# Case Details Vishal Tiwari v. Union of India & Ors

- **Citation:** 2024 INSC 3
- **Court:** Supreme Court of India
- **Decided:** 2024-01-03
- **Bench:** Dr Dhananjaya Y Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-vishal-tiwari-v-union-of-india-ors-37376
- **Pages:** 40

## Headnote

Matter pertains to the Adani-Hindenburg report alleging that the
Adani Group manipulated its share price wherein the petitioner
is seeking investigation by the Special Investigation Team or by
the CBI.
Headnotes
Constitution of India - Art. 32 - Report by an "activist short
seller", Hindenburg Research about the financial transactions
of the Adani group alleging that the Adani group manipulated
its share prices and failed to disclose transactions with related
parties and other relevant information in violation of the
regulations framed by SEBI - Petitioners sought constitution
of expert Committee and transfer of investigation from SEBI
to Special Investigation Team or by the CBI:
Held: Power of this Court to enter the regulatory domain of SEBI
in framing delegated legislation is limited - Court must refrain from
substituting its own wisdom over the regulatory policies of SEBI
- No apparent regulatory failure attributable to SEBI - Procedure
followed in arriving at the current shape of the Regulations does not
suffer from irregularity or illegality - Further SEBI has completed
twenty-two out of the twenty-four investigations into the allegations
levelled against the Adani group - SEBI directed to complete
the pending investigations expeditiously - SEBI should take its
investigations to their logical conclusion in accordance with law -
Facts of this case do not warrant a transfer of investigation from
SEBI - Court does have the power to transfer an investigation
being carried out by the authorized agency to an SIT or CBI
in extraordinary circumstances when the competent authority
172
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
portrays a glaring, willful and deliberate inaction in carrying out
the investigation - Threshold for the transfer of investigation has
not been demonstrated to exist - Reliance placed by the petitioner
on the OCCPR report and the letter by the DRI is misconceived
- Allegations of conflict of interest against members of the
Expert Committee are unsubstantiated and are rejected - Union
Government and SEBI to consider the suggestions of the Expert
Committee in its report and take further actions to strengthen the
regulatory framework, protect investors and ensure the orderly
functioning of the securities market - SEBI and the investigative
agencies of the Union Government to probe into the loss suffered
by Indian investors due to the conduct of Hindenburg Research
and other entities in taking short positions involved any infraction
of the law and if so, suitable action be taken. [Para 67]
Constitution of India - Art. 32 - Investigation conducted by
SEBI into the allegations that the Adani group manipulated its
share prices and failed to disclose transactions with related
parties - SEBI's regulatory domain - Scope of judicial review:
Held: Courts do not and cannot act as appellate authorities
examining the correctness, suitability, and appropriateness of a
policy, nor are courts advisors to expert regulatory agencies on
matters of policy which they are entitled to formulate - Scope of
judicial review, when examining a policy framed by a specialized
regulator, is to scrutinize whether it violates the fundamental rights
of the citizens; is contrary to the provisions of the Constitution; is
opposed to a statutory provision; or is manifestly arbitrary - Legality
of the policy, and not the wisdom or soundness of the policy, is
the subject of judicial review - When technical questions arise
particularly in the domain of economic or financial matters and
experts in the field have expressed their views and such views are
duly considered by the statutory regulator, the resultant policies
or subordinate legislative framework ought not to be interfered
with - SEBI's wide powers, coupled with its expertise and robust
information gathering mechanism, lend a high level of credibility
to its decisions as a regulatory, adjudicatory and prosecuting
agency - Court must be mindful of the public interest that guides
the funct

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* Author
[2024] 1 S.C.R. 171 : 2024 INSC 3
Case Details
Vishal Tiwari
v.
Union of India & Ors
(Writ Petition (C) No. 162 of 2023)
03 January 2024
[Dr Dhananjaya Y Chandrachud*, CJI,
J B Pardiwala and Manoj Misra, JJ.]
Issue for Consideration
Matter pertains to the Adani-Hindenburg report alleging that the
Adani Group manipulated its share price wherein the petitioner
is seeking investigation by the Special Investigation Team or by
the CBI.
Headnotes
Constitution of India - Art. 32 - Report by an "activist short
seller", Hindenburg Research about the financial transactions
of the Adani group alleging that the Adani group manipulated
its share prices and failed to disclose transactions with related
parties and other relevant information in violation of the
regulations framed by SEBI - Petitioners sought constitution
of expert Committee and transfer of investigation from SEBI
to Special Investigation Team or by the CBI:
Held: Power of this Court to enter the regulatory domain of SEBI
in framing delegated legislation is limited - Court must refrain from
substituting its own wisdom over the regulatory policies of SEBI
- No apparent regulatory failure attributable to SEBI - Procedure
followed in arriving at the current shape of the Regulations does not
suffer from irregularity or illegality - Further SEBI has completed
twenty-two out of the twenty-four investigations into the allegations
levelled against the Adani group - SEBI directed to complete
the pending investigations expeditiously - SEBI should take its
investigations to their logical conclusion in accordance with law -
Facts of this case do not warrant a transfer of investigation from
SEBI - Court does have the power to transfer an investigation
being carried out by the authorized agency to an SIT or CBI
in extraordinary circumstances when the competent authority
172
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
portrays a glaring, willful and deliberate inaction in carrying out
the investigation - Threshold for the transfer of investigation has
not been demonstrated to exist - Reliance placed by the petitioner
on the OCCPR report and the letter by the DRI is misconceived
- Allegations of conflict of interest against members of the
Expert Committee are unsubstantiated and are rejected - Union
Government and SEBI to consider the suggestions of the Expert
Committee in its report and take further actions to strengthen the
regulatory framework, protect investors and ensure the orderly
functioning of the securities market - SEBI and the investigative
agencies of the Union Government to probe into the loss suffered
by Indian investors due to the conduct of Hindenburg Research
and other entities in taking short positions involved any infraction
of the law and if so, suitable action be taken. [Para 67]
Constitution of India - Art. 32 - Investigation conducted by
SEBI into the allegations that the Adani group manipulated its
share prices and failed to disclose transactions with related
parties - SEBI's regulatory domain - Scope of judicial review:
Held: Courts do not and cannot act as appellate authorities
examining the correctness, suitability, and appropriateness of a
policy, nor are courts advisors to expert regulatory agencies on
matters of policy which they are entitled to formulate - Scope of
judicial review, when examining a policy framed by a specialized
regulator, is to scrutinize whether it violates the fundamental rights
of the citizens; is contrary to the provisions of the Constitution; is
opposed to a statutory provision; or is manifestly arbitrary - Legality
of the policy, and not the wisdom or soundness of the policy, is
the subject of judicial review - When technical questions arise
particularly in the domain of economic or financial matters and
experts in the field have expressed their views and such views are
duly considered by the statutory regulator, the resultant policies
or subordinate legislative framework ought not to be interfered
with - SEBI's wide powers, coupled with its expertise and robust
information gathering mechanism, lend a high level of credibility
to its decisions as a regulatory, adjudicatory and prosecuting
agency - Court must be mindful of the public interest that guides
the functioning of SEBI and refrain from substituting its own wisdom
in place of the actions of SEBI. [Paras 17 ]
Constitution of India - Art. 32 - Investigation conducted by
SEBI into the allegations that the Adani group manipulated
[2024] 1 S.C.R.
173
VISHAL TIWARI v. UNION OF INDIA & ORS
its share prices and failed to disclose transactions with
related parties and other information in violation of the SEBI
regulations - Regulatory failure, if attributable to SEBI:
Held: No reason to interfere with the regulations made by SEBI
in the exercise of its delegated legislative powers - SEBI has
traced the evolution of its regulatory framework, and explained
the reasons for the changes in its regulations - Procedure
followed in arriving at the current shape of the regulations is not
tainted with any illegality - There are no submissions that the
regulations are unreasonable, capricious, arbitrary, or violative of
the Constitution - Petitioners have not challenged the vires of the
Regulations but have contended that there is regulatory failure
based on SEBI's alleged inability to investigate which is attributed
to changes in the regulations - Such a ground is unknown to this
Court's jurisprudence - Critique of the regulations made as an
afterthought and based on a value judgment of economic policy
is impermissible - Prayer seeking directions to SEBI to revoke its
amendments to the FPI Regulations and LODR Regulations must
fail - No valid grounds have been raised for this Court to direct
SEBI to revoke its amendments to the FPI Regulations and the
LODR Regulations which were made in exercise of its delegated
legislative power - Thus, the procedure followed in arriving at the
current shape of the regulations does not suffer from irregularity
or illegality - FPI Regulations and LODR Regulations have been
tightened by the amendments in question. [Para 28, 29, 30, 67c]
Constitution of India - Arts. 32 and 142 - Transfer of the
investigation from SEBI to another agency or to SIT - Power of:
Held: Court does have the power u/Art. 32 and 142 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 - 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 - Petitioner must place on record strong evidence
indicating that the investigating agency has portrayed inadequacy
in investigation or prima facie appears to be biased.[Para 32]
174
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
Constitution of India - Arts. 32 - Investigation - Comprehensive
investigation conducted by SEBI into the allegations that the
Adani group manipulated its share prices and failed to disclose
transactions with related parties:
Held: Out of the twenty-four investigations carried out by SEBI,
twenty-two are concluded - Twenty-two final investigation reports
and one interim investigation report have been approved by the
competent authority under SEBI's procedures - As regards the
delay of only ten days in filing the report, such a delay does not
prima facie indicate deliberate inaction by SEBI, when the issue
involved a complex investigation in coordination with various
agencies, both domestic and foreign - No apparent regulatory
failure can be attributed to SEBI based on the material before this
Court - Thus, prima facie no deliberate inaction or inadequacy in
the investigation by SEBI. [Paras 35, 37, 38].
Constitution of India - Arts. 32 - Investigation conducted by
SEBI into the allegations levelled against the Adani group -
Adequacy of SEBI's investigation - Challange to - Reliance
on the OCCRP report of a third-party organization and the
letter by DRI:
Held: Reliance on newspaper articles or reports by third-party
organizations to question a comprehensive investigation by a
specialized regulator does not inspire confidence - Such reports
by "independent" groups or investigative pieces by newspapers
may act as inputs before SEBI or the Expert Committee - However,
they cannot be relied on as conclusive proof of the inadequacy
of the investigation by SEBI nor, can such inputs be regarded as
"credible evidence" - Also the petitioner's assertion that SEBI was
lackadaisical in its investigation is not borne out from the reference
to the letter sent by the DRI. [Paras 40, 43]
Shares and securities - Short selling - Meaning of:
Held: Short selling is a sale of securities which the seller does not
own but borrows from another entity, with the hope of repurchasing
them at a later date with a lower price, thus, attempting to profit from
an anticipated decline in the price of the securities - In its report,
Hindenburg Research admits to taking a short position in the Adani
group through US-traded bonds and non-Indian traded derivative
instruments - SEBI has submitted that short selling is a desirable
[2024] 1 S.C.R.
175
VISHAL TIWARI v. UNION OF INDIA & ORS
and essential feature to provide liquidity and to help price correction
in over-valued stocks and hence, short selling is recognised as
a legitimate investment activity by securities market regulators in
most countries - Short selling is regulated by a circular notified
by SEBI on 20 December 2007 - Any restrictions on short selling,
may distort efficient price discovery, provide promoters unfettered
freedom to manipulate prices, and favour manipulators rather than
rational investors - Thus, the International Organisation of Securities
Commission recommends that short selling be regulated but not
prohibited with an aim to increase transparency - Measures to
regulate short selling will be considered by the Government of
India and SEBI. [Para 58]
Constitution of India - Arts. 32 - Public interest jurisprudence
under - Scope of:
Held: It was expanded by this Court to secure access to justice
and provide ordinary citizens with the opportunity to highlight
legitimate causes before this Court - It has served as a tool to
secure justice and ensure accountability on many occasions, where
ordinary citizens have approached the Court with well-researched
petitions that highlight a clear cause of action - However, petitions
that lack adequate research and rely on unverified and unrelated
material tend to, in fact, be counterproductive - This word of
caution must be kept in mind by lawyers and members of civil
society alike. [Para 68]
Constitution of India - Arts. 32 - Allegations that the Adani
group manipulated its share prices and failed to disclose
transactions with related parties - Recommendations of the
Expert Committee to strengthen regulatory framework and
secure compliance to protect investors - Elucidated. [Para
64-66]
List Of Citations and Other References
IFB Agro Industries Ltd v. SICGIL India Ltd (2023) 4
SCC 209; Prakash Gupta v. SEBI 2021 SCC OnLine
SC 485; Himanshu Kumar v. State of Chhattisgarh 2022
SCC OnLine SC 884; K.V. Rajendran v. Superintendent
of Police CBCID South Zone, Chennai [2013] 9 SCR
199: (2013) 12 SCC 480 - referred to.
176
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
List of Acts
Securities Contracts (Regulation) Rules, 1957; SEBI (Foreign
Portfolio Investments) Regulations, 2014; SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015; SEBI Act 1992;
Depositories Act 1996; Prevention of Money Laundering Act, 2002;
Prevention of Money Laundering Maintenance of Records Rules,
2004.
List of Keywords
Judicial review; SEBI; SEBI's regulatory domain; Transfer of
investigation; Expert Committee; Short selling; Adani group;
Hindenburg Research; Court-monitored investigation; Special
Investigation Team; CBI; Market volatility; Organized Crime
and Corruption Reporting Project; Price manipulation; Stock
market manipulation; Conflict of interest; Enforcement actions;
Quasi-judicial proceedings; Delay; Opaque structures; Delegated
legislative powers; Administrative powers; Adjudicatory powers;
Subordinate legislation; Beneficial owner; Natural person; Related
party transaction; Promoter; Promoter group; Listed company;
Third party; Commercial law; Economic policy; Parent legislation;
Third-party organizations; Credible evidence; Public domain; Good
faith; Bias; Market Wide Circuit Breakers; Circuit Filters/Price
bands on individual shares; Additional surveillance measures;
Market Wide Position Limits; Forensic financial research; Informed
decision making; Structural Reform; Enforcement Policy; Judicial
Discipline; Settlement Policy; Timelines; Surveillance and Market
Administration Measures; Doctrine of separation; Public interest
jurisprudence.
Other Case Details Including Impugned Order and
Appearances
ORIGINAL CIVIL/CRIMINAL JURISDICTION : Writ Petition (C)
No.162 of 2023.
(Under Article 32 of The Constitution of India)
With
Writ Petition (Crl.) No.39 of 2023, Writ Petition (C) No.201 of 2023
And Writ Petition (Crl.) No.57 of 2023.
[2024] 1 S.C.R.
177
VISHAL TIWARI v. UNION OF INDIA & ORS
Appearances:
Vishal Tiwari, in-person, Manohar Lal Sharma, in-person, Prashant
Bhushan, Ramesh Kumar Mishra, Ms. Neha Rathi, Ms. Kajal Giri,
Varun Thakur, Deepak Goel, Mrs. Tanuj Bagga Sharma, Dr. M.K
Ravi, Ms. Alka Goyal, Dr. Praveen Hans for M/s. Varun Thakur &
Associates, Advs. for the Petitioner.
Tushar Mehta, Solicitor General, Arvind Datar, Sr. Adv., Pratap
Venugopal, Ms. Surekha Raman, Abhishek Anand, Shreyash Kumar,
Ms. Unnimaya S. for M/s. K J John and Co, Raj Bahadur Yadav,
Kanu Agrawal, Pratap Venugopal, Pratyush Srivastav, Sandeep
Kumar Mahapatra, Rajat Nair, Pratyush Shrivastava, Arvind Kumar
Sharma, Mukesh Kumar Maroria, Ramesh Babu M. R., Ms. Manisha
Singh, Ms. Nisha Sharma, Rohan Srivastava, Ms. Ekta Choudhary,
Divyank Dutt Dwivedi, Ms. Aditi Sharma, Sanjay Kapur, Devesh
Dubey, Arjun Bhatia, Advs. for the Respondents.
Applicant-in-person,
Judgment / Order of The Supreme Court
Judgment
Dr Dhananjaya Y Chandrachud, CJI
Table of Contents*
A.
Factual background and submissions...............................3
B.
The scope of judicial review over SEBI's
regulatory domain............................................................... 11
C.
There is no apparent regulatory failure
attributable to SEBI.............................................................17
D.
The plea to transfer the investigation from
SEBI to another agency or to an SIT................................23
i.
The power to transfer an investigation is
exercised in extraordinary situations.......................23
ii.
SEBI has prime facie conducted a
comprehensive investigation.....................................25
* Ed Note: Pagination as per original Judgment.
178
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
iii.
Reliance on the OCCRP report and the
letter by DRI is misconceived....................................28
E.
Allegations of conflict of interest against
members of the Expert Committee...................................30
F.
Other recommendations by the Expert Committee.........32
i.
Volatility and short selling.........................................32
ii.
Investor Awareness....................................................36
iii.
Recommendations of the Expert Committee
to strengthen regulatory framework and secure
compliance to protect investors...............................39
G.
Conclusion...........................................................................43
1.
A batch of writ petitions filed before this Court under Article 32 of the
Constitution in February 2023, raised concerns over the precipitate
decline in investor wealth and volatility in the share market due to
a fall in the share prices of the Adani Group of Companies.1 The
situation was purportedly caused by a report which was published
on 24 January 2023 by an "activist short seller", Hindenburg
Research about the financial transactions of the Adani group. The
report inter alia alleged that the Adani group manipulated its share
prices and failed to disclose transactions with related parties and
other relevant information in violation of the regulations framed by
SEBI and provisions of securities' legislation. Significantly, the report
expressly states that Hindenburg Research took a short position in
the Adani group through US-traded bonds and non-Indian traded
derivative instruments.
A.
Factual background and submissions
2.
A brief overview of the petitions follows:
a.
The petitioner in WP(C) No. 162 of 2023, raises concerns about
the drastic fall in the securities market, the impact on investors,
the purported lack of redressal available and the disbursement
of loans to the Adani group allegedly without due procedure.
The petitioner inter alia seeks the constitution of a committee
1
"Adani group"
[2024] 1 S.C.R.
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VISHAL TIWARI v. UNION OF INDIA & ORS
monitored by a retired judge of this Court to investigate the
Hindenburg Report;
b.
The petitioner in WP (C) No. 201 of 2023 submits that the Adani
group is in violation of Rule 19A of the Securities Contracts
(Regulation) Rules, 1957 by "surreptitiously controlling more
than 75% of the shares of publicly listed Adani group companies,
thereby manipulating the price of its shares in the market." The
petitioner inter alia seeks a court-monitored investigation by a
Special Investigation Team2 or by the CBI into the allegations
of fraud and the purported role played by top officials of public
sector banks and lender institutions;
c.
The petitioner in WP (Crl.) No. 57 of 2023 seeks directions
to the competent investigative agencies to (i) investigate the
transactions of the Adani group under the supervision of a
sitting judge of this Court; and (ii) investigate the role of the
Life Insurance Corporation of India and the State Bank of India
in such transactions;
d.
The petitioner in WP (Crl.) No. 39 of 2023 seeks the registration
of an FIR against a certain Mr Nathan Anderson (the founder
of Hindenburg Research) and his associates for short-selling
and directions to recover the profits yielded by short-selling, to
compensate the investors.
3.
When the batch came up for hearing on 10 February 2023, this
Court noted that there was a need to review the existing regulatory
mechanisms in the financial sector to ensure that they are
strengthened with a view to protect Indian investors from market
volatility. This Court sought inputs from the Solicitor General on the
proposed constitution of an Expert Committee for the purpose. This
Court observed:
"4 We have suggested to the Solicitor General that he
may seek instructions on whether the Government of India
would facilitate the constitution of an expert committee
for an overall assessment of the situation, and if so, to
place its suggestions on the constitution and remit of
2
"SIT"
180
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
the committee on the next date. Meantime the Solicitor
General shall place on the record a brief note on factual
and legal aspects so as to further the deliberations during
the course of the next hearing."
4.
The batch of cases came up for hearing on 17 February 2023.
This Court heard detailed submissions on behalf of the parties and
reserved further orders. In its order dated 2 March 2023, this Court
took note of the loss of investor wealth in the aftermath of the report
by Hindenburg Research and recognized the dire need to protect
Indian investors from unanticipated volatility in the market. This Court
observed that SEBI is already seized of the investigation into the
Adani group and inter alia directed:
a.
SEBI to continue with its investigation and examine the following
non-exhaustive issues raised in the 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;"
b.
SEBI to conclude its investigation within two months and file a
status report before this Court;
c.
The constitution of an Expert Committee chaired by Justice
Abhay Manohar Sapre, former judge of this Court. Besides its
Chairperson, the Committee was to compose of the following
members:
a.
Mr OP Bhatt;
b.
Justice JP Devadhar;
c.
Mr KV Kamath;
d.
Mr Nandan Nilekani;
e.
Mr Somasekhar Sundaresan
[2024] 1 S.C.R.
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VISHAL TIWARI v. UNION OF INDIA & ORS
d.
The remit of the Expert Committee was:
"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."
The Expert Committee was directed to furnish its report to this Court
within two months.
5.
This Court clarified that the Expert Committee and SEBI would work
in collaboration with each other. The appointment of the Committee
would, in other words, not affect the investigation by SEBI which would
proceed simultaneously. The constitution of the Expert Committee
was not to divest SEBI of its powers or responsibilities in continuing
with its investigation. The Court observed:
"12. ...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."
6.
On 6 May 2023, in compliance with the above interim order, the
Expert Committee submitted its report to this Court. In its order
dated 17 May 2023, this Court directed that copies of the report
shall be made available to the parties and their counsel to enable
182
[2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
them to assist the Court in the course of further deliberations. This
Court also granted SEBI an extension of time till 14 August 2023 to
submit its status report about its investigation.
7.
SEBI filed an interlocutory application on 14 August 2023 intimating
this Court about the status of the twenty-four investigations which were
undertaken by them. Further, SEBI submitted a status report dated
25 August 2023 providing details about the twenty-four investigations.
Both SEBI and the counsel for the petitioners have also filed their
responses to the Expert Committee's report.
8.
In the above background, this matter came up for hearing before this
Court on 24 November 2023. We heard Mr Prashant Bhushan, learned
counsel and other counsel appearing on behalf of the petitioners and Mr
Tushar Mehta, learned Solicitor General appearing on behalf of SEBI.
9.
Mr Prashant Bhushan, appearing on behalf of the petitioner broadly
pressed his case for two directions: firstly, a direction to constitute an
SIT to oversee the SEBI investigation into the Adani group and that
all such investigations be court-monitored; and second, a direction
to SEBI to revoke certain amendments made to the SEBI (Foreign
Portfolio Investments) Regulations, 20143 and the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015.4 Mr
Bhushan made the following submissions:
a.
The Hindenburg Report and certain newspaper reports allege
that some Foreign Portfolio Investments5 in Adani group stocks
in the Indian stock market are owned by shell companies based
outside India, which have close connections with the Adani
group. Such investments in Adani stocks allow the Adani group
to maintain financial health and artificially boost the value of
stocks in the market, in violation of Indian law;
b.
The investments by FPIs violate Rule 19A of the Securities
Contracts (Regulations) Rules, 1957 which requires a minimum
25% public shareholding in all public-listed companies;
3
"FPI Regulations"
4
"LODR Regulations"
5
"FPIs"
[2024] 1 S.C.R.
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VISHAL TIWARI v. UNION OF INDIA & ORS
c.
The investigative findings of the Organized Crime and Corruption
Reporting Project6, published by two newspapers, indicate price
manipulation by the Adani group through two Mauritius-based
funds. However, SEBI has not acted on such reports;
d.
The Directorate of Revenue Intelligence7 had addressed a
letter dated 31 January 2014 to the then SEBI Chairperson
alerting them about possible stock market manipulation being
committed by the Adani group by over-valuation of the import
of power equipment. However, SEBI did not take adequate
action based on this letter;
e.
SEBI must be directed to revoke amendments to the FPI
Regulations which have done away with restrictions on opaque
structures. As a result of these amendments, SEBI, the
Enforcement Directorate8 and the CBDT have not been able
to give any clear findings with regard to price manipulation and
insider trading. SEBI has tied its own hands;
f.
SEBI must be directed to revoke the amendment made to its
LODR Regulations which have altered the definition of "related
party";
g.
SEBI's inability to establish a prima facie case of regulatory noncompliance and legal violations by the Adani group promoters
despite starting an investigation in November 2020, appears
to be prima facie self-inflicted. The unprecedented rise in the
price of the Adani scrips occurred between January 2021 and
December 2022, over a period when the Adani group was
already under SEBI investigation;
h.
A few members of the Expert Committee may have a conflict of
interest and there is a likelihood of bias, which was not brought
to the notice of the Court by the concerned members; and
i.
SEBI has willfully delayed the submission of its status report on
the investigation into the Adani group within the time granted
by this Court.
6
 "OCCRP"
7
"DRI"
8
 "ED"
184
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DIGITAL SUPREME COURT REPORTS
10. On the other hand, the learned Solicitor General, appearing on behalf
of SEBI made the following submissions:
a.
Twenty-two out of twenty-four investigations being conducted
by SEBI are complete. In these investigations, enforcement
actions/ quasi-judicial proceedings would be initiated, wherever
applicable;
b.
The delay by SEBI in filing the report is only ten days which is
unintentional and not willful, given that twenty-four investigations
were to be carried out;
c.
SEBI has been taking various steps on the areas identified by
the Expert Committee and will also take into consideration the
suggestions of the Expert Committee to improve its practices
and procedures;
d.
The events pertaining to the present batch of petitions relate
to only one set of entities in the market without any significant
impact at the systemic level. While the shares of the Adani group
saw a significant decline on account of the selling pressure, the
"wider Indian market has shown full resilience";
e.
The petitioner's reliance on the letter by the DRI is misconceived.
After having received DRI's letter, SEBI sought information from
DRI on the subject and received a response. Further, while
SEBI's examination was in process, the Additional Director,
DRI (Adjudication) found the allegations of over-valuation to be
incorrect. The CESTAT and this Court also dismissed appeals
against the order;
f.
The OCCRP report relied on by the petitioner lacks documentary
support and certain important facts with regard to the source
of the report have been concealed; and
g.
The FPI Regulations, initially, had allowed "opaque structures"
under certain conditions, inter alia, that they undertake to
disclose the details of beneficial owners on being sought. The
subsequent amendment required upfront mandatory disclosure
of beneficial owners by FPIs. This made the disclosure clause
redundant which led to its omission in 2019. The amendments
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have tightened the regulatory framework by making disclosure
requirements mandatory and removing the requirement of
disclosure only when sought.
B.
The scope of judicial review over SEBI's regulatory domain
11. The petitioners in the present case are inter alia seeking directions
with regard to (i) investigations being carried out by SEBI; and (ii)
regulations/policies adopted by SEBI. In other words, directions in
relation to both the regulatory and delegated legislative powers of
SEBI are being sought by the petitioners. At the outset, therefore,
this Court's power to enter the domain of a specialized regulator,
such as SEBI must be delineated.
12. SEBI was established as India's principal capital markets regulator
with the aim to protect the interest of investors in securities and
promote the development and regulation of the securities market in
India. SEBI is empowered to regulate the securities market in India
by the SEBI Act 1992, the SCRA and the Depositories Act 1996.
SEBI's powers to regulate the securities market are wide and include
delegated legislative, administrative, and adjudicatory powers to
enforce SEBI's regulations. SEBI exercises its delegated legislative
power by inter alia framing regulations and appropriately amending
them to keep up with the dynamic nature of the securities' market.
SEBI has issued a number of regulations on various areas of security
regulation which form the backbone of the framework governing the
securities market in India.
13. Section 11 of the SEBI Act lays down the functions of SEBI and
expressly states that it "shall be the duty of the Board to protect the
interests of investors in securities and to promote the development
of, and to regulate the securities market, by such measures as it
thinks fit". Further, Section 30 of the SEBI Act empowers SEBI to
make regulations consistent with the Act. Significantly, while framing
these regulations, SEBI consults its advisory committees consisting
of domain experts, including market experts, leading market players,
legal experts, technology experts, retired Judges of this Court or the
High Courts, academicians, representatives of industry associations
and investor associations. During the consultative process, SEBI
also invites and duly considers comments from the public on their
proposed regulations. SEBI follows similar consultative processes
while reviewing and amending its regulations.
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14. This Court in IFB Agro Industries Ltd v. SICGIL India Ltd,9
examined the role of independent regulatory bodies such as SEBI in
public administration and upheld the primacy of SEBI as the forum
to adjudicate violations of its regulations. Further, the Court detailed
the delegated legislative, administrative, and adjudicatory powers of
SEBI arising from the SEBI Act. The court held:
"30. Public administration is dynamic and ever-evolving.
It is now established that governance of certain sectors
through independent regulatory bodies will be far more
effective than being under the direct control and supervision
of Ministries or Departments of the Government. Regulatory
control by an independent body composed of domain
experts enables a consistent, transparent, independent,
proportionate, and accountable administration and
development of the sector. All this is achieved by way
of legislative enactments which establish independent
regulatory bodies with specified powers and functions. They
exercise powers and functions, which have a combination
of legislative, executive, and judicial features.
31. Another feature of these regulators is that they are
impressed with a statutory duty to safeguard the interest
of the consumers and the real stakeholders of the sector.
...
33. The statutory provisions contained in Chapters IV,
VI-A, read with Section 30, delineate the legislative,
administrative, and adjudicatory functions of the Board. In
its normative or legislative functions, SEBI can formulate
regulations encompassing various aspects having a
bearing on the securities market. It should be noted that
the SEBI Act, 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
wealth. Insofar as its administrative/executive power
goes, it has the power to regulate the business of stock
9
 (2023) 4 SCC 209
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VISHAL TIWARI v. UNION OF INDIA & ORS
exchanges and securities market. The Board provides
for the registration and regulation of stock brokers, share
transfer agents, depositories, venture capital funds,
collective investment schemes, etc. It also has the power
to prohibit various transactions which interfere with the
health of the securities market.
34. In the exercise of its adjudicatory powers under Section
15-I, SEBI has the power to appoint officers for holding
an inquiry, give a reasonable opportunity to the person
concerned and determine if there is any transgression of
the Rules prescribed. The Board has the power to impose
penalties for violations and also restitute the parties.
The adjudicatory power also includes the power to settle
administrative and civil proceedings under Section 15-JB
of the SEBI Act.
35. The regulatory jurisdiction of the Board also includes
ex-ante powers to predict a possible violation and take
preventive measures. The exercise of ex-ante jurisdiction
necessitates the calling of information as provided in
Sections 11(2)(i), 11(2)(ia) and 11(2)(ib) of the SEBI Act.
Where the Board has a reasonable ground to believe that
a transaction in the securities market is going to take place
in a manner detrimental to the interests of the stakeholders
or that any intermediary has violated the provisions of the
Act, it may investigate into the matter under Section 11(C)
of the SEBI Act. In other words, being the real-time security
market regulator, the Board is entitled to keep a watch,
predict and even act before a violation occurs.
...
(Emphasis supplied)
15. In a consistent line of precedent, this Court has held that when
technical questions arise particularly in the financial or economic
realm; experts with domain knowledge in the field have expressed their
views; and such views are duly considered by the expert regulator in
designing policies and implementing them in the exercise of its power
to frame subordinate legislation, the court ought not to substitute its
own view by supplanting the role of the expert. Courts do not act as
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appellate authorities over policies framed by the statutory regulator
and may interfere only when it is found that the actions are arbitrary
or violative of constitutional or statutory mandates. The court cannot
examine the correctness, suitability, or appropriateness of the policy,
particularly when it is framed by a specialized regulatory agency in
collaboration with experts. The court cannot interfere merely because
in its opinion a better alternative is available.
16. In Prakash Gupta v. SEBI,10 this Court speaking through one of us
(DY Chandrachud, J), observed that the Court must be mindful of
the public interest that guides the functioning of SEBI and should
refrain from substituting its own wisdom over the actions of SEBI.
The Court held:
"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 wealth
[...]
102. In a consistent line of precedent, this Court has
been mindful of the public interest that guides the
functioning of SEBI and has refrained from substituting
its own wisdom over the actions of SEBI. Its wide
regulatory and adjudicatory powers, coupled with
its expertise and information gathering mechanisms,
imprints its decisions with a degree of credibility. The
powers of the SAT and the Court would necessarily have
to align with SEBI's larger existential purpose."
17. From the above exposition of law, the following principles emerge:
a.
Courts do not and cannot act as appellate authorities examining
the correctness, suitability, and appropriateness of a policy, nor
are courts advisors to expert regulatory agencies on matters
of policy which they are entitled to formulate;
b.
The scope of judicial review, when examining a policy framed
by a specialized regulator, is to scrutinize whether it (i) violates
10
 2021 SCC OnLine SC 485.
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VISHAL TIWARI v. UNION OF INDIA & ORS
the fundamental rights of the citizens; (ii) is contrary to the
provisions of the Constitution; (iii) is opposed to a statutory
provision; or (iv) is manifestly arbitrary. The legality of the policy,
and not the wisdom or soundness of the policy, is the subject
of judicial review;
c.
When technical questions arise - particularly in the domain of
economic or financial matters - and experts in the field have
expressed their views and such views are duly considered by
the statutory regulator, the resultant policies or subordinate
legislative framework ought not to be interfered with;
d.
SEBI's wide powers, coupled with its expertise and robust
information-gathering mechanism, lend a high level of credibility
to its decisions as a regulatory, adjudicatory and prosecuting
agency; and
e.
This Court must be mindful of the public interest that guides
the functioning of SEBI and refrain from substituting its own
wisdom in place of the actions of SEBI.
We have made a conscious effort to keep the above principles in
mind while adjudicating the petitions, which contain several prayers
that require the Court to enter SEBI's domain.
C.
There is no apparent regulatory failure attributable to SEBI
18. The petitioners have submitted, based on the Hindenburg Report
and other newspaper reports, that the FPIs investing in Adani group
stocks in the Indian stock market are shell companies outside India
owed by the brother of the Chairperson of the Adani group. These
shell companies have, it is urged, an unclear ownership pattern and
seem to only trade in Adani stocks which allegedly allows the Adani
group to maintain an appearance of financial health and solvency.
The petitioners allege that this would artificially boost the value
of Adani stocks in the market and expose the Indian market and
investors to huge losses.
19. Additionally, the petitioners contend that after accounting for these
shell companies which allegedly belong to a member of the Adani
family, the promotor shareholding would surpass 75%. This, it is
alleged, would be in contravention of Rule 19A of the Securities
Contracts (Regulation) Rules 1957 which mandates a minimum
of 25% public shareholding. The alleged contravention would
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according to the petitioners entail the delisting of the Adani group as
a consequence. According to the petitioners, the disclosure of the
ownership of the FPIs investing in the Adani stocks lies at the heart
of the alleged violation of Rule 19A.