Holding

The Court held that SEBI’s regulatory actions and delegated legislation are not subject to judicial substitution, there is no regulatory failure or deliberate inaction, and therefore the investigation should not be transferred nor the SEBI amendments revoked.

Summary

The petitions arose after Hindenburg Research alleged that the Adani Group manipulated its share price and failed to disclose related‑party transactions, prompting the petitioner to seek a court‑monitored investigation by a Special Investigation Team or the CBI and the revocation of certain SEBI regulations. The Supreme Court examined whether SEBI’s regulatory actions and its delegated legislation could be judicially reviewed, and whether there was any regulatory failure justifying a transfer of the investigation. It held that SEBI, as a specialised regulator, enjoys wide delegated powers and its policies are subject only to review for constitutional or statutory violations, not for perceived policy wisdom. The Court found no evidence of deliberate inaction or bias by SEBI, noting that 22 of 24 investigations were completed and the delay in filing the status report was minimal. Consequently, the Court declined to transfer the investigation, rejected the petition to revoke SEBI’s amendments, and directed SEBI to finish the remaining investigations within three months while considering the Expert Committee’s recommendations. The petitions were disposed of.

Issues considered

The scope of judicial review over SEBI's regulatory and delegated legislative powers.
Whether SEBI has committed a regulatory failure warranting court intervention or transfer of investigation to a Special Investigation Team or CBI.
Whether the petitioner has demonstrated sufficient evidence of deliberate inaction, bias, or conflict of interest by SEBI or members of the Expert Committee.
Whether the amendments to the SEBI (Foreign Portfolio Investments) Regulations, 2014 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 should be revoked.
Whether reliance on third‑party reports (OCCRP, DRI letter) can substantiate a claim of inadequate investigation.

Legislation cited

Subjects

Judicial reviewSEBIRegulatory domainTransfer of investigationExpert CommitteeShort sellingAdani groupHindenburg ResearchCourt‑monitored investigationSpecial Investigation TeamCBIMarket volatilityOrganized Crime and Corruption Reporting ProjectPrice manipulationStock market manipulationConflict of interestEnforcement actionsQuasi‑judicial proceedingsDelayOpaque structuresDelegated legislative powersAdministrative powersAdjudicatory powersSubordinate legislationBeneficial ownerNatural personRelated party transactionPromoterPromoter groupListed companyThird partyCommercial lawEconomic policyParent legislationCredible evidencePublic domainGood faithBiasMarket Wide Circuit BreakersCircuit FiltersPrice bandsMarket Wide Position LimitsForensic financial researchInformed decision makingStructural reformEnforcement policyJudicial disciplineSettlement policyTimelinesSurveillance and market administration measuresDoctrine of separationPublic interest jurisprudence

Judgment

[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

* Author
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. 179

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. 181

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. 183

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 non-
compliance 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 [2024] 1 S.C.R.

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
[2024] 1 S.C.R. 185

VISHAL TIWARI v. UNION OF INDIA & ORS

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.
186 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

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
[2024] 1 S.C.R. 187

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
188 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

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.
[2024] 1 S.C.R. 189

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
190 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

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. In its order dated 10 March
2023, this Court noted that SEBI was already seized of investigations
into the Adani group since 2020. This Court further directed SEBI
to investigate the alleged violation of Rule 19A of the Securities
Contracts (Regulation) Rules 1957.
20. The FPI Regulations, 2014 had mandated the disclosure of the
ultimate beneficial ownership by natural persons of the FPI under the
provisions concerning “opaque structures” in ownership of FPIs. The
declaration of the “ultimate beneficial owner” under SEBI Regulations
was required to conform to the disclosure of “beneficial owner”
under the Prevention of Money Laundering Act, 200211 and thereby
under Rule 9 of the Prevention of Money Laundering Maintenance
of Records Rules, 2004. These requirements were amended by
SEBI in 2018 and 2019 by removing the requirement of disclosing
ownership of the FPIs by a natural person. The petitioner submits
that this amounts to a regulatory failure on the part of SEBI.
21. The petitioner further argues that the LODR Regulations, 2015 defined
a “related party transaction” in Regulation 2(1)(zb) as a transaction
involving a transfer of resources between a listed entity and a “related
party”, regardless of whether a price is charged. The term “related
party”, in Regulation 2(1)(zc) had the same meaning that is ascribed
to “related party” under Section 2(76) of the Companies Act, 2013.
Based on a report of the Committee on Corporate Governance dated
5 October 2017 the definition was amended on 1 April 2019 to provide
that any person or entity belonging to the “promoter” or “promoter
group” of a listed entity that held 20% or more of the shareholding
in the listed entity shall be deemed to be a related party.
22. On 21 November 2021, substantial amendments were made to the
definition of “related party” with deferred prospective effect from 1
April 2022 and 1 April 2023. In these amendments, the definition of
“related party” was amended to include persons holding 20% or more
in the listed company whether directly or indirectly or on a beneficial
interest basis under Section 89 of the Companies Act, 2013 with

11 PMLA
[2024] 1 S.C.R. 191

VISHAL TIWARI v. UNION OF INDIA & ORS

effect from 1 April 2022. However, with effect from 1 April 2023, the
deemed inclusion would bring within the scope of the term “related
party” persons who hold 10% or more of the listed company. The
Expert Committee report has opined that these amendments were
necessitated to address the mischief or contrivance of effecting a
transaction involving a transfer of resources between a listed company
and a third party which is not a related party, only to technically escape
the rigours of compliance applicable to a related party transaction,
to thereafter transfer the resources from the unrelated party to a
related party. The Committee further opined that deferred prospective
application of regulations is not bad practice in commercial law, as
it allows the market to adjust to the proposed changes and avoid
uncertainty.
23. However, the petitioner argues that these amendments to the LODR
Regulations have facilitated the mischief or contravention with
regard to related party transactions by the Adani group. This, as the
petitioner argues, is because the series of amendments have made
it difficult to establish contravention of law by first opening a loophole
and then plugging the loophole with deferred effect. The petitioner
has also argued that while initially the director, their relative, or a
relative of a key managerial person was considered a related party,
the amendments have changed this position to hold that a person/
entity be deemed ‘related party’ only if the shareholding of that
person/entity is at least 20%. These amendments have allegedly
made it difficult to investigate the acquisition against the Adani group
for flouting minimum public shareholding regulations by engaging in
related party transactions through FPIs. It has also made it difficult to
assign the specific contravention of a regulation to the Adani group.
24. In essence, the petitioners have argued that the amendments to
the two regulations amount to regulatory failure on the part of SEBI
and have accordingly prayed that SEBI be directed to revoke the
amendments to the FPI Regulations and LODR Regulations or
make suitable changes. It may be pointed out that these arguments
and prayers were not present in the initial petitions. They have only
propped after the report of the Expert Committee dated 6 May 2023.
The Report stated that in view of the amendments to the regulations,
it cannot return a finding of regulatory failure by SEBI. Thereafter, the
petitioners have made arguments to belie the finding of the Expert
Committee Report.
192 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

25. SEBI in its affidavit dated 10 July 2023 has submitted that the
entire rouse around regulatory failure caused by amendments to
FPI Regulations and LODR Regulations was initiated because of
SEBI’s submissions before the Expert Committee in the context
of challenges faced in obtaining information regarding holders of
economic interest. SEBI had used the term “opaque” to describe the
FPIs which it submits was mistaken by the Expert Committee to imply
the rules on “opaque structures” under the FPI Regulations, 2014.
26. SEBI claims no disability in its investigation into the Adani group on
account of the amendments to the FPI Regulations. On merits, SEBI
has argued that the FPI Regulations, 2014 in fact did not prohibit
opaque structures. They were permitted upon meeting certain
conditions including the condition that they provide details of their
beneficial ownership as and when called upon to do so. The 2018
amendment required mandatory disclosures by all FPIs with a few
exceptions. It marked a shift towards tightening the regulations with
mandatory disclosure of beneficial owner details. This new mandate
rendered the previous provision on disclosure upon demand otiose.
Mandatory upfront disclosure meant that the undertaking to disclose
beneficial ownership by FPIs was a vestige. This led to provisions on
“opaque structures” being omitted in 2019 upon the recommendation
of the Working Group headed by a former Deputy Governor of RBI.
27. In essence, SEBI argues that the difficulty it faces in obtaining
information regarding holders of economic interest in FPIs does
not change regardless of the amendments in the FPI Regulations.
SEBI contends that a challenge arises due to differing regulations in
jurisdictions where entities with economic interest in an FPI operate.
The ambiguity lies in beneficial ownership identification, which is based
on control or ownership in some jurisdictions, potentially overlooking
entities with economic interest but no apparent control. Consequently,
investment managers or trustees, utilizing arrangements like voting
shares, may be recognized as beneficial owners, leading to a potential
failure in identifying the actual investing entities with economic interest,
especially when holdings are distributed across multiple FPIs.
28. We find merit in SEBI’s arguments and do not find any 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, as noticed above, and explained the reasons
[2024] 1 S.C.R. 193

VISHAL TIWARI v. UNION OF INDIA & ORS

for the changes in its regulations. The procedure followed in arriving
at the current shape of the regulations is not tainted with any illegality.
Neither has it been argued that the regulations are unreasonable,
capricious, arbitrary, or violative of the Constitution. The 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. In effect, this Court
is being asked to replace the powers given to SEBI by Parliament
as a delegate of the legislature with the petitioners’ better judgment.
The critique of the regulations made as an afterthought and based on
a value judgment of economic policy is impermissible. Additionally,
we find no merit in the argument that the FPI Regulations, 2014
have been diluted to facilitate mischief. The amendments far from
diluting, have tightened the regulatory framework by making the
disclosure requirements mandatory and removing the requirement
of it being disclosed only when sought. The disclosure requirement
therefore is now at par with PMLA.
29. We do not see any valid grounds raised for this Court to interfere
by directing SEBI to revoke its amendments to regulations which
were made in the exercise of its legislative power. A regulation may
be subject to judicial review based on it being ultra vires the parent
legislation or the Constitution. None of these grounds have been
pressed before the Court. Therefore, we find that the prayer seeking
directions to SEBI to revoke its amendments to the FPI Regulations
and LODR Regulations must fail.
30. SEBI has completed twenty-two out of the twenty-four investigations
into the Adani group. It submits that the remaining two are pending
due to inputs being awaited from foreign regulators. We also record
the assurance given by the Solicitor General on behalf of SEBI that
the investigations would be concluded expeditiously. SEBI cannot
keep the investigation open-ended and indeterminate in time. Hence,
SEBI shall complete the pending investigations preferably within
three months.
D. The plea to transfer the investigation from SEBI to another
agency or to an SIT
i. The power to transfer an investigation is exercised in
extraordinary situations
194 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

31. The petitioners seek the transfer of the investigation from SEBI to the
CBI or an SIT. The question that falls for decision is whether a case
has been established by the petitioners for the court to issue such a
direction.
32. 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. 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. The petitioner must place on record strong
evidence indicating that the investigating agency has portrayed
inadequacy in the investigation or prima facie appears to be biased.
33. Recently, in Himanshu Kumar v. State of Chhattisgarh12, this
Court, speaking through one of us (JB Pardiwala, J) relying on a
judgement of a three judge Bench of this Court in K.V. Rajendran
v. Superintendent of Police CBCID South Zone, Chennai 13
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. The Court held as follows:
“49. Elaborating on this principle, this Court further
observed:
“17. … the Court could exercise its constitutional powers
for transferring an investigation from the State investigating
agency to any other independent investigating agency like
CBI only in rare and exceptional cases. Such as where high
officials of State authorities are involved, or the accusation
itself is against the top officials of the investigating agency
thereby allowing them to influence the investigation, and

12 2022 SCC OnLine SC 884
13 (2013) 12 SCC 480
[2024] 1 S.C.R. 195

VISHAL TIWARI v. UNION OF INDIA & ORS

further that it is so necessary to do justice and to instil
confidence in the investigation or where the investigation
is prima facie found to be tainted/biased.”
50. The Court reiterated that an investigation may be
transferred to the CBI only in “rare and exceptional cases”.
One factor that courts may consider is that such transfer
is “imperative” to retain “public confidence in the impartial
working of the State agencies.” This observation must be
read with the observations made by the Constitution Bench
in the case of Committee for Protection of Democratic
Rights, West Bengal (supra), that mere allegations against
the police do not constitute a sufficient basis to transfer
the investigation.
…
52. It has been held by this Court in CBI v. Rajesh Gandhi,
1997 Cri LJ 63, that no one can insist that an offence be
investigated by a particular agency. We fully agree with
the view in the aforesaid decision. An aggrieved person
can only claim that the offence he alleges be investigated
properly, but he has no right to claim that it be investigated
by any particular agency of his choice.
53. The principle of law that emerges from the precedents
of this Court is that the power to transfer an investigation
must be used “sparingly” and only “in exceptional
circumstances”. In assessing the plea urged by the
petitioner that the investigation must be transferred to the
CBI, we are guided by the parameters laid down by this
Court for the exercise of that extraordinary power.”
(emphasis supplied)
34. Given the above position of law, the question that arises before the
Court is whether, in the facts of the present case, the transfer of
investigation from SEBI to another agency is warranted.
ii. SEBI has prime facie conducted a comprehensive
investigation
35. As noted above, out of the twenty-four investigations carried out
by SEBI, twenty-two are concluded. Twenty-two final investigation
196 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

reports and one interim investigation report have been approved by
the competent authority under 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.
36. Further, in its status report, SEBI has provided the current status
of each of the investigations conducted by it and the reasons for
interim findings in two of the investigations. 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. An overview of twenty-four
investigations conducted by SEBI is as follows:

Sr. Issues No. of
No. Investigations
1 Minimum Public Shareholding- alleged violation of Rule 19A 1
of Securities Contracts (Regulation) Rules, 1957
2 Alleged manipulation of stock prices in contravention of 2
existing laws
3 Alleged related Party Transactions (RPT)-Failure to disclose 13
transactions with Related Parties and other relevant
information
4 Other Issues:
(A) Possible violation of SEBI (Foreign Portfolio Investors) 1
Regulations, 2014 and 2019
(B) Possible violation of SEBI (Substantial Acquisition of 1
Shares and Takeovers) Regulations, 2011
(C) Trading-Pre-post Hindenburg Report 1
(D) Possible violation of SEBI (Prohibition of Insider Trading) 5
Regulations, 2015
Total 24

SEBI’s status report and the details of the twenty-four 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.
37. The petitioners have also raised questions about the delay by SEBI
in submitting the status report before this Court. As noted earlier, by
an order dated 2 March 2023, this Court directed SEBI to conclude
its investigation within two months and file a status report before this
[2024] 1 S.C.R. 197

VISHAL TIWARI v. UNION OF INDIA & ORS

Court. This Court by its order dated 17 May 2023, granted SEBI an
extension of time till 14 August 2023 to submit its status report about
its investigation. Eventually, SEBI filed an interlocutory application
intimating this Court about the status of the twenty-four investigations
undertaken by SEBI on 14 August 2023. SEBI submitted a status
report dated 25 August 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.
38. Further, as noted in part C of this judgment, no apparent regulatory
failure can be attributed to SEBI based on the material before this
Court. Therefore, there is prima facie no deliberate inaction or
inadequacy in the investigation by SEBI.
iii. Reliance on the OCCRP report and the letter by DRI is
misconceived
39. To assail the adequacy of SEBI’s investigation thus far, the petitioner
has sought to rely on a report published by OCCRP and various
newspapers referring to the report. The petitioner’s case appears to
rest solely on inferences from the report by the OCCRP, a third-party
organization involved in “investigative reporting”. The petitioners have
made no effort to verify the authenticity of the claims.
40. The 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, as the petitioners state, can such inputs be
regarded as “credible evidence”. The veracity of the inputs and their
sources must be demonstrated to be unimpeachable. The petitioners
cannot assert that an unsubstantiated report in the newspapers
should have credence over an investigation by a statutory regulator
whose investigation has not been cast into doubt on the basis of
cogent material or evidence.
198 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

41. In addition to the OCCRP report, the petitioners have also relied on
a letter dated 31 January 2014 sent by the DRI to the then SEBI
Chairperson. The letter purportedly alerted SEBI about inter alia
potential stock market manipulation by the Adani group through
over-valuation of the import of power equipment from a UAE-based
subsidiary. According to the petitioner, SEBI did not disclose the
receipt of the letter and did not take adequate action based on it.
42. SEBI has submitted that after receiving the above letter, it sought
information from the DRI on the issue and received the requisite
inputs. Further, while SEBI examined the preliminary alerts by the
DRI, the Additional Director General (Adjudication), DRI concluded
their examination and held that the allegations were not established.
The order of the Additional Director General was assailed by the
Commissioner of Customs before the Customs, Excise and Service
Tax Tribunal.14 The CESTAT passed an order on 8 November
2022 dismissing the appeal and concluding that the allegation of
overvaluation was not proved. The order of the CESTAT was upheld
by this Court on 27 March 2023. Further, SEBI has also submitted
that its investigation based on the DRI alerts was concluded and
the related findings were also placed before the Expert Committee.
43. None of the above facts have been disputed by the counsel for the
petitioners. The petitioner is re-agitating an issue that has already
been settled by concurrent findings of the DRI’s Additional Director
General, the CESTAT and this Court. Therefore, 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 in 2014.
44. Additionally, it must be noted that in the present case, this Court
has already exercised its extraordinary powers by setting up an
Expert Committee to assess the situation in the market, suggest
regulatory measures, and investigate whether there has been a
regulatory failure. To expect the Court to monitor the investigation
indefinitely, even after the committee has submitted its report and
SEBI has completed its investigation in twenty-two out of twenty-four
enquiries is not warranted.

14 “CESTAT”
[2024] 1 S.C.R. 199

VISHAL TIWARI v. UNION OF INDIA & ORS

E. Allegations of conflict of interest against members of the Expert
Committee
45. The petitioners have raised allegations against some of the members
of the Expert Committee alleging that there was a conflict of interest
which was not revealed to the Court.
46. On 2 March 2023, this Court constituted the Expert Committee
comprising of domain experts and headed by a former judge of this
Court. The allegations against certain members of the committee
were raised by the petitioner for the first time only on 18 September
2023 almost six months after the constitution of the committee and
several months after the Committee had submitted its report in
May 2023. All the purported facts and documents relied on by the
petitioner in this regard were available in the public domain well
before the allegations were raised by the petitioner for the first time
in September 2023. The belated allegations by the petitioner prima
facie indicate that they have not been made in good faith.
47. In any event, the allegation against Mr Somasekhar Sundaresan
is that he had represented the Adani group before various fora
including the SEBI Board, as a lawyer. To buttress the submission,
the petitioner has merely averred to one order of the SEBI Board
dated 25 May 2007 which indicates that Mr Sundaresan has
appeared for Adani Exports Ltd on an unconnected issue. On a
specific query by the Court during the hearing, counsel appearing
on behalf of the petitioner did not present any additional evidence.
The acceptance of a professional brief by a lawyer in 2007 cannot
be construed to reflect “bias” or even a “likelihood of bias” in 2023.
There is an absence of proximity both in terms of time (the alleged
appearance was sixteen years ago) and subject matter. There was
also no justifiable reason for the petitioners to wait until the expert
committee submitted its report.
48. Similarly, the allegations against Mr OP Bhatt and Mr Kamath have
not been adequately substantiated by the petitioner. With regard to
Mr OP Bhatt, the petitioner has alleged that he is presently working
as the Chairman of a leading renewable energy company, which
is working in partnership with the Adani group on certain projects.
Additionally, the petitioner has also raised vague accusations against
Mr OP Bhatt and Mr Kamath in relation to unconnected misconduct
by Mr Vijay Mallya and the ICICI Bank, respectively.
200 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

49. The petitioner has not established the link between these
unsubstantiated allegations and the appointment of Mr Bhatt and Mr
Kamath to the committee. Here too, the petitioner has only annexed
newspaper reports published after the appointment of the committee
by this Court, without any attempts to verify their authenticity or
supplement them with independent research.
50. Therefore, the allegations of conflict of interest against members of
the Expert Committee are unsubstantiated and do not warrant this
Court’s serious consideration.
F. Other recommendations by the Expert Committee
51. The Expert Committee met on 17 March 2023 and noted that it
would require specific factual briefings from SEBI on all four aspects
within the remit of the Committee. It further sought inputs from
market participants with regard to (i) suggestions and measures
to strengthen investor awareness; (ii) strengthen the statutory and
regulatory framework; and (iii) secure compliance with the existing
framework. We have discussed the committee’s analysis on the
issue of whether there was a regulatory failure above. The other
observations and recommendations of the Expert Committee report
are discussed below.
i. Volatility and short selling
52. The Court in its order dated 10 March 2023 expressed concern over
the impact of volatility in the securities market on Indian investors.
It therefore empowered the Expert Committee with the remit to
enquire into and assess the volatility in the market. The enquiry was
to give a sense of direction to increase investor awareness, address
deficiencies in the regulatory framework and enable the Committee
to make any other suggestions to avoid unanticipated volatility which
would adversely impact the interests of investors.
53. Market forces act on the assessment of available information and
its anticipated impact. This behaviour creates volatility in the market.
However, such volatility is an inherent feature of the market and
becomes a matter of concern when it has wide ramifications. The
stocks of the Adani group witnessed volatility in the aftermath of the
publication of the Hindenburg Report. This volatility was examined by
the Expert Committee, which after examining the facts presented by
SEBI and engaging with market participants, opined that the impact
of the Adani group-related events on the overall market was low.
[2024] 1 S.C.R. 201

VISHAL TIWARI v. UNION OF INDIA & ORS

54. The report of the Committee indicates that the Indian securities’ market
showed resilience and the impact of the fluctuations in the Adani
stocks was not deleterious to the economic ecosystem as a whole.
The volatility in Adani stocks in the aftermath of the Hindenburg Report
was stabilised due to market forces and mitigatory measures. While
shares of the group fluctuated, it did not pose any systemic market-
level risk. According to the Expert Committee the trend observed in
volatility in the Indian market in comparison with the global volatility
index has been consistent since the COVID-19 pandemic and was
maintained even during the period when volatility was observed
in the Adani stocks. Therefore, according to the Committee, while
events related to Adani stocks had an impact at an individual scale,
it did not result in volatility in the market.
55. After drawing the above conclusion, the Expert Committee has
additionally made the following recommendation upon considering
the submissions of SEBI and other market participants:
“47. ⁠SEBI has submitted that only recently, it has made
a regulatory intervention in terms of supervising the
construction of stock indices. SEBI must consider
directing index writers to construct indices to compute
volatility of stocks that are constituents of indices
so that volatility in these stocks can be compared
with volatility in the indices. The availability of such
data on a real time basis would enable the market
to be more informed in making its investment and
divestment decisions. SEBI must ensure that there are
secular norms and periodic reviews for construction
and design changes in indices.”
In its note filed in compliance with this Court’s order
dated 10 February 2023, SEBI had submitted that it
has implemented measures to deal with issues which
may impact sudden and unusual price movements,
excessive volatility, etc. by measures like Market
Wide Circuit Breakers, Circuit Filters/Price bands on
individual shares, additional surveillance measures15,
and Market Wide Position Limits. SEBI has inter

15 ASM
202 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

alia reiterated these submissions before the Expert
Committee and has further, in its affidavit dated 10 July
2023 placed on record the existing ASM and graded
surveillance measure16 framework. We are inclined to
direct SEBI to further consider the recommendations
and take appropriate measures.
56. The chain of events which triggered the Adani group-related events
and eventually the petitions filed before this Court were attributable
to the report by short-seller Hindenburg Research. The Expert
Committee also points to the publication of the report to explain
the volatility observed. The petitioner on the other hand has argued
that the real cause of the loss of investor money was the alleged
unchecked violations of law and artificial boosting of share prices
which would always entail the risk of volatility upon being discovered
in one way or the other. These allegations have been investigated by
SEBI including some investigations which were directed by this Court.
SEBI as the statutory regulator has stated that it would complete the
process in accordance with law.
57. However, this Court had sought inputs as to the role of short sellers,
like Hindenburg, and the rules governing their actions as well
as measures which may be taken to regulate them. Hindenburg
Research describes itself as a research firm that specialises in
“forensic financial research”. The firm purports to seek out situations
where companies may have accounting irregularities, bad actors in
management, undisclosed related party transactions, illegal/unethical
business or financial reporting practices and undisclosed regulatory,
product or financial issues.
58. 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
and essential feature to provide liquidity and to help price correction
in over-valued stocks and hence, short selling is recognised as

16 GSM
[2024] 1 S.C.R. 203

VISHAL TIWARI v. UNION OF INDIA & ORS

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. SEBI submits that any restrictions on
short selling, may distort efficient price discovery, provide promoters
unfettered freedom to manipulate prices, and favour manipulators
rather than rational investors. Therefore, the International Organisation
of Securities Commission recommends that short selling be regulated
but not prohibited with an aim to increase transparency. We record
the statement made by the Solicitor General before this Court
that measures to regulate short selling will be considered by the
Government of India and SEBI. SEBI and the investigative agencies
of the Union Government shall also enquire into whether there was
any infraction of law by the entities, which engaged in short-selling on
this occasion. The loss which has been sustained by Indian investors
as a result of the volatility caused by the short positions taken by
Hindenburg Research and any other entities acting in concert with
Hindenburg Research should be probed.
ii. Investor Awareness
59. Informed decisions made by an aware investor population are a pre-
requisite to an efficient market. The data from 2019 to 2022 provided
by SEBI shows that there is an increase in the number of investors
in the Indian economy in the ‘future and options segment’ of the
stock market.17 This requires specialized knowledge. The creation
of a framework for this knowledge to percolate to investors lies in
the policy domain. However, this Court sought an assessment of the
existing framework to aid a determination of whether the regulatory
framework suffers from infirmities which would lead to an adverse
impact on the Indian investors. The Court also sought inputs on
measures which may be taken to increase investor awareness thereby
creating a conducive environment for a more efficient market. The
Expert Committee solicited views and perspectives from SEBI and
various market participants.
60. Before the Expert Committee, SEBI submitted that there has been
no market default owing to price movements due to the measures

17 SEBI, Analysis of Profit and Los of Individual Traders dealing in Equity F&O Segment, 25 January
2023, available at <https://www.sebi.gov.in/reports-and-statistics/research/jan-2023/study-analysis-of-profit-
and-loss-of-individual-traders-dealing-in-equity-fando-segment_67525.html#>
204 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

taken by SEBI. These measures include an index-based market-
wide “circuit breaker” system, limit of 20% in movement of prices in
individual shares, price bands at 10% of the previous day’s closing
price for the future and options segment, stock specific surveillance
mechanisms like ASM and GSM, and cautionary messages displayed
to brokers placing orders for stocks under ASM or GSM.
61. The Expert Committee has concluded that having systems like ASM
and GSM is not sufficient and that there must be a real prospect of
investors being aware of heightened surveillance by measures, such
as clients being alerted when stocks are under ASM or GSM at the
point of entry of orders. The Expert Committee also highlighted the
possibility of there being a surfeit of information in which investors find
themselves drowned. Measures to communicate relevant information
in a comprehensive manner to the investors are therefore imperative
for informed decision making.
62. The Committee also explored investor awareness with respect to
unclaimed securities, dividends and bank deposits of deceased next
of kin which may be lost due to the legal framework. The Committee
invited the Investor Education and Protection Fund Authority18 to
present its workings and manner of administration. Based on its
findings, the Committee recommended that the Government of India
establish a centralised authority to handle and process unclaimed
private assets. It suggested creating the Central Authority for
Unclaimed Property which must aim to reunite assets of deceased
persons with their next of kin. The Committee also made some
suggestions in the context of IEPFA which state:
“a. The integrated portal announced in the Finance
Minister Budget Speech should be expedited and
process re-engineering delegation to the issuer
companies based upon type and threshold of the
claims must be considered;
b. The same may be reviewed on incremental basis
from time to time considering the benefits on reducing
the timeline for disposal of claims vis-à-vis the risks
of fraud.

18 IEPFA
[2024] 1 S.C.R. 205

VISHAL TIWARI v. UNION OF INDIA & ORS

c. Pilot projects such as taking up names from the death
registry in a given area to map it with the database
of the IEPFA and proactively attempting to reach out
to the next of kin should be considered;
d. Registered market intermediaries who are answerable
to the regulatory regime of financial sector regulators
could be identified and recognized as agents for
service delivery to enable release of unclaimed
dividend and securities;
e. An officer strength of a dozen personnel is evidently
disproportionate. The IEPFA would need a full time
Chief Executive Officer who would have specific
key performance indicia that would be fixed by the
governance oversight of the Authority.”
The Committee made further recommendation to induce financial
literacy and make it a fundamental part of pedagogy right from
school curricula.
63. SEBI has submitted that while it is open to considering some of
the above suggestions, it is not empowered to implement others as
they lie outside its prescribed sphere of competence and expertise.
In particular, SEBI has submitted that the recommendations on
creation of a financial redressal agency, central unclaimed property
authority, and framework to set up a multi-agency committee would
require multiple regulators and the Government may need to look
into these recommendations. We find it appropriate to direct both the
Government of India and SEBI to consider the recommendations of
the Expert Committee with respect to investor awareness and create
an appropriate legal framework to implement the recommendations.
iii. Recommendations of the Expert Committee to strengthen
regulatory framework and secure compliance to protect
investors
64. The Expert Committee was also directed 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. Pursuant to its remit, the Committee in its report dated 6
May 2023 has made the following suggestions:
206 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

a. Structural Reform: SEBI must perform its complex functions
in a structured form by ensuring greater transparency in law-
making, and greater societal involvement in contributing to the
law. This will lead to greater compliance with the laws;
b. Effective Enforcement Policy: SEBI must optimize its resources
and lay down policies for effective enforcement of its law
by stipulating the criteria by which it may use its powers to
initiate measures. This must be consistent with the legislative
policy of SEBI and an attempt must be made to apply the law
prospectively;
c. Judicial Discipline: Adjudicating Officers and Whole Time
Members must show consistency and not take differing views
in similar circumstances. Judicial discipline must be followed
in applying ratios of previous decisions as well as following the
decisions made at the appellate stage;
d. Settlement Policy: SEBI must have a robust settlement policy and
formulate objective criteria to regulate it. It must not be hesitant
to enter settlements whereby financial injury commensurate with
the alleged violation may be inflicted on the party;
e. Timelines: SEBI must lay down and adhere to strict timelines
for initiation of investigations, completion of investigations,
initiation of proceedings, disposal of settlement, and disposal
of proceedings;
f. Surveillance and Market Administration Measures: The element
of human discretion must be done away with as far as possible.
It must be saved for extraordinary circumstances that would
not have been factored in already. With regard to disclosures,
all provision of data should be in machine-readable format and
inter-operable across electronic platforms;
g. The suggestions made on structural reforms by committees in
the past should be followed. These include (i) the creation of
a Financial Redress Agency that handles investor grievances
across sectors; (ii) easing and centralizing the process for
recovering unclaimed private property, which is currently spread
across agencies, either through the aegis of the Financial Stability
and Development Council or even by appropriate legislation;
(iii) creation of a framework for a multi-agency committee to
investigate complex enforcement matters. The same must have
[2024] 1 S.C.R. 207

VISHAL TIWARI v. UNION OF INDIA & ORS

a temporary shelf life which ends upon initiation of prosecution.
It may only be used in cases involving serious cross-sectoral
repercussions which would need multi-disciplinary skill sets to
act in coordination; and (iv) following the doctrine of separation
within SEBI in its quasi-judicial, and executive arm.
65. SEBI has addressed these recommendations in its affidavit dated 10
July 2023. SEBI has inter alia submitted that its existing framework
already accounts for the recommendations of the Expert Committee on
effective enforcement policy, judicial discipline, settlement policy, and
surveillance & market administration measures. SEBI has opposed
the recommendations with respect to laying down timelines on the
ground that the time taken to form a prima facie opinion and conduct
an investigation is contingent on many variable factors which render
the process and time taken subjective. SEBI submits that they cannot
be uniformly bound to a time limit. Further, as noted above, SEBI
has submitted that creation of financial redressal agency, central
unclaimed property authority, and framework to set up a multi-agency
committee would require multiple regulators and the Government
may need to look into these recommendations. SEBI argues that it
is not competent to enforce the same and requires the Government
of India to consider them.
66. The Expert Committee has made the above suggestions after applying
its mind to the wealth of information collected from SEBI, market
participants, invitees and from their own expertise. These suggestions
merit favourable consideration with a positive intent. We direct the
Government of India and SEBI to consider these suggestions and
to take the benefit of the efforts put in by the Expert Committee. We
may add that the approach in considering these suggestions must not
be defensive but constructive. The Committee has favourably noted
some of the measures that SEBI has taken in reaction to the events
and learnings from the market. The same attitude of advantaging from
the perspectives should be taken by the Government of India and
SEBI. The Union Government and SEBI would be at liberty to interact
with the Committee so as to take this forward. Since a member of
the Bar who was a member of the Committee has been appointed
to the Bench since the submission of the report, the Chairperson
of the Committee will be at liberty to nominate a member with legal
expertise and domain knowledge for the purpose of interacting with
the Union Government and SEBI.
208 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

G. Conclusion
67. In a nutshell, the conclusions reached in this judgement are
summarized below:
a. The power of this Court to enter the regulatory domain of SEBI
in framing delegated legislation is limited. The court must refrain
from substituting its own wisdom over the regulatory policies
of SEBI. The scope of judicial review when examining a policy
framed by a specialized regulator is to scrutinise whether it
violates fundamental rights, any provision of the Constitution,
any statutory provision or is manifestly arbitrary;
b. 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. The procedure followed in arriving at the
current shape of the regulations does not suffer from irregularity
or illegality. The FPI Regulations and LODR Regulations have
been tightened by the amendments in question;
c. SEBI has completed twenty-two out of the twenty-four
investigations into the allegations levelled against the Adani
group. Noting the assurance given by the Solicitor General on
behalf of SEBI we direct SEBI to complete the two pending
investigations expeditiously preferably within three months;
d. This Court has not interfered with the outcome of the
investigations by SEBI. SEBI should take its investigations to
their logical conclusion in accordance with law;
e. The facts of this case do not warrant a transfer of investigation
from SEBI. In an appropriate case, this Court does have the
power to transfer an investigation being carried out by the
authorized agency to an SIT or CBI. Such a power is exercised
in extraordinary circumstances when the competent authority
portrays a glaring, willful and deliberate inaction in carrying out
the investigation. The threshold for the transfer of investigation
has not been demonstrated to exist;
f. The reliance placed by the petitioner on the OCCPR report
to suggest that SEBI was lackadaisical in conducting the
[2024] 1 S.C.R. 209

VISHAL TIWARI v. UNION OF INDIA & ORS

investigation is rejected. A report by a third-party organization
without any attempt to verify the authenticity of its allegations
cannot be regarded as conclusive proof. Further, the petitioner’s
reliance on the letter by the DRI is misconceived as the issue has
already been settled by concurrent findings of DRI’s Additional
Director General, the CESTAT and this Court;
g. The allegations of conflict of interest against members of the
Expert Committee are unsubstantiated and are rejected;
h. The Union Government and SEBI shall constructively consider
the suggestions of the Expert Committee in its report detailed
in Part F of the judgment. These may be treated as a non-
exhaustive list of recommendations and the Government of
India and SEBI will peruse the report of the Expert Committee
and take any further actions as are necessary to strengthen the
regulatory framework, protect investors and ensure the orderly
functioning of the securities market; and
i. SEBI and the investigative agencies of the Union Government
shall probe into whether the loss suffered by Indian investors
due to the conduct of Hindenburg Research and any other
entities in taking short positions involved any infraction of the
law and if so, suitable action shall be taken.
68. Before concluding, we must observe that public interest jurisprudence
under Article 32 of the Constitution 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.
69. We are grateful to all the members and the Chairperson of the
Expert Committee for their time, efforts, and dedication in preparing
their erudite, comprehensive, and detailed report in a time-bound
manner. Subject to the consent and availability of the members and
210 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

Chairperson of the Expert Committee, SEBI and the Government
of India may draw upon their expertise and knowledge while taking
necessary measures pursuant to the recommendations of the
Committee.
70. The Petitions shall accordingly stand disposed of in the above terms.
71. Pending applications, if any, stand disposed of.

Headnotes prepared by: Nidhi Jain Result of the case: Petitions
disposed of.