The Supreme Court on Friday observed that there is a need for a robust regulatory framework to protect the interest of the Indian investors and if the Centre agrees, a committee may be set up to suggest regulatory improvements.
The Supreme Court said this while hearing a plea seeking a direction to set up a committee monitored by a retired apex court judge to investigate the Hindenburg Research report, which resulted in crashing of Adani Group company share prices and caused massive losses to the investors.
During the hearing, the top court noted that the point that really “bothers us is how do we protect the interest of the Indian investors”.
A bench headed by Chief Justice of India, D.Y. Chandrachud, asked market regulator Sebi, represented by Solicitor General Tushar Mehta, to detail in its response how a strong framework could be brought to prevent instances like these from happening.
The court also suggested a committee having experts from the securities area, a former judge, or an international financial law expert to look into the matter. It added that Sebi could have a wider role and then it could embark on analysing how it can be improved since the capital flow will become more seamless.
The bench, also comprising justices P.S. Narasimha and J.B. Pardiwala, said, “It is said the total loss by Indian investors is several lakh crores. How do we ensure they are protected? How do we ensure that this does not happen in the future?”
The bench stressed that in future, what should be the role of Sebi?
During the hearing, the bench recommended the expert committee that could confer wider powers to Sebi, and also emphasised that it does not want to cast any doubt on Sebi or the regulatory agencies.
Mehta assured the court that the market regulator is closely monitoring the situation.
The bench added that after having inputs, the government can take a call as to whether some modification is required of the statute, or whether a modification for the regulatory framework is needed.
Mehta contended that the epicentre of the issue is beyond India’s jurisdiction and it would be little premature for him to immediately answer. He stressed that some regulations deal with the concerns and “we are also concerned”.
The bench pointed out that beyond a certain stage, it would not enter into the policy domain, but there should be a mechanism to ensure that such a thing doesn’t happen in the future.
Citing the current scenario of seamless capital flow, the bench queried Mehta, “How do you ensure that investors are protected? Everybody is an investor now… Small, medium, or big,” as it recommended that Mehta could consult experts from the Ministry of Finance.
The bench also emphasised that it is conscious that if it says something, it may affect the stock market, which largely runs on sentiments, therefore the court has to be cautious.
The bench noted that Sebi’s response can contain the relevant causal factors, and also the need for putting into place a robust mechanism to protect the investors.
It added that if the Centre is ready to accept the suggestion, the necessary recommendation of the committee may be made and a brief note on legal and factual matrix may be filed by the Solicitor General by Monday.
Mehta emphasised that Sebi has closely monitored the situation and continues to do so, in view of the Hindenburg report.
After hearing the arguments, the apex court fixed the next hearing on Monday, asking Sebi to come back with a response on the regulatory regime and the steps taken in the wake of the Hindenburg report controversy.
The top court was hearing two separate petitions filed by advocates Vishal Tiwari and M.L. Sharma in connection with the Hindenburg controversy.
(The story has been published via a syndicated feed with a modified headline.)
