Editorial: The everywhere court

They say the road to hell is paved with good intentions. Now, however well-intentioned the Supreme Court decision to entertain PILs on the on-going brouhaha over the Adani group, the apex court ought to have avoided doing so. For there was always a genuine fear that it may send a wrong signal to domestic and foreign investors in the Indian share markets that our regulatory mechanisms are ill-equipped to handle interventions by dubious foreign players. The SC also stood in danger of undermining the Securities and Exchange Board of India which is mandated to protect investors’ interests and to generally regulate the markets. Despite the run on the Adani shares following the report of the US-based short-seller, Hindenburg Research, no hanky-panky had come to light as far as the operations of the Indian share markets were concerned. The shares of the Adani companies dropped precipitously following the publication of the Hindenburg report. There was nothing surprising in the market’s reaction after such an adverse report into the financials of the Adani conglomerate. Markets are sensitive to stock-specific information. Once the Adani group is able to convincingly address the charge of it being over-leveraged, it is more than likely that investor confidence in the Adani shares will be restored — whether the share prices scale the pre-Hindenburg-report highs depends entirely on the market sentiment. Neither the apex court nor, for that matter, any other domestic or foreign authority can hold a bottom under the Adani shares — nor, for that matter, can they determine how high they ought to go.

Particularly absurd was the relief sought under one PIL: Declare short-selling illegal and probe the antecedents of the Hindenburg Research promoter, one Nathan Anderson, for “artificial crashing” of the Adani shares. Even the other PIL on the face of it was curious, to say the least. It sought a probe into the contents of the Hindenburg Report. The PILs needed to be dismissed at the threshold itself, probably with costs for wasting the judges’ time. Admittedly, the three-member bench headed by Chief Justice D Y Chandrachud was mindful of the unusual nature of the pleas being entertained, remarking that the court wasn’t “planning a witch-hunt” and would tread with great caution, as its observations could affect market sentiment. That the market regulator as also the RBI were already suo moto investigating the Adani conglomerates’ financials was a public secret. It was the least they could do to boost investor confidence.

The apex court hearing the PILs even at the preliminary stage would imply a lack of trust in the SEBI and the RBI. This smacks of a certain judicial arrogance which indicates that the apex court is not only the last court of appeal but even the first. CJI Chandrachud left none in doubt that the PIL movers were in the right forum: “We have indicated to the Solicitor General concerns with regard to ensuring that the regulatory mechanisms are duly strengthened so as to ensure Indian investors are protected against certain volatility, the kind of which was witnessed in the recent two weeks. That in turn would require due assessment of the existing regulatory framework and the need for strengthening regulatory framework in the interest of the securities market.” Aware that the court stood in clear danger of stepping on the toes of the market regulator, CJI Chandrachud was also at pains to insist, “This is just an open dialogue… they have brought an issue… what is of concern is how do we ensure the protection of Indian investors? Probably SEBI is also doing its investigation.” SEBI should have been spared such condescension. There was no room for speculation whether the market regulator off its own bat would undertake investigation into the turmoil on the bourses. It did. And, what is more, this was widely reported in news reports. However, having admitted the PILs and having expressed concern at the bloodbath in the Adani shares, it is on the cards that the two PILs would be disposed of on the next hearing scheduled for today. Even the loud talk of appointing an amicus curiae to assist the court in the matter was uncalled for. The court was in danger of putting the cart before the horse. To put it bluntly, it lacked locus to entertain the PILs in question. The right thing would have been to wait for the market regulator’s probe to run its course and then the apex court ought to have heard any complaint, were some vital matters stemming from the short-selling heist on the bourses to remain unaddressed.