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VISHAL TIWARI V. UNION OF INDIA

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FACTS OF THE CASE
A significant decline in investor wealth and market volatility after
a January 24, 2023, Hindenburg Research report accusing the Adani Group of share price
manipulation and regulatory misconduct sparked the case. The document claims that after it
was found that Hindenburg was underutilized at the Adani Group, things got worse. The
petitioners requested the creation of a committee to assist them. The petitioner criticized
public sector banks for the loan disbursements from the Adani Group, emphasized the
carelessness of SEBI, and called for an investigation into these claims. They asked for a
Special Investigation Team or the Central Bureau of Examination to conduct a court-
monitored investigation.
The applicants sought their F.I.R. from both Hindenburg Research and its Founder and
associates, in this appeal, to investigate their actions. This appeal essentially revolves around
the crash of the securities market and a fall back for the investors while speculating on the
conduct of public sector banks and their nexus with the Adani group to ask for fair
investigation to protect the investor. The petitioners have been most concerned about
transparency and accountability. In that respect, the Court observed that there would be an
understanding between the Expert Committee and SEBI. Advocate Mr. Prashant Bhushan,
who represented the petitioner, mainly contended before the court for its issuing directions
that the Adani group must be probed by an SIT in its further inquiry with SEBI. It is a case
that focuses on the market oversight, proper corporate governance, and investor confidence
requiring thorough probing of the accusations and their regulatory responses with the
intention of providing a clean and transparent market.


ISSUES OF THE CASE –
 Whether the investigation be handed over to an independent SIT or CBI?
 Whether the amended regulations of SEBI with respect to FPIs and related party
transactions leading to regulatory failure towards Adani Group?
 Whether any conflicts of interest were shown by SEBI members or committee appointees
that called for judicial intervention.

ARGUMENTS FOR THE PETITIONER
The petitioner contended that the Adani Group
was charged with stock price manipulation in the Hindenburg Research report. According to
the report, the Adani Group artificially raised its stock prices through the use of offshore shell
companies and other unlawful techniques.
The petitioner highlighted that retail investors who depended on market regulations wanted to
ensure fairness and had invested their hard-earned money in Adani Group companies had
suffered large losses as the consequence of such manipulation. The Adani Group's failure to
disclose transactions with related parties was a point of concern for the petitioner. The
Hindenburg report claims that these transactions did not have transparency and raised doubt
on the group's accounting procedures and all around financial security.
For the purpose to inquire into the allegations made in the Hindenburg report, the petitioner
demanded that an independent committee be established. To ensure an impartial and
exhaustive investigation, the petitioner requested an expert committee led by a retired
Supreme Court justice. It was decided that this independent committee was required to
guarantee investor interests were protected and to provide transparency. The petitioner was
worried that SEBI might not be able to carry out a fully independent and thorough
investigation because of its continued relationship with the Adani Group.
In particular, the petitioner demanded that a Special Investigation Team (SIT) be established
to supervise the inquiry into the related party transactions and stock price manipulation.
The petitioner highlighted the significant economic danger of public sector organizations to
the Adani Group, including the State Bank of India (SBI) and the Life Insurance Corporation
of India (LIC). The petitioner contended that these organizations had given the group large
loans and billions of dollars in investments in Adani businesses.
The petitioner expressed worries that these public institutions might be negatively impacted,
which would have an adverse impact on the Indian economy and taxpayers if the Adani
Group were to fail as a result of the accusations of fraud.
The petitioner's worries regarding the financial stability of important national institutions
became even more pressing as a result of public institutions' being subjected to the Adani
Group.
In order to enhance investor protection, the petitioner requested the Supreme Court to order
regulatory framework reforms. The primary objectives of these reforms were for enhanced
oversight prevent fraudulent activity, enforce disclosure standards more strictly, and increase
visibility of the securities market. In order to protect investors from major losses and to
ensure that market manipulation and corporate fraud were identified sooner, the petitioner
requested that the Supreme Court provide guidance to SEBI and other regulators. To make
sure that the investigations weren't limited or delayed, the court had to step in as soon as
possible. With a view to address the allegations of market manipulation and protect the
interests of investors—especially the retail investors who were most impacted by the stock
price swings—the petitioner urged the Court to act swiftly


ARGUMENTS FOR THE RESPONDENT –
The SEBI maintained that it was looking into the claims made by Hindenburg Research about
the Adani Group. They highlighted that SEBI had been keeping an eye on the circumstances
since the publication of the Hindenburg report and had launched a thorough investigation into
the issue. The counsel for SEBI made it apparent that they were investigating the concerns
brought up regarding disclosures, related-party transactions, and market manipulation.
Instead of ignoring or postponing the issue, SEBI investigated the claims in accordance with
its mandate. SEBI's attorney emphasized that SEBI was completely capable of carrying out
the investigation within the current legal and regulatory framework, negating the need for an
outside entity like an independent committee or Special Investigation Team (SIT). The
respondents contended that SEBI was legally required to look into the matter and had the
institutional capacity to do so. They emphasized that since SEBI was already using its powers
under the Companies Act and the Securities and Exchange Board of India Act, the petitioner's
request for an independent committee or SIT was superfluous. In cases involving regulatory
action, particularly when SEBI was already involved, respondents requested the Court to
uphold judicial restraint. They argued that the Court's intervention at this point would prove
premature and could jeopardize SEBI's ability to operate as an autonomous regulatory
agency. The respondents contended that there was absolutely no proof that SEBI's
investigation had been biased or ineffectual.
The respondents underlined that safeguarding investors and ensuring the market operated
fairly and neatly were SEBI's top priorities. They emphasized that SEBI was making efforts
on solving worries regarding volatility in the markets and had put policies in place to protect
investors. The Adani Group asserted that they have continuously functioned in the best
interests of their shareholders and reaffirmed their dedication to protecting investors. The
group contended that the market's response to the Hindenburg report was overblown and that
investors should focus on the Adani Group's long-term basic concepts rather than reacting to
the mood of the moment. According to the parties involved, there was no compelling reason
for judicial intervention, nor was there any sense of urgency. They argued that the Court
shouldn't meddle in the regulator's discretionary powers because the current regulatory
mechanisms, such as SEBI's inquiry and oversight, were sufficient. The respondents drew
attention to the fact that there had been no precedent in Indian law for the establishment of a
Special Investigation Team (SIT) in situations where there were claims of fraudulent trading
or market manipulation. They maintained that judicial involvement in these cases would be
unheard of and might jeopardize the independence of regulatory agencies.


JUDGEMENT-
The petitioner's concerns about the Hindenburg Research report, which charged the Adani
Group with stock market deception, accounting errors, and other fraudulent practices, were
the main focus of the Supreme Court's decision. The petitioner claimed that SEBI's actions
were insufficient and requested court intervention in the shape of an independent
investigation, which included the creation of a Special Investigation Team (SIT). Following
the publication of the Hindenburg Research report, the Supreme Court recognized that SEBI,
the main regulatory agency in charge of India's securities markets, had already begun looking
into the Adani Group's operations. The Court underlined that, in accordance with Indian
securities laws, SEBI had the legal right and know-how to look into issues pertaining to stock
price volatility, market manipulation, and disclosure violations. The Court also emphasized
how crucial it is to uphold judicial restraint when it comes to oversight from regulators. It
emphasized that the best people for dealing with financial market problems and look into

claims of market manipulation were SEBI and other regulatory bodies. In cases where
regulatory agencies were actively carrying out their responsibilities, the Court cited the
principle of legal non-interference.

The Court of Appeal affirmed SEBI's independence and underlined that the existing
regulatory structure was intended to enable SEBI to act appropriately in response to its
conclusions. It pointed out that although the petitioner had legitimate worries about
protecting investors, SEBI was carrying out its mandate to protect the needs of investors and
maintain the honesty of the securities market.
The petitioner's claims that SEBI had conducted an inefficient and biased investigation failed
to persuade the Court. The Court determined that neither the creation of a third party such as
a SIT nor judicial intervention was urgently needed. Although petitioner had brought
attention to the price swings that followed the publication of the Hindenburg report, the Court
noted that it was unable to identify any proof that SEBI hadn't taken the necessary action.

The Court came to the conclusion that SEBI's regulatory procedures shouldn't be disrupted at
the present moment due to the negative effects on shareholders, particularly the average
investor. It underlined that among the natural hazards associated with trading stocks were
market swings and loss to investors. A petitioner's asked to establish self-appointed
committees, or SIT, to look into the accusations made contrary to the Adani Group was
denied by the Supreme Court of India. It came to the conclusion that SEBI was handling the
matter appropriately and using its supervisory power to look into and resolve the claims of
price swings and manipulation of the market. The Court acknowledged that the present
regulatory system was strong enough to handle the petitioner's fears and underlined the
importance of judicial restraint. It concluded that when an incident fell under the jurisdiction
of a regulatory body such as SEBI, unique court involvement was not necessary.

As a result, the Supreme Court rejected the petition and upheld SEBI's authority and
independence to look into and oversee the securities industry.

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Detail Information

Title

VISHAL TIWARI V. UNION OF INDIA

Court

: supreme court., 2024

Lenght/Sections/Order/Rules

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Language

English

Case Number/Citation

WRIT PETITION (C) NO. 162 /2023

Matter(s)

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Councels

PETITIONER- MR. PRASHANT BHUSHAN RESPONDENT- K J JOHN AND CO & RAMESH BABU M. R.

Statement of Responsibility

Huda Zehra, Unity PG College, Lucknow

See Also

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