SC on the Adani-Hindenburg Issue- Background, Response & Concerns

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Recently, the Supreme Court went ahead and formed an expert panel to look into the Adani-Hindenburg issue, following several PILs being filed.

This topic of “SC on the Adani-Hindenburg Issue- Background, Response & Concerns” is important from the perspective of the UPSC IAS Examination, which falls under General Studies Portion.


  • In late January, the US-based Hindenburg Research released a report accusing the Adani Group of fraud- specifically, stock manipulation, accounting fraud and improper use of shell companies.
  • This report came just before the Follow-on Public Offer/ FPO that the Adani Enterprises planned to float on February 1st. The Group had sought to raise ₹20,000 crore through it.
  • Following the report, the Group’s stock prices saw a steep fall. Its overall market capitalization declined by ₹9.11 lakh crore.
  • However, due to participation of large institutional investors and high net-worth individuals, the FPO was fully subscribed. This is despite the fact that the FPO share prices were above the public market price.
  • Yet, the Adani Group decided to call off the FPO and return the money to its investors.
  • Meanwhile, the incident raised mayhem in the market and several PILs were filed at the Supreme Court.

How has the court responded?

  • Recently, the Supreme Court constituted a 6-member expert panel under retired SC Judge, Justice AM Sapre, in view of ‘investor safety’. Other members include KV Kamath and Nandan Nilekani.
  • Notably, the court had turned down the Centre’s suggestion of a more discrete approach with regards to the panel. The Centre wanted to recommend the panellists’ names and scope in a sealed cover to the court, citing possible adverse impact on the market.
  • The court also asked SEBI (Securities and Exchange Board of India) to investigate the allegations levels by the US-based activist short-seller.

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What is the committee to do?

The committee is to look into the following issues:

  • Investigation into possible regulatory failure- i.e. possible contravention of laws related to securities market
  • An overall assessment of the current situation- this includes the causal factors behind the recent market volatility.
  • Suggestion of measures to
    • Strengthen statutory and regulatory framework
    • Secure compliance with existing framework
    • Improve investor awareness

The committee is to submit its report in 2 months’ time, in a sealed cover.

What are the concerns?

  • While the formation of this committee has assuaged the concerns of some, it raises some questions. For instance, does stock price fluctuations calls for judicial intervention.
  • In the past, the court said that it didn’t want to cast doubts on the market regulator. However, some perceive the court’s constitution of expert panel to contradict this stand. The panel’s formation invites doubts about SEBI’s abilities.
  • There are questions about whether the panel’s views would be considered more authoritative than the market regulator’s views.
  • Concerns are also being raised about the opacity in the panel processes- from the selection of the panellists to the fate of the panel report.

What is the way ahead?

  • The SEBI has been bestowed with a wide range of powers with regards to the securities market.
  • In its affidavit to the Supreme Court, it stated its intentions to undertake a detailed investigation into the Adani-Hindenburg issue. This investigation is also expected to extend to market activities in general- both before and after the report’s publication.
  • In the past, the regulator has taken more than 2 months to investigate cases of frauds in the securities. Hence, the time limit could pose challenges in SEBI’s investigation of the recent case. It would have been more prudent to wait for the regulator to look into the matter and submit the report accordingly.  


The recent move by the top court to form an expert panel to look into the Adani issue assuages some concerns in the market. However, it also casts doubts on the SEBI’s abilities to handle such issues which fall under its domain. It is necessary to allow sufficient space for statutory bodies to perform their function.

Practice Question for Mains:

Comment on the Supreme Court’s response to the Adani Hindenburg issue. What is the way ahead? (250 words)

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