-member expert committee headed by former Justice A.M. Sapre, with members including former SBI Chairman O.P. Bhatt, Infosys co-founder Nandan Nilekani, banking veteran K.V. Kamath, former judge J.P. Devadhar, and advocate Somasekhar Sundaresan. The committee was tasked with assessing the regulatory framework, investigating potential regulatory failure, and suggesting measures for investor protection.
Key Holdings
The hearings in October 2023 revealed the following positions:
Expert committee findings: The Sapre Committee reported that it had found no prima facie evidence of regulatory failure on SEBI's part. The committee concluded that SEBI had been conducting investigations into the relevant matters and its regulatory processes appeared functional.
Short position build-up identified: The committee noted evidence of a build-up in short positions on Adani Group stocks prior to the publication of the Hindenburg Report. Profits were earned by entities that had taken short positions before the report triggered price declines.
SEBI's investigation status: SEBI informed the Court that it had initiated 24 investigations in connection with the Adani matter. Of these, 22 investigations — covering related-party transactions, insider trading, stock price manipulation, and FPI investment routes — had been completed. Two investigations remained pending.
Demands for SIT rejected: The petitioners' demand for a Special Investigation Team or CBI investigation was strongly contested by the respondents, who argued that SEBI possessed the institutional competence and statutory mandate to conduct such investigations.
Judgment reserved: The Court reserved its final judgment after completing hearings, with the verdict subsequently delivered on 3 January 2024.
Implications for Practitioners
The Adani-Hindenburg proceedings represent the most significant judicial examination of India's securities market regulatory framework in recent years. For securities law practitioners, the case highlights the interplay between judicial oversight and regulatory autonomy — the extent to which courts will defer to SEBI's investigative competence versus intervening through independent probes.
The expert committee model employed here — a multi-disciplinary panel of retired judges, financial experts, and legal professionals — may become a template for future cases involving complex market regulatory questions that require technical assessment beyond the Court's conventional expertise.
For compliance professionals and in-house counsel at listed entities, the case underscores the scrutiny that market regulators face from both courts and the public when significant investor losses occur. Robust compliance frameworks, transparent related-party transaction policies, and proactive disclosure practices remain the best defences against regulatory and judicial investigation.