IN THE SUPREME COURT OF INDIA
ORIGINAL CIVIL/CRIMINAL JURISDICTION
Writ Petition (C) No. 162 of 2023

Vishal Tiwari …PETITIONER

Versus

Union of India …RESPONDENTS

Date Of Judgment: January 3, 2024
Case Citation: 2024 INSC 3
Presiding Judges:
Chief Justice Dhananjaya Y. Chandrachud
Justice Jamshed B. Pardiwala
Justice Manoj Misra

Factual Background:

In a report released on January 24, 2023, the American investment research firm Hindenburg Research accused the Adani Group of neglecting to disclose important financial information, manipulating stock prices, and breaking SEBI regulations. Investor wealth was eroded as a result of this revelation, which caused the share price of the Adani Group of Companies to drop significantly.

The Supreme Court of India received a number of petitions addressing the need to look into the Adani Group and shield investors from market shocks. In its ruling on March 2, 2023, the Court ordered SEBI to look into claims that the Adani Group may have violated regulations. To evaluate the issue and suggest actions to improve investor protection, an expert group was also formed.

The petitioners asked for the creation of a Special Investigation Team (SIT) to supervise the inquiry and attempted to revoke some of the amendments made to the SEBI (Foreign Portfolio Investments) Regulations, 2014 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Regulations”). The expert committee turned in its findings on May 6, 2023, and SEBI filed a status report on August 25, 2023. Of the twenty-four investigations, SEBI has finished twenty-two as of the judgment date.

Issue Of The Case:

1. Whether the Supreme Court should transfer the investigation into the Adani Group from SEBI to a Special Investigation Team (“SIT”)?

2. What is the scope of judicial review over the regulatory functions of the Securities and Exchange Board of India (“SEBI”)?

Judgment:

The Supreme Court ruled that courts have little authority to meddle in SEBI’s regulatory operations. The Court found no justification for rescinding the SEBI Regulations modifications. The Court decided that there was no need to move the inquiry to a SIT because there was no evident violation of SEBI’s regulations. The Court ordered SEBI and the Union Government to take into account the expert committee’s recommendations for fortifying the regulatory framework. It was Chief Justice Chandrachud who wrote the court’s ruling.

Ratio Decidendi:

The Supreme Court noted that it cannot judge whether rules created by statutory regulators such as SEBI are correct in its capacity as an appellate body. Judicial review is restricted to determining whether a policy is obviously arbitrary or infringes upon fundamental rights, constitutional requirements, or statutory legislation. The Court further ruled that courts should respect the knowledge of regulators who have taken expert opinions into account when creating their policies, especially in technical areas like economic and financial concerns.

The Supreme Court maintained SEBI’s rules, ruling that the agency had adequately outlined the development and justification of its regulatory structure and that the processes it employed were neither unlawful nor capricious.

During its probe of the Adani Group, the Supreme Court found no evidence of regulatory failure by SEBI. The Court noted that it should exercise its power to transfer investigations under Articles 32 and 142 of the Constitution of India only in extreme situations. Unless the investigating authority conducts the investigation in a clear, purposeful, and deliberate manner, the Court cannot step in.

Conclusion:

The case of Vishal Tiwari vs Union of India revolves around the allegations of stock market manipulation and regulatory violations by the Adani Group, as reported by Hindenburg Research. The Supreme Court of India ultimately concluded that the Securities and Exchange Board of India (SEBI) did not lack efficiency in conducting the investigation and upheld the validity of the investigation held by SEBI. The court also clarified that its power to enter the regulatory domain and question SEBI’s delegated legislation powers is limited. Additionally, the court directed SEBI to complete the pending investigations preferably within three months.