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Vishal Tiwari vs Union of India & Ors. (2023): W.P.(C) No. 162 of 2023

Writ Petition (Crl.) · 2023 INSC 191Decided 2 Mar 2023
Writ Petition (Crl.) No. 39 of 2023
Dr. Dhananjaya Y. Chandrachud · Pamidighantam Sri Narasimha · J.B. Pardiwala

Background

Following a report published by Hindenburg Research on 24 January 2023 alleging that the Adani Group of companies had manipulated its share prices, failed to disclose related-party transactions, and violated securities laws, the Adani Group's share prices fell sharply, causing large losses to investors, including public institutions like the State Bank of India and Life Insurance Corporation of India that held exposure to the group. Four connected petitions were filed seeking a range of reliefs: a retired-judge-headed probe into the report's contents, an FIR against Hindenburg's founder for alleged short-selling, a court-monitored SIT/CBI investigation into alleged fraud and the role of public sector banks, and a Supreme Court-supervised probe generally.

Decision Breakdown

The Court noted that SEBI (the securities regulator) was already investigating the allegations, including possible violations of SEBI's fraud, insider trading, and foreign portfolio investment regulations, but had not clearly stated it was probing violations of the minimum public shareholding rule (Rule 19A of the Securities Contracts (Regulation) Rules, 1957). The Court directed SEBI to specifically also investigate: (a) any violation of Rule 19A, (b) any failure to disclose related-party transactions, and (c) any manipulation of stock prices, and to complete its investigation within two months with a status report. Separately, to review and strengthen the broader regulatory framework protecting Indian investors from such market volatility, the Court constituted an Expert Committee headed by former Supreme Court judge Justice Abhay Manohar Sapre (with members including O.P. Bhatt, Justice J.P. Devadhar (retd.), K.V. Kamath, Nandan Nilekani, and Somashekhar Sundaresan) to assess the causes of the volatility, suggest measures to protect investors, and recommend regulatory reforms, reporting in a sealed cover within two months.

Lesson Learnt

Even where a specialised regulator like SEBI is already investigating a market scandal, the Supreme Court can direct it to widen the scope of its inquiry into specific statutory violations, and can independently set up an expert body to assess systemic regulatory gaps, showing how courts use both regulatory oversight and expert review together to protect ordinary investors during major market shocks.

Official source (sci.gov.in)View Judgment (PDF)

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