On June 7, 2024, lawyer Vishal Tiwari filed a plea in the Supreme Court of India. The plea called for a detailed report and an investigation from both the Securities and Exchange Board of India (SEBI) and the Central government regarding the share market crash and loss to investors after the Lok Sabha election results on June 4.The plea is connected to the ongoing Adani-Hindenburg case, which has been a focal point of scrutiny for market regulations and corporate governance in India.

The June 4 Stock Market Crash

Firms in banks, defense and infrastructure related public sector companies’ stocks as well as Adani and Ambani group stocks were among the worst hit list.

The stock market crash on June 4, 2024, followed the announcement of the Lok Sabha election results. The poll results shocked markets by wiping off Rs 32 lakh crore in a single day. The results were uncertain; while the BJP-led National Democratic Alliance (NDA) secured a majority, the BJP itself fell short of a majority by over 32 seats. This deviation from the exit polls, which had predicted a comprehensive win for the NDA, led to significant market turmoil.

As an aftermath of this, the Indian stocks suffered their worst intraday fall since March 2020 on June 4. NSE Nifty 50 index closed down 5.93 percent at 21,884.5 points, and the S&P BSE Sensex fell 5.74 percent to 72,079.05.

On June 4, the share market had the worst intraday fall since March 2020,NSE Nifty 50 index plummeted by 5.93% to 21,884.5 points, and the S&P BSE Sensex dropped by 5.74% to 72,079.05. After announcements of exit poll results the indexes took a drop by 8.5 percent earlier in the day, after hitting record highs on June 3 after exit polls predicted a comprehensive win for the NDA. The share market went high, but when the actual results were announced, it resulted in a crash, raising questions about the regulatory authority and its mechanism, the plea added.

Link to the Adani-Hindenburg Case

On January 3, the Supreme Court instructed SEBI and other agencies to investigate if the losses sustained by Indian investors due to the actions of Hindenburg Research and other short-selling entities amounted to any legal infractions, and if so, to take appropriate action. The application raises concerns about SEBI’s lack of transparency in complying with the court order and submitting related investigation records. “The public and investors who suffered losses have the right to know whether the Indian stock market crashed after the Hindenburg report due to irregularities and violations by any corporate group, causing substantial losses to public money,” it reads. “The results of SEBI’s investigations should be placed on record to prevent things from remaining hidden and buried.”

Shorten with AIThe application urged SEBI to be with the court’s direction by submitting the investigation report in the Adani-Hindenburg matter. Citing media reports, Tiwari highlighted a significant market crash, with losses amounting to 20 lakh crores, following the 2024 Lok Sabha poll results. The application asked the court to direct the Union government and SEBI to submit a status report on the January 3 directions for considering the expert committee’s suggestions in the PIL related to the Hindenburg report on the Adani group of companies. The court had issued multiple directions on the plea by Tiwari and others.

Tiwari’s plea emphasizes the need for transparency and accountability, drawing parallels to the Adani-Hindenburg case, where Hindenburg Research accused the Adani Group of market manipulation and fraud, causing significant market volatility and investor losses. The Supreme Court had previously directed SEBI to investigate these allegations thoroughly and implement reforms suggested by an expert committee to protect investors. However, Tiwari argues that SEBI has not provided clear updates on the implementation of these reforms or the status of their investigations. The plea highlights a lack of communication to both the Supreme Court and the public regarding the completion of the Adani-Hindenburg investigation, raising concerns about regulatory measures’ efficacy and investor protection.

The application has been filed as part of the Adani-Hindenburg writ petition. The plea states that the case is pending, but the Supreme Court’s website and the June 3 judgment indicated the case was disposed of. The plea asks the court to direct SEBI to file its investigation report on the Adani-Hindenburg issue and a status report on the implementation of the expert committee’s directions. It alleges that SEBI has not confirmed the implementation of the suggested reforms and has not informed the Supreme Court or the public about the completion of the investigation.

The plea states, “Whether SEBI has completed the pending investigations in compliance with the court order and submitted any record before the Hon. Court is not evident. SEBI has not apprised the Hon. Court or public visibly in any manner.” The plea noted that the public has the right to know what transpired. The Supreme Court on January 3 rejected the demand to transfer the probe into allegations of securities law violations by Adani group companies to a special investigation team, providing relief to the conglomerate almost a year after the Hindenburg Research report. The court also asked SEBI to complete the remaining two of the 24 probes in three months.

Call for Transparency and Accountability

The plea filed by Tiwari is not just a legal document but a call for greater transparency and accountability from regulatory authorities. It asserts that the public and investors have a right to know whether the market crash was a result of regulatory failures or corporate misconduct. By linking the recent market crash to the Adani-Hindenburg case, the plea highlights ongoing concerns about market manipulation and the adequacy of SEBI’s responses to such issues.

In the aftermath of the market crash, a press conference, Congress leader Rahul Gandhi claimed on June 6, has called for thorough investigations into potential irregularities. Gandhi has demanded a probe by the Joint Parliamentary Committee, alleging that Prime Minister Narendra Modi and Home Minister Amit Shah were “directly involved” in the country’s “biggest stock market scam” in which retail investors lost Rs 30 lakh crore, and demanded a probe by the Joint Parliamentary Committee into what he described as a “criminal act”. These allegations add a political dimension to the issue, further intensifying the need for a transparent investigation and accountability.

Rahul Gandhi also questioned the timing of Prime Minister Narendra Modi, Amit Shah’s and Finance Minister Nirmala Sitaraman advice to Indian investors ahead of the Lok Sabha election verdict.

Conclusion

The plea filed addresses the issue of market regulation, transparent to the investors and their protection India. By demanding a detailed report and investigation from the Central government and SEBI on the market crash and the Adani-Hindenburg case, the place highlights the requirement for robust regulatory mechanisms and accountability. The volatility seen recently in the market, coupled with previous cases of manipulation seen in the market, highlights challenges for a fair and transparent environment to investors. This plea could give significant implications for the future of market regulation and regain investor confidence.