Adani-Hindenburg Saga; Supreme Court Of India Emerged As A Key Arbiter



The year 2023 began with a storm, shaking the Indian corporate landscape as the American short-seller Hindenburg Research unveiled a scathing report, alleging accounting fraud and stock price manipulation against the Adani Group, a behemoth conglomerate led by Gautam Adani.

Allegations In The Report

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. The accusations sent shockwaves through the Indian markets, with Adani’s share prices plummeting and triggering questions about regulatory oversight and financial stability. 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.

Investor’s Approach SC

The fiasco led investors to knock door of the Apex Court under article 32 of the Constitution of India. The Petitioners majorly raised concern 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. The petitioner in WP (C) No. 201 of 2023 alleged 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.” Further, in one of the Petitions, Petitioner inter alia sought a court-monitored investigation by a Special Investigation Team (SIT) or by the CBI into the allegations of fraud and the purported role played by top officials of public sector banks and lender institutions. Considering that the issues was sensitive and had major implications on public at large, the Court felt 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.

SC Judgement Summary

In a landmark judgment delivered on January 3, 2024, the Apex Court took a nuanced stance. While acknowledging the gravity of the charges against Adani, the court refused to set up a SIT or entrust the investigation to other agencies. Instead, it placed its faith in Securities and Exchange Board of India (SEBI), acknowledging its progress in resolving 22 out of 24 cases stemming from the Hindenburg report. There were allegations of SIT Experts having conflict of interest, the Supreme Court had constituted an Expert Committee to assess the situation in the market, suggest regulatory measures, and investigate whether there had been a regulatory failure.

The petitioner had raised allegations of conflict of interest against some of the members of the Expert Committee, alleging that there was a conflict of interest that was not revealed to the Court. The Supreme Court, in its judgment, held that the allegations were belated and prima facie indicated that they were not made in good faith. The Court noted that the Expert Committee had submitted its report in a time-bound manner and had provided erudite, comprehensive, and detailed recommendations.

The Supreme Court, in its judgment, clarified the scope of judicial review over SEBI’s regulatory domain. The Court held that SEBI is an expert body entrusted with the task of regulating the securities market, and its decisions are entitled to a high degree of deference. However, the Court also noted that SEBI’s decisions are not immune from judicial review, and the Court can intervene if SEBI’s decisions are arbitrary, capricious, or contrary to law. This decision was not without its justifications. The court recognized the limits of judicial interference in SEBI’s regulatory domain, emphasizing the need for upholding its autonomy. It also cautioned against relying on unsubstantiated reports or media frenzy for initiating separate investigations. The reliance on unverified information, the court warned, could undermine public interest jurisprudence, and potentially hamper robust investigations.

The Supreme Court, after examining the evidence presented by the petitioner and SEBI, held that there was no apparent regulatory failure attributable to SEBI. The Court noted that SEBI had initiated an investigation into the Adani Group’s alleged violations and had taken appropriate action based on the evidence available. The Court also observed that SEBI’s investigation was ongoing, and it would be premature to conclude that SEBI had failed to take appropriate action.

The petitioner had sought a direction from the Supreme Court to transfer the investigation from SEBI to another agency or to an SIT. The Supreme Court, in its judgment, held that the power to transfer an investigation is exercised in extraordinary situations and only when there is a clear case of bias or lack of independence. The court emphasized on the fact that the power to transfer an investigation to investigating agencies such as the CBI must be invoked only in rare and exceptional cases. The Court noted that there was no evidence to suggest that SEBI was biased or lacked independence in its investigation. The Court also observed that SEBI had conducted a comprehensive investigation, and there was no reason to doubt its impartiality.

The Expert Committee had made several recommendations to strengthen the regulatory framework, protect investors, and ensure the orderly functioning of the securities market. The Supreme Court, in its judgment, noted that these recommendations were necessary to address the challenges faced by the securities market. The Court observed that SEBI and the Government of India could draw upon the expertise and knowledge of the Expert Committee while taking necessary measures pursuant to the recommendations. Court also found allegations of conflict of interest against members of the Expert Committee as unsubstantiated.

The Way Forward

Looking towards 2024, the Adani-Hindenburg saga serves as a stark reminder of the challenges involved in regulating complex financial activities. It compels us to re-evaluate the balance between regulatory autonomy and accountability, the role of the media in shaping public perceptions, and the need for robust investigative mechanisms.

While the immediate dust has settled, the saga’s long-term impact remains to be seen. For investors, navigating the uncertainties surrounding the investigation continues to be a challenge. For regulators, the pressure to strengthen safeguards against financial malpractices intensifies. For the larger Indian economy, the episode serves as a wake-up call to prioritize transparency and trust in its financial systems.

As we embark on a new year, the lessons learned from the Adani-Hindenburg saga will undoubtedly shape the future of corporate governance and regulatory oversight in India. The year ahead will be crucial in determining the effectiveness of the implemented measures and, ultimately, in restoring confidence in the integrity of the Indian markets.


In conclusion, the Adani-Hindenburg saga remains a complex knot of corporate intrigue, regulatory scrutiny, and economic vulnerability. While the Supreme Court’s judgment has provided a resolution, the road ahead is paved with unanswered questions and lingering uncertainties, it is a significant decision that clarifies the scope of judicial review over SEBI’s regulatory domain, addresses the plea to transfer the investigation from SEBI to another agency or to an SIT, and examines the allegations of conflict of interest against members of the Expert Committee. The judgment also highlights the importance of strengthening the regulatory framework, protecting investors, and ensuring the orderly functioning of the securities market. The Supreme Court’s decision provides guidance to SEBI and other regulatory bodies on how to discharge their duties and responsibilities in a fair, impartial, and transparent manner.

As India navigates the intricacies of this financial tussle, the year 2024 will be a defining test of its commitment to transparency, accountability, and robust market systems. Only time will tell if the lessons learned from this episode will lead to a stronger, more resilient Indian economy.


Authors: Deepak Deshmukh (Associate Partner), Vivek Dwivedi (Senior Associate)

Contributor: Aadit Sharma (Intern).


To Read The Judgement Click Here



Interns and Paralegals.


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