2024 Supreme(SC) 9

SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI., J.B. PARDIWALA, MANOJ MISRA, JJ.
Vishal Tiwari – Petitioner
Versus
Union of India and Others – Respondents
Writ Petition (C) Nos. 162, 201 of 2023, Writ Petition (Crl) Nos. 39, 57 of 2023
Decided On : 03-01-2024

IMPORTANT POINTS
(1) Power of Supreme Court to enter regulatory domain of SEBI in framing delegated legislation is limited – Court cannot examine correctness, suitability, or appropriateness of policy, particularly when it is framed by a specialized regulatory agency in collaboration with experts.
(2) Power to transfer an investigation to investigating agencies such as CBI must be invoked only in rare and exceptional cases – No person can insist that offence be investigated by a specific agency since plea can only be that offence be investigated properly.

Headnote:

(A) Judicial Review – Scope and ambit – Power of Supreme Court to enter regulatory domain of SEBI in framing delegated legislation is limited – When technical questions arise particularly in financial or economic realm; experts with domain knowledge in field have expressed their views; and such views are duly considered by expert regulator in designing policies and implementing them in exercise of its power to frame subordinate legislation, court ought not to substitute its own view by supplanting role of expert – Courts do not act as appellate authorities over policies framed by statutory regulator and may interfere only when it is found that actions are arbitrary or violative of constitutional or statutory mandates – Court cannot examine correctness, suitability, or appropriateness of policy, particularly when it is framed by a specialized regulatory agency in collaboration with experts – Court cannot interfere merely because in its opinion a better alternative is available – No valid grounds have been raised for this Court to direct SEBI to revoke its amendments to FPI Regulations and LODR Regulations which were made in exercise of its delegated legislative power. (Paras 15, 17 and 67)

(B) Constitution of India – Articles 32 and 142 – Transfer of investigation from SEBI to CBI – Supreme Court does have power under Article 32 and Article 142 of Constitution to transfer investigation from authorized agency to CBI or constitute an SIT – However, such powers must be exercised sparingly and in extraordinary circumstances – Unless authority statutorily entrusted with power to investigate portrays a glaring, willful and deliberate inaction in carrying out investigation court will ordinarily not supplant authority which has been vested with power to investigate – Such powers must not be exercised by court in absence of cogent justification indicative of a likely failure of justice in absence of exercise of power to transfer – Power to transfer an investigation to investigating agencies such as CBI must be invoked only in rare and exceptional cases – No person can insist that offence be investigated by a specific agency since plea can only be that offence be investigated properly – Petitioner must place on record strong evidence indicating that investigating agency has portrayed inadequacy in investigation or prima facie appears to be biased. (Paras 32 and 33)

(C) Securities Contracts (Regulation) Rules 1957 – Rule 19A – Violation of SEBI Regulations – Facts of this case do not warrant transfer of investigation from SEBI – In an appropriate case, Supreme Court does have power to transfer an investigation being carried out by authorized agency to an SIT or CBI – Such a power is exercised in extraordinary circumstances when competent authority portrays a glaring, willful and deliberate inaction in carrying out investigation – Threshold for transfer of investigation has not been demonstrated to exist – Allegations of conflict of interest against members of Expert Committee are unsubstantiated and are rejected – SEBI and investigative agencies of Union Government shall probe into whether loss suffered by Indian investors due to conduct of Hindenburg Research and any other entities in taking short positions involved any infraction of law and if so, suitable action shall be taken. (Paras 67)

Facts of the case:

A batch of writ petitions filed before this Court under Article 32 of Constitution in February 2023, raised concerns over precipitate decline in investor wealth and volatility in share market due to a fall in share prices of Adani Group of Companies. Situation was purportedly caused by a report which was published on 24 January 2023 by an “activist short seller” Hindenburg Research about financial transactions of Adani group. Report inter-alia alleged that Adani group manipulated its share prices and failed to disclose transactions with related parties and other relevant information in violation of regulations framed by SEBI and provisions of securities’ legislation. Significantly, report expressly states that Hindenburg Research took a short position in Adani group through US-traded bonds and non-Indian traded derivative instruments.

Findings of Court:

Public interest jurisprudence under Article 32 of Constitution was expanded by this Court to secure access to justice and provide ordinary citizens with 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.

Result : Petitions disposed of with observations.