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:

* Author

[2024] 1 S.C.R. 171 : 2024 INSC 3

Case Details

Vishal Tiwari

v.

Union of India & Ors

(Writ Petition (C) No. 162 of 2023)

03 January 2024

[Dr Dhananjaya Y Chandrachud*, CJI,

J B Pardiwala and Manoj Misra, JJ.]

Issue for Consideration

Matter pertains to the Adani-Hindenburg report alleging that the

Adani Group manipulated its share price wherein the petitioner

is seeking investigation by the Special Investigation Team or by

the CBI.

Headnotes

Constitution of India – Art. 32 - Report by an “activist short

seller”, Hindenburg Research about the financial transactions

of the Adani group alleging that the Adani group manipulated

its share prices and failed to disclose transactions with related

parties and other relevant information in violation of the

regulations framed by SEBI – Petitioners sought constitution

of expert Committee and transfer of investigation from SEBI

to Special Investigation Team or by the CBI:

Held: Power of this Court to enter the regulatory domain of SEBI

in framing delegated legislation is limited – Court must refrain from

substituting its own wisdom over the regulatory policies of SEBI

– No apparent regulatory failure attributable to SEBI – Procedure

followed in arriving at the current shape of the Regulations does not

suffer from irregularity or illegality – Further SEBI has completed

twenty-two out of the twenty-four investigations into the allegations

levelled against the Adani group – SEBI directed to complete

the pending investigations expeditiously – SEBI should take its

investigations to their logical conclusion in accordance with law –

Facts of this case do not warrant a transfer of investigation from

SEBI – Court does have the power to transfer an investigation

being carried out by the authorized agency to an SIT or CBI

in extraordinary circumstances when the competent authority 

172 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

portrays a glaring, willful and deliberate inaction in carrying out

the investigation – Threshold for the transfer of investigation has

not been demonstrated to exist – Reliance placed by the petitioner

on the OCCPR report and the letter by the DRI is misconceived

– Allegations of conflict of interest against members of the

Expert Committee are unsubstantiated and are rejected – Union

Government and SEBI to consider the suggestions of the Expert

Committee in its report and take further actions to strengthen the

regulatory framework, protect investors and ensure the orderly

functioning of the securities market – SEBI and the investigative

agencies of the Union Government to probe into the loss suffered

by Indian investors due to the conduct of Hindenburg Research

and other entities in taking short positions involved any infraction

of the law and if so, suitable action be taken. [Para 67]

Constitution of India – Art. 32 – Investigation conducted by

SEBI into the allegations that the Adani group manipulated its

share prices and failed to disclose transactions with related

parties – SEBI’s regulatory domain – Scope of judicial review:

Held: Courts do not and cannot act as appellate authorities

examining the correctness, suitability, and appropriateness of a

policy, nor are courts advisors to expert regulatory agencies on

matters of policy which they are entitled to formulate – Scope of

judicial review, when examining a policy framed by a specialized

regulator, is to scrutinize whether it violates the fundamental rights

of the citizens; is contrary to the provisions of the Constitution; is

opposed to a statutory provision; or is manifestly arbitrary – Legality

of the policy, and not the wisdom or soundness of the policy, is

the subject of judicial review – When technical questions arise

particularly in the domain of economic or financial matters and

experts in the field have expressed their views and such views are

duly considered by the statutory regulator, the resultant policies

or subordinate legislative framework ought not to be interfered

with – SEBI’s wide powers, coupled with its expertise and robust

information gathering mechanism, lend a high level of credibility

to its decisions as a regulatory, adjudicatory and prosecuting

agency – Court must be mindful of the public interest that guides

the functioning of SEBI and refrain from substituting its own wisdom

in place of the actions of SEBI. [Paras 17 ]

Constitution of India – Art. 32 – Investigation conducted by

SEBI into the allegations that the Adani group manipulated 

[2024] 1 S.C.R. 173

VISHAL TIWARI v. UNION OF INDIA & ORS

its share prices and failed to disclose transactions with

related parties and other information in violation of the SEBI

regulations – Regulatory failure, if attributable to SEBI:

Held: No reason to interfere with the regulations made by SEBI

in the exercise of its delegated legislative powers – SEBI has

traced the evolution of its regulatory framework, and explained

the reasons for the changes in its regulations – Procedure

followed in arriving at the current shape of the regulations is not

tainted with any illegality – There are no submissions that the

regulations are unreasonable, capricious, arbitrary, or violative of

the Constitution – Petitioners have not challenged the vires of the

Regulations but have contended that there is regulatory failure

based on SEBI’s alleged inability to investigate which is attributed

to changes in the regulations – Such a ground is unknown to this

Court’s jurisprudence – Critique of the regulations made as an

afterthought and based on a value judgment of economic policy

is impermissible – Prayer seeking directions to SEBI to revoke its

amendments to the FPI Regulations and LODR Regulations must

fail – No valid grounds have been raised for this Court to direct

SEBI to revoke its amendments to the FPI Regulations and the

LODR Regulations which were made in exercise of its delegated

legislative power – Thus, the procedure followed in arriving at the

current shape of the regulations does not suffer from irregularity

or illegality – FPI Regulations and LODR Regulations have been

tightened by the amendments in question. [Para 28, 29, 30, 67c]

Constitution of India – Arts. 32 and 142 – Transfer of the

investigation from SEBI to another agency or to SIT – Power of:

Held: Court does have the power u/Art. 32 and 142 to transfer an

investigation from the authorized agency to the CBI or constitute

an SIT – However, such powers must be exercised sparingly and

in extraordinary circumstances – Unless the authority statutorily

entrusted with the power to investigate portrays a glaring, willful

and deliberate inaction in carrying out the investigation, the court

will ordinarily not supplant the authority which has been vested

with the power to investigate – Such powers must not be exercised

by the court in the absence of cogent justification indicative of a

likely failure of justice in the absence of the exercise of the power

to transfer – Petitioner must place on record strong evidence

indicating that the investigating agency has portrayed inadequacy

in investigation or prima facie appears to be biased.[Para 32]

174 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

Constitution of India – Arts. 32 – Investigation – Comprehensive

investigation conducted by SEBI into the allegations that the

Adani group manipulated its share prices and failed to disclose

transactions with related parties:

Held: Out of the twenty-four investigations carried out by SEBI,

twenty-two are concluded – Twenty-two final investigation reports

and one interim investigation report have been approved by the

competent authority under SEBI’s procedures – As regards the

delay of only ten days in filing the report, such a delay does not

prima facie indicate deliberate inaction by SEBI, when the issue

involved a complex investigation in coordination with various

agencies, both domestic and foreign – No apparent regulatory

failure can be attributed to SEBI based on the material before this

Court – Thus, prima facie no deliberate inaction or inadequacy in

the investigation by SEBI. [Paras 35, 37, 38].

Constitution of India – Arts. 32 – Investigation conducted by

SEBI into the allegations levelled against the Adani group –

Adequacy of SEBI’s investigation – Challange to – Reliance

on the OCCRP report of a third-party organization and the

letter by DRI:

Held: Reliance on newspaper articles or reports by third-party

organizations to question a comprehensive investigation by a

specialized regulator does not inspire confidence – Such reports

by “independent” groups or investigative pieces by newspapers

may act as inputs before SEBI or the Expert Committee – However,

they cannot be relied on as conclusive proof of the inadequacy

of the investigation by SEBI nor, can such inputs be regarded as

“credible evidence” – Also the petitioner’s assertion that SEBI was

lackadaisical in its investigation is not borne out from the reference

to the letter sent by the DRI. [Paras 40, 43]

Shares and securities – Short selling – Meaning of:

Held: Short selling is a sale of securities which the seller does not

own but borrows from another entity, with the hope of repurchasing

them at a later date with a lower price, thus, attempting to profit from

an anticipated decline in the price of the securities – In its report,

Hindenburg Research admits to taking a short position in the Adani

group through US-traded bonds and non-Indian traded derivative

instruments – SEBI has submitted that short selling is a desirable 

[2024] 1 S.C.R. 175

VISHAL TIWARI v. UNION OF INDIA & ORS

and essential feature to provide liquidity and to help price correction

in over-valued stocks and hence, short selling is recognised as

a legitimate investment activity by securities market regulators in

most countries – Short selling is regulated by a circular notified

by SEBI on 20 December 2007 – Any restrictions on short selling,

may distort efficient price discovery, provide promoters unfettered

freedom to manipulate prices, and favour manipulators rather than

rational investors – Thus, the International Organisation of Securities

Commission recommends that short selling be regulated but not

prohibited with an aim to increase transparency – Measures to

regulate short selling will be considered by the Government of

India and SEBI. [Para 58]

Constitution of India – Arts. 32 – Public interest jurisprudence

under – Scope of:

Held: It was expanded by this Court to secure access to justice

and provide ordinary citizens with the opportunity to highlight

legitimate causes before this Court – It has served as a tool to

secure justice and ensure accountability on many occasions, where

ordinary citizens have approached the Court with well-researched

petitions that highlight a clear cause of action – However, petitions

that lack adequate research and rely on unverified and unrelated

material tend to, in fact, be counterproductive – This word of

caution must be kept in mind by lawyers and members of civil

society alike. [Para 68]

Constitution of India – Arts. 32 – Allegations that the Adani

group manipulated its share prices and failed to disclose

transactions with related parties – Recommendations of the

Expert Committee to strengthen regulatory framework and

secure compliance to protect investors – Elucidated. [Para

64-66]

List Of Citations and Other References

IFB Agro Industries Ltd v. SICGIL India Ltd (2023) 4

SCC 209; Prakash Gupta v. SEBI 2021 SCC OnLine

SC 485; Himanshu Kumar v. State of Chhattisgarh 2022

SCC OnLine SC 884; K.V. Rajendran v. Superintendent

of Police CBCID South Zone, Chennai [2013] 9 SCR

199: (2013) 12 SCC 480 – referred to.

176 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

List of Acts

Securities Contracts (Regulation) Rules, 1957; SEBI (Foreign

Portfolio Investments) Regulations, 2014; SEBI (Listing Obligations

and Disclosure Requirements) Regulations, 2015; SEBI Act 1992;

Depositories Act 1996; Prevention of Money Laundering Act, 2002;

Prevention of Money Laundering Maintenance of Records Rules,

2004.

List of Keywords

Judicial review; SEBI; SEBI’s regulatory domain; Transfer of

investigation; Expert Committee; Short selling; Adani group;

Hindenburg Research; Court-monitored investigation; Special

Investigation Team; CBI; Market volatility; Organized Crime

and Corruption Reporting Project; Price manipulation; Stock

market manipulation; Conflict of interest; Enforcement actions;

Quasi-judicial proceedings; Delay; Opaque structures; Delegated

legislative powers; Administrative powers; Adjudicatory powers;

Subordinate legislation; Beneficial owner; Natural person; Related

party transaction; Promoter; Promoter group; Listed company;

Third party; Commercial law; Economic policy; Parent legislation;

Third-party organizations; Credible evidence; Public domain; Good

faith; Bias; Market Wide Circuit Breakers; Circuit Filters/Price

bands on individual shares; Additional surveillance measures;

Market Wide Position Limits; Forensic financial research; Informed

decision making; Structural Reform; Enforcement Policy; Judicial

Discipline; Settlement Policy; Timelines; Surveillance and Market

Administration Measures; Doctrine of separation; Public interest

jurisprudence.

Other Case Details Including Impugned Order and

Appearances

ORIGINAL CIVIL/CRIMINAL JURISDICTION : Writ Petition (C)

No.162 of 2023.

(Under Article 32 of The Constitution of India)

With

Writ Petition (Crl.) No.39 of 2023, Writ Petition (C) No.201 of 2023

And Writ Petition (Crl.) No.57 of 2023.

[2024] 1 S.C.R. 177

VISHAL TIWARI v. UNION OF INDIA & ORS

Appearances:

Vishal Tiwari, in-person, Manohar Lal Sharma, in-person, Prashant

Bhushan, Ramesh Kumar Mishra, Ms. Neha Rathi, Ms. Kajal Giri,

Varun Thakur, Deepak Goel, Mrs. Tanuj Bagga Sharma, Dr. M.K

Ravi, Ms. Alka Goyal, Dr. Praveen Hans for M/s. Varun Thakur &

Associates, Advs. for the Petitioner.

Tushar Mehta, Solicitor General, Arvind Datar, Sr. Adv., Pratap

Venugopal, Ms. Surekha Raman, Abhishek Anand, Shreyash Kumar,

Ms. Unnimaya S. for M/s. K J John and Co, Raj Bahadur Yadav,

Kanu Agrawal, Pratap Venugopal, Pratyush Srivastav, Sandeep

Kumar Mahapatra, Rajat Nair, Pratyush Shrivastava, Arvind Kumar

Sharma, Mukesh Kumar Maroria, Ramesh Babu M. R., Ms. Manisha

Singh, Ms. Nisha Sharma, Rohan Srivastava, Ms. Ekta Choudhary,

Divyank Dutt Dwivedi, Ms. Aditi Sharma, Sanjay Kapur, Devesh

Dubey, Arjun Bhatia, Advs. for the Respondents.

Applicant-in-person,

Judgment / Order of The Supreme Court

Judgment

Dr Dhananjaya Y Chandrachud, CJI

Table of Contents*

A. Factual background and submissions............................... 3

B. The scope of judicial review over SEBI’s

regulatory domain .............................................................. 11

C. There is no apparent regulatory failure

attributable to SEBI ............................................................ 17

D. The plea to transfer the investigation from

SEBI to another agency or to an SIT ...............................23

i. The power to transfer an investigation is

exercised in extraordinary situations ...................... 23

ii. SEBI has prime facie conducted a

comprehensive investigation....................................25

* Ed Note: Pagination as per original Judgment.

178 [2024] 1 S.C.R.

DIGITAL SUPREME COURT REPORTS

iii. Reliance on the OCCRP report and the

letter by DRI is misconceived...................................28

E. Allegations of conflict of interest against

members of the Expert Committee...................................30

F. Other recommendations by the Expert Committee ........ 32

i. Volatility and short selling.........................................32

ii. Investor Awareness....................................................36

iii. Recommendations of the Expert Committee

to strengthen regulatory framework and secure

compliance to protect investors...............................39

G. Conclusion ..........................................................................43

1. A batch of writ petitions filed before this Court under Article 32 of the

Constitution in February 2023, raised concerns over the precipitate

decline in investor wealth and volatility in the share market due to

a fall in the share prices of the Adani Group of Companies.1

 The

situation was purportedly caused by a report which was published

on 24 January 2023 by an “activist short seller”, Hindenburg

Research about the financial transactions of the Adani group. The

report inter alia alleged that the Adani group manipulated its share

prices and failed to disclose transactions with related parties and

other relevant information in violation of the regulations framed by

SEBI and provisions of securities’ legislation. Significantly, the report

expressly states that Hindenburg Research took a short position in

the Adani group through US-traded bonds and non-Indian traded

derivative instruments.

A. Factual background and submissions

2. A brief overview of the petitions follows:

a. The petitioner in WP(C) No. 162 of 2023, raises concerns about

the drastic fall in the securities market, the impact on investors,

the purported lack of redressal available and the disbursement

of loans to the Adani group allegedly without due procedure.

The petitioner inter alia seeks the constitution of a committee

1 “Adani group”

[2024] 1 S.C.R. 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 noncompliance and legal violations by the Adani group promoters

despite starting an investigation in November 2020, appears

to be prima facie self-inflicted. The unprecedented rise in the

price of the Adani scrips occurred between January 2021 and

December 2022, over a period when the Adani group was

already under SEBI investigation;

h. A few members of the Expert Committee may have a conflict of

interest and there is a likelihood of bias, which was not brought

to the notice of the Court by the concerned members; and

i. SEBI has willfully delayed the submission of its status report on

the investigation into the Adani group within the time granted

by this Court.

6 “OCCRP”

7 “DRI”

8 “ED”

184 [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, Chennai13

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.

No.

Issues No. of

Investigations

1 Minimum Public Shareholding- alleged violation of Rule 19A

of Securities Contracts (Regulation) Rules, 1957

1

2 Alleged manipulation of stock prices in contravention of

existing laws

2

3 Alleged related Party Transactions (RPT)-Failure to disclose

transactions with Related Parties and other relevant

information

13

4 Other Issues:

(A) Possible violation of SEBI (Foreign Portfolio Investors)

Regulations, 2014 and 2019

(B) Possible violation of SEBI (Substantial Acquisition of

Shares and Takeovers) Regulations, 2011

(C) Trading-Pre-post Hindenburg Report

(D) Possible violation of SEBI (Prohibition of Insider Trading)

Regulations, 2015

1

1

1

5

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 marketlevel 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

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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 prerequisite 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-profitand-loss-of-individual-traders-dealing-in-equity-fando-segment_67525.html#>

204 [2024] 1 S.C.R.

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taken by SEBI. These measures include an index-based marketwide “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

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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:

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a. Structural Reform: SEBI must perform its complex functions

in a structured form by ensuring greater transparency in lawmaking, 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 

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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.

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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 nonexhaustive 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.

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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.