Govt agrees to set up experts panel, SC to hear plea on Adani row on Friday

The Centre on Monday agreed to the Supreme Court's proposal to set up a panel of experts to look into strengthening the regulatory mechanisms for the stock market in the wake of the recent Adani group shares crash triggered by Hindenburg Research's fraud allegations.

Saying it has no objection to constituting the panel, the Centre, at the same time, stressed that market regulator Securities and Exchange Board of India and other statutory bodies are "fully equipped", not only regime wise, but otherwise also to deal with the situation. It also wanted to be allowed to provide details such as names and the scope of the panel's mandate in a “sealed cover”.

The top court on Friday said the interests of Indian investors need to be protected against market volatility in the backdrop of the Adani stocks rout and asked the Centre to consider setting up a panel of domain experts headed by a former judge to look into strengthening the regulatory mechanisms.

The court, which was hearing two PILs alleging exploitation of innocent investors and "artificial crashing" of the Adani Group's stock value, was told by solicitor general Tushar Mehta that the Centre was agreeable to the proposal as it came from the court.

Mehta, however, told the bench also comprising Justices PS Narasimha and JB Pardiwala, that the “remit” of the proposed committee would be relevant because any “unintentional” message to the investors that regulatory bodies here needed a monitoring by a panel may have some adverse impact on flow of money into the country.

“I have instructions that the SEBI and other agencies are fully equipped, not only regime wise, but otherwise also to take care of the situation. However, responding to the suggestion which fell from the court, the government has no objection to constituting a committee,” he said.

“But the remit of the committee would be very relevant because any unintentional message to international investors or domestic investors that the regulatory authorities need a monitoring by the committee may have some adverse impact on the flow of money,” the top law officer said at the outset of the hearing.

He said the Centre may be allowed to suggest names, who are people of “some calibre” and scope of the proposed committee in a sealed cover because it may not be appropriate to discuss these in open court hearings.

The bench then asked the law officer to give the note by Wednesday and listed the two PILs for further hearing on Friday.

The top court had also sought the views of the SEBI and the Centre as to how to ensure putting a robust mechanism in place since the capital movement now is “seamless” in the country.

The stock market is not the place where only high value investors invest, it had said, adding that with the changing financial and tax regime investments are being made by “the wide spectrum of middle class."

It had noted that as per some reports the total loss suffered by Indian investors due to the recent Adani stocks rout was in the range of several lakh crores of rupees.

On the issue of strengthening the existing regulatory regime, the bench had mooted a committee which can comprise experts from the securities areas, the international banking sector and a “wise guiding figure in the form of a former judge”.

“We have also suggested to the solicitor general, if they are willing to accede to forming a committee to see the overall situation. If the Union government is so inclined to accept the suggestion, the necessary submissions can be urged on the constitution of the committee to that end,” it had said in the order.

One PIL filed by lawyer Vishal Tiwari sought a direction to the Centre to constitute a committee monitored by a retired apex court judge to inquire into the Hindenburg Research report which has made a slew of allegations against the business conglomerate led by industrialist Gautam Adani.

Another PIL filed by advocate M L Sharma sought prosecution of short-seller Nathan Anderson of the US-based Hindenburg Research and his associates in India and the US for allegedly exploiting innocent investors and the "artificial crashing" of the Adani Group's stock value in the market.

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.