The order of the Supreme Court rejecting the plea to institute a court-monitored special investigation into allegations of accounting fraud and stock manipulation by the Indian conglomerate Adani Group, published in a research report by US short-seller Hindenburg Research in January last year, is technically and legally sound but fails to address some questions.
The court has rightly directed the Securities and Exchange Board of India (Sebi), the stock market regulator, to complete in three months its probe into the allegations. It is only logical that an agency with statutory powers that closely analyzes the market, intervenes when there are unusual movements and penalises foul players is not stopped midway for the probe to be handed over to another agency. The court was right when it said it cannot enter into the domain of the regulatory regime and that the Hindenburg report cannot become the basis of a separate probe. The court has also pointed out that Sebi has completed investigation in 22 of the 24 points under its scrutiny.
In essence, the court has put its faith back in the institutional mechanism to address issues that crop up in areas where they have jurisdiction instead of transferring the entire burden of righting every wrong to itself.
The disturbing fact is that the Supreme Court refused to question the way Sebi has been investigating cases against Adani Group for the last 10 years. One of the petitioners told the court that the regulator concealed an alert to it by another government agency, the Directorate of Revenue Intelligence (DRI), in 2014. It was about diversion of funds and stock market manipulation by the Adani Group.
The total silence of the Enforcement Directorate which is busy conducting fishing expeditions in Opposition-ruled states also did not disturb the apex court. In short, while trusting the institutions, the court did not take into account their record of dealing with politically powerful business groups. Having given Sebi the freedom to go ahead, the court will have to revisit the case and see how the Sebi report squares with that of Hindenburg.
Institutional credibility is paramount in a democracy, whether it is market regulator or the judiciary.
