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

  • Published
    5th Jan, 2024


The Supreme Court of India’s ruling on a batch of petitions, filed in the wake of a U.S.-based short seller’s allegations of malfeasance including stock price manipulation at the Adani group of companies, has squarely tossed the ball back to the markets regulator’s court.

Supreme Court's Confidence in SEBI

  • Judicial Restraint: The Supreme Court, in its ruling, exhibits judicial restraint, respecting SEBI's regulatory policies and refraining from substituting its wisdom. It emphasizes SEBI's comprehensive investigation, instilling confidence in its competence.
  • Dismissal of Regulatory Failure Claims: The Bench dismisses claims of regulatory failure, stating that SEBI's amendments to FPI regulations aren't illegal or arbitrary. The ruling addresses concerns without challenging the regulator's policy decisions.
  • Unexplored Fundamental Questions: Notably, the Court avoids addressing fundamental questions raised by the Expert Committee, leaving issues related to minimum public shareholding and related party transactions primarily between SEBI and the Court.

Investor Concerns and SEBI's Approach

  • Allegations from Hindenburg Research: The ruling does little to alleviate investor concerns regarding SEBI's approach to Hindenburg Research's allegations. It lacks elaboration on SEBI's findings and mentions ongoing investigations, urging their expedited completion.
  • Pending Investigations: The Court notes SEBI's completion of 22 out of 24 investigations into the Adani group. However, two investigations are pending, awaiting input from foreign regulators, emphasizing the need for expeditious resolution.
  • Judicial Abstinence and Public Interest: The decision's judicial abstinence may undermine the larger public interest, particularly regarding SEBI's perceived tardiness in investigating corporate malfeasance and market manipulation.

Challenges and the Way Forward

  • Past Instances of SEBI's Alacrity Concerns: The Court acknowledges past instances where SEBI's enforcement alacrity was questioned. The ruling's abstinence raises challenges, emphasizing the importance of justice being seen to be done.
  • SEBI's Directive to Complete Investigations: While the Court doesn't review SEBI's actions, it directs the regulator to complete pending investigations expeditiously, highlighting a balance between judicial oversight and regulatory autonomy.
  • Judicial Abstinence Impact: The ruling's impact on SEBI's accountability and public trust remains uncertain. Striking a balance between judicial review and regulatory autonomy is crucial for the integrity of financial markets.
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