Vishal Tiwari Versus Union of India & Ors

Vishal Tiwari Versus Union of India & Ors 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Writ Petition (C) No. 162 of 2023
Vishal Tiwari …Petitioner
Union of India & Ors. …Respondents
Writ Petition (Crl) No. 39 of 2023
Writ Petition (C) No. 201 of 2023
And With
Writ Petition (Crl) No. 57 of 2023
1. Notice.
2. The present batch of petitions concerns the loss of investor wealth in the
securities market over the last few weeks because of a steep decline in the share
price of the Adani Group of companies. The decline in the share price was
precipitated by a report published by Hindenburg Research on 24 January 2023.
This report inter alia alleges that the Adani Group of companies has manipulated
its share prices; failed to disclose transactions with related parties and other
relevant information concerning related parties in contravention of the
regulations framed by SEBI; and violated other provisions of securities laws. The
report also states that Hindenburg Research has taken a short position in the
Adani Group companies through US traded bonds and non-Indian traded
derivative instruments. It is in this background that the present batch of petitions
came to be filed.
3. A brief overview of the petitions follows:
a. WP(C) No. 162 of 2023 states that public money amounting to thousands
of crores is at risk because public institutions like the State Bank of India1
and the Life Insurance Corporation of India2 are exposed to the Adani
Group. It inter alia seeks the issuance of directions to the Union of India
and the Union Ministry of Home Affairs to constitute a committee headed

1 “SBI”
2 “LIC”
by a retired judge of the Supreme Court to investigate the contents of the
report published by Hindenburg Research;
b. WP(Crl) No. 39 of 2023 is for the issuance of directions to the Union Ministry
of Home Affairs to register an FIR against Mr. Nathan Anderson (founder of
Hindenburg Research) and his associates for short selling, and for
directions to recover the profits yielded by the short selling to compensate
c. WP(C) No. 201 of 2023 inter alia states that “the Adani Group has been in
flagrant violation of ... Rule 19A of the Securities Contracts (Regulation)
Rules by surreptitiously controlling more than 75% of the shares of public
listed Adani group companies, thereby manipulating the price of its shares
in the market.” It inter alia seeks a court monitored investigation by a
Special Investigation Team or by the Central Bureau of Investigation into
the allegations of fraud and the role played by top officials of leading
public sector banks and other lender institutions; and
d. WP(Crl) 57 of 2023 is for directions to any investigative authority to: (i)
investigate the Adani Group companies under the supervision of a sitting
judge of this Court; and (ii) investigate the role of LIC and SBI in these
4. In its order dated 10 February 2023, this Court noted that there was a need
to review existing regulatory mechanisms in the financial sector to ensure that
they are strengthened with a view to protect Indian investors from volatilities in
the market. Accordingly, it was suggested to the Solicitor General that he may
seek instructions from the Union of India on the constitution and remit of an
expert committee.
5. We have heard Mr. Prashant Bhushan, learned senior counsel appearing
for the petitioners and Mr. Tushar Mehta, learned Solicitor General appearing for
the Union of India. Both of them have also placed on record brief notes
indicating their suggestions for the remit of the expert committee to be
constituted. Further, SEBI has placed on record a brief note on the factual and
legal aspects describing the existing statutory regime, regulatory mechanisms
and frameworks in place for the protection of investors. It has also laid out the
regulatory framework governing short selling. Mr Vishal Tiwari and Mr Manohar Lal
Sharma have appeared in person.
6. SEBI has submitted in its note that:
a. It has adopted a disclosure based regulatory regime for both issuance of
and trading in securities. This is in line with the discontinuation of pricing
control for capital issues in favour of the principle of free discovery by the
markets based on demand and supply from informed investors; and
b. It is “strongly and adequately empowered to put in place regulatory
frameworks for effecting stable operations and development of the
securities markets including protection of investors.” It has also detailed the
extant framework governing investor protection in the context of the
subject matter at hand. It has stated that the key pillars of investor
protection are:
“11.1 Mandatory disclosures by listed
companies to facilitate free and fair price
discovery and to ensure that all investors
have equal access to material information for
them to be able to take informed investment
11.2 Market systems to ensure seamless
trading and settlement including volatility
11.3 Enforcement action in the event of
misconduct in the market including fraud or
violations of SEBI regulations.”
7. In Prakash Gupta v. SEBI,3 a two Judge Bench of this Court, of which one
of us (D.Y. Chandrachud, J) was a part discussed the specialized regulatory role
of SEBI and noted that:
“99. The provisions of the SEBI Act, as analyzed
earlier in this judgment, would indicate the
importance of the role which has been
ascribed to it as a regulatory, adjudicatory and
prosecuting agency. SEBI has vital functions to
discharge in the context of maintaining an
orderly and stable securities’ market so as to
protect the interests of investors.”
8. On the subject matter of these petitions, SEBI has stated that:
“21.1 SEBI is already enquiring into both, the allegations
made in the Hindenburg report as well as the market
activity immediately preceding and post the publication
of the report, to identify violations of SEBI Regulations
including but not limited to SEBI (Prohibition of Fraudulent
and Unfair Trade Practices I relating to Securities Market)
Regulations 2003, SEBI (Prohibition of Insider Trading)
Regulations 2015, SEBI (Foreign Portfolio Investors)
Regulations 2019, Offshore Derivative Instruments (ODI)
norms, short selling norms, if any. As the matter is in early

3 2021 SCC OnLine SC 485
stages of examination, it may not be appropriate to list
details about the ongoing proceedings at this stage.”
9. In view of the above statement, it appears that SEBI is seized of the
investigation into the allegations made against the Adani Group companies.
SEBI has not expressly referred to an investigation into the alleged violation of the
Securities Contracts (Regulation) Rules 1957 which provide for the maintenance
of minimum public shareholding in a public limited company. Similarly, there may
be various other allegations that SEBI must include in its investigation.
10. As a part of its ongoing investigation, SEBI shall also investigate the
following aspects of the issues raised in the present batch of petitions:
a. Whether there has been a violation of Rule 19A of the Securities Contracts
(Regulation) Rules 1957;
b. Whether there has been a failure to disclose transactions with related
parties and other relevant information which concerns related parties to
SEBI, in accordance with law; and
c. Whether there was any manipulation of stock prices in contravention of
existing laws.
11. The above directions shall not be construed to limit the contours of the
ongoing investigation. SEBI shall expeditiously conclude the investigation within
two months and file a status report.
12. Further, SEBI shall apprise the expert committee (constituted in paragraph
14 of this order) of the action that it has taken in furtherance of the directions of
this Court as well as the steps that it has taken in furtherance of its ongoing
investigation. The constitution of the expert committee does not divest SEBI of its
powers or responsibilities in continuing with its investigation into the recent
volatility in the securities market.
13. In Prakash Gupta (supra), we took note of the developing nature of the
regulations pertaining to the securities market. This Court noted that:
“101. Therefore, the SEBI Act and the rules, regulations and
circulars made or issued under the legislation, are constantly
evolving with a concerted aim to enforce order in the securities
market and promote its healthy growth while protecting investor
14. In order to protect Indian investors against volatility of the kind which has
been witnessed in the recent past, we are of the view that it is appropriate to
constitute an Expert Committee for the assessment of the extant regulatory
framework and for making recommendations to strengthen it. We hereby
constitute a committee consisting of the following members:
a. Mr. O P Bhatt;
b. Justice J P Devadhar (retired)
c. Mr. KV Kamath;
d. Mr. Nandan Nilekani; and
e. Mr. Somashekhar Sundaresan.
The Expert Committee shall be headed by Justice Abhay Manohar Sapre, a
former judge of the Supreme Court of India.
15. The remit of the Committee shall be as follows:
a. To provide an overall assessment of the situation including the relevant
causal factors which have led to the volatility in the securities market in
the recent past;
b. To suggest measures to strengthen investor awareness;
c. To investigate whether there has been regulatory failure in dealing with
the alleged contravention of laws pertaining to the securities market in
relation to the Adani Group or other companies; and
d. To suggest measures to (i) strengthen the statutory and/or regulatory
framework; and (ii) secure compliance with the existing framework for the
protection of investors.
16. The Chairperson of the Securities and Exchange Board of India is requested
to ensure that all requisite information is provided to the Committee. All
agencies of the Union Government including agencies connected with
financial regulation, fiscal agencies and law enforcement agencies shall
co-operate with the Committee. The Committee is at liberty to seek
recourse to external experts in its work.
17. The honorarium payable to the members of the Committee shall be fixed
by the Chairperson and shall be borne by the Union Government. The
Secretary, Ministry of Finance shall nominate a senior officer who will act as
a nodal officer to provide logistical assistance to the Committee. All the
expenses incurred in connection with the work of the Committee shall be
defrayed by the Union Government.
18. The Committee is requested to furnish its report in sealed cover to this
Court within two months.
 [Dr Dhananjaya Y Chandrachud]
 [Pamidighantam Sri Narasimha]
 [J.B. Pardiwala]
New Delhi;
March 2, 2023 


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