Adani-Hindenburg row: Power to transfer probe to CBI or SIT must be exercised sparingly, says SC

The power to transfer an investigation from the authorised agency to the CBI or constitute an SIT must be exercised sparingly and in extraordinary circumstances, the Supreme Court said on Wednesday.

While refusing to transfer the probe into allegations of stock price manipulation by the Adani Group to a special investigation team (SIT) or the CBI, the apex court said the petitioner must place on record strong evidence indicating that the probe agency has shown inadequacy in the investigation or prima facie appears to be biased.

A bench headed by Chief Justice D Y Chandrachud dealt with the submissions of the petitioners who were seeking transfer of the probe from the Securities and Exchange Board of India (SEBI) to the CBI or an SIT.

“This court does have the power under Article 32 and Article 142 of the Constitution to transfer an investigation from the authorized agency to the CBI or constitute an SIT. However, such powers must be exercised sparingly and in extraordinary circumstances,” said the bench, also comprising Justices J B Pardiwala and Manoj Misra.

The apex court delivered a 46-page verdict on a batch of petitions on the Adani-Hindenburg row over allegations of stock price manipulation by the Indian corporate giant.

The bench observed unless the authority statutorily entrusted with the power to investigate portrays a “glaring, willful and deliberate inaction” in carrying out the investigation, the court will ordinarily not supplant the authority which has been vested with the power to investigate.

“Such powers must not be exercised by the court in the absence of cogent justification indicative of a likely failure of justice in the absence of the exercise of the power to transfer,” it said.

Referring to a recent judgement by the apex court, the bench said it reiterated the principle that the power to transfer an investigation to investigating agencies such as the CBI must be invoked only in rare and exceptional cases.

“Further, no person can insist that the offence be investigated by a specific agency since the plea can only be that the offence be investigated properly,” it noted.

The bench said out of the 24 matters probed by the SEBI, investigation has concluded in 22.

It noted that 22 final investigation reports and one interim investigation report have been approved by the competent authority under the SEBI’s procedures.

“With respect to the interim investigation reports SEBI has submitted that it has sought information from external agencies/entities and upon receipt of such information will determine the future course of action,” the bench said.

The top court said in its status report, the SEBI has provided the current status of each of the investigations conducted by it and the reasons for interim findings in two.

“SEBI has also provided details such as the number of emails issued, summons for personal appearance, pages of documents examined, statements recorded on oath, etc. for each investigation,” it said.

“SEBI’s status report and the details of the 24 investigations does not indicate inaction by SEBI. In fact, to the contrary, the course of conduct by SEBI inspires confidence that SEBI is conducting a comprehensive investigation,” the bench observed.

It also dealt with the petitioners’ contention about the delay by the market regulator in submitting its status report before the court.

“As noted earlier, by an order dated March 2, 2023, this court directed SEBI to conclude its investigation within two months and file a status report before this court. This court by its order dated May 17, 2023, granted SEBI an extension of time till August 14, 2023 to submit its status report about its investigation,” the bench noted.

It said the SEBI had filed an interlocutory application intimating the court about the status of 24 investigations undertaken by it on August 14, 2023.

“SEBI submitted a status report dated August 25, 2023 providing comprehensive details about all the investigations carried out by SEBI. Therefore, there is a delay of only ten days in filing the report. Such a delay does not prima facie indicate deliberate inaction by SEBI, particularly, as the issue involved a complex investigation in coordination with various agencies, both domestic and foreign,” the bench said.

It said no apparent regulatory failure can be attributed to SEBI based on the material before the court.

“Therefore, there is prima facie no deliberate inaction or inadequacy in the investigation by SEBI,” the apex court said.

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Holding that the power of the court to enter the regulatory domain of SEBI in framing delegated legislation was limited, the apex court directed the market regulator to complete the two pending investigations expeditiously, preferably within three months.

The term delegated legislation or secondary legislation refers to laws made by individuals or bodies authorised by the legislature to create detailed regulations under a specific Act of Parliament.

The judgment was delivered on PILs filed by lawyers Vishal Tiwari, M L Sharma, Congress leader Jaya Thakur, and Anamika Jaiswal.

The Adani Group stocks got bludgeoned on the bourses after Hindenburg Research made a litany of allegations, including those about fraudulent transactions and share-price manipulation, against the business conglomerate.

The Adani Group dismissed the charges as lies, saying it complies with all laws and disclosure requirements.

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