In a significant legal development, the Supreme Court on Friday reserved its verdict on a series of petitions demanding an investigation into fraud allegations targeting companies within the Adani Group, as detailed in the Hindenburg Research report.

 The bench, headed by Chief Justice of India (CJI) DY Chandrachud, alongside Justices JB Pardiwala and Manoj Misra, reserved its decision during the hearing.

A central point of contention during the proceedings was the credibility of the Securities Exchange Board of India (SEBI) in handling the case. Advocate Prashant Bhushan, representing a petitioner, argued that SEBI's probe lacked credibility, particularly highlighting its reluctance to investigate entries connected to Adani due to amendments in Foreign Portfolio Investor (FPI) guidelines. He stated, "We have reached the conclusion that the SEBI probe is not credible. They acknowledge that 13 to 14 entries are connected to Adani, but they claim they cannot investigate it due to amendments in the FPI guidelines."

As a response to Prashant Bhushan's argument, the Court highlighted that the securities market regulator should not be expected to rely solely on information presented in the media. The Chief Justice of India (CJI) stated, "Mr. Bhushan, I do not think you can ask a financial regulator to take something printed in the newspaper... This does not discredit SEBI... Should SEBI now follow journalists?" The CJI questioned why SEBI, if journalists could access such documents, had not obtained them over the years. Bhushan countered by referring to reports from entities like the OCCRP and The Guardian, indicating that offshore companies investing in Adani stocks were allegedly controlled by Vinod Adani.

The Court emphasized that the Securities Exchange Board of India (SEBI) cannot take action against entities solely relying on newspaper reports. The Chief Justice of India (CJI) questioned the evidentiary value of such reports in terms of complying with the principles of natural justice, expressing skepticism about making assumptions regarding their credibility. The CJI stated, "How can this be of any evidentiary value, complying with the principles of natural justice? How can a show cause be there in such a case? We cannot make an assumption that it is credible or lacking in credibility."

The case revolves around allegations that Adani artificially inflated its share prices, triggered by a report from Hindenburg Research. This led to a substantial decline in the share value of Adani companies, prompting petitions to the Supreme Court. One plea argued that amendments to the SEBI Act created a shield for regulatory violations and market manipulations by the Adani Group.

Earlier this year, the Supreme Court directed SEBI to conduct an independent investigation, and an expert committee led by retired Justice AM Sapre was established to examine the matter. The committee's May report found no apparent lapse on SEBI's part.

During the recent hearing, Solicitor General Tushar Mehta argued that there is an emerging trend of deliberately circulating media reports to sway decisions within India. He claimed that stories, such as the OCCRP report, were being "planted" from outside the country with the intention of influencing actions and decisions within India.

Prashant Bhushan, on the other hand, continued to assert that the role of SEBI remains questionable, emphasizing that the regulatory body failed to take action on pertinent information even when it was accessible as far back as 2014. He made reference to a report from the Directorate of Revenue Intelligence (DRI) to support his argument.

The Court requested Bhushan to specify aspects of the report justifying further investigation, noting that making allegations is straightforward. 

During the hearing, there were heated exchanges regarding the impartiality of both the Securities Exchange Board of India (SEBI) and the members of the expert committee appointed by the Court. Anamika Jaiswal, one of the petitioners, raised concerns about a conflict of interest and alleged that SEBI had concealed relevant facts. Specifically, she pointed out a potential conflict within SEBI's Corporate Governance committee, which included Cyril Shroff, whose daughter is married to Gautam Adani's son.

In response, Solicitor General Mehta dismissed these concerns, stating, "I did not want to give it credibility by replying to it... If we start looking at such self-serving reports, then SEBI will be rendered meaningless." 

Bhushan also raised concerns about the inclusion of Somasekhar Sundaresan and Justice OP Bhatt in the expert committee, citing their past associations with Adani. 

The Court, however, appeared unconvinced by Prashant Bhushan's arguments. The Chief Justice of India (CJI) responded, "He (Sundaresan) was not an in-house counsel, he was a lawyer. He appeared in 2006. This conflict arises 17 years later. You have not even attached any more instances. Then how do we take these unsubstantiated allegations on record?" The CJI questioned the lack of additional instances and evidence to support the allegations of a conflict of interest.

In the latest update, SEBI informed the Court that it is nearing completion of its investigation, with 22 out of 24 cases already concluded. The remaining two cases await information from foreign regulators, indicating progress in SEBI's efforts to address the allegations.