On 2-3-2023, the Supreme Court ordered a Six-member panel to be set up “to investigate if there was a 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 submit that report in a sealed cover to the Court. It also asked the chairperson and capital market regulator of the Securities and Board Exchange of India (‘SEBI’) to thoroughly and specifically investigate:
- if there has been a violation of the minimum public shareholding norms in public limited companies,
- if there has been a failure to disclose transactions with related parties, and
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if there was any manipulation of stock prices.
In pursuance of this, on 10-7-2023, the SEBI filed a 41-page affidavit with recommendations before the SC. The committee asked the SC to “Put in place a coherent policy on settlement of proceedings, whereby financial injury commensurate with the alleged violation may be inflicted on the party and resources need not be expended where a settlement is possible”. Further, the committee demanded prompt action so as to limit the negative impact on the Securities market. It said that “the entire matrix of Securities law is crafted with the objective of ensuring a secure investment environment and hence, immediate action is warranted under securities law. It recommended that for violations of securities laws:
a) The directions that could be issued are in the nature of preventive, regulatory, remedial, and probative.
b) The proceedings could result in penalties or affect the eligibility of entities to act as an intermediary in the securities market.
Also, the SEBI seemed to be defending its SEBI (Foreign Portfolio Investors) Regulations, 2019 and Guidelines, wherein SEBI sought to rationalize and simplify the Foreign Portfolio Regime(‘FPR’). SEBI submitted that alternation and novation in the rules didn’t make it hard to identify ultimate beneficiaries of offshore funds.
[Vishal Tiwari v. Union of India, 2023 SCC OnLine SC 215, decided on 02-03-2023]
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