The Supreme Court's intervention in the Hindernberg–Adani report and election commissioner appointment matters have been well-received as necessary to counterbalance the Union government and make it accountable. However, both judgments raise questions of adequacy and propriety, respectively.
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TWO recent decisions of the Supreme Court, both delivered on March 2, have won plaudits from the Opposition and civil society. The first was the appointment of a committee by the court to report on how the citizen-investor can be protected from manipulated market volatility; the second is the court-directed framework for appointing election commissioners.
The display of authoritarianism in the approach and attitude of Prime Minister Narendra Modi's Bharatiya Janata Party-led National Democratic Alliance government has been both nonchalant and impudent because it is based on its 300 + plus strength in the Lok Sabha and the increasing numerical strength of the ruling coalition in the Rajya Sabha. This does not leave much room for the opposition parties in the Parliament to check the executive. There is an expectation that the judiciary should step in and check the unruly ways of the Modi government.
“Could the Supreme Court have asked SEBI to submit a report on the Adani Group companies in the wake of the Hindenburg report and the beating that the Adani companies' shares got, which involved the loss of investments of thousands of investors?
The Chief Justice of India, Dr. D.Y. Chandrachud seems to have fulfilled the expectation of both the political opposition and civil society in these two instances. The court's intervention has raised hopes that the Modi government will be made answerable for its acts of omission and commission.
It is, however, necessary to look at the court's intervention a little closely to assess whether it is adequate in the case of the committee appointed to look into market volatility and the safety of people's investments in the stock market, and whether it is right for the court to decide how election commissioners are to be appointed. These involve legal and constitutional aspects.
In the first case, the issue came up before the court because of the sharp fall in the share price of the multinational conglomerate, Adani group of companies, following the explosive allegations made by investment-research firm Hindenburg Research LLC on its business practices — that the Adani conglomerate violated laws by propping up shell companies to transfer funds and hype their market value through market transactions done in Mauritius.
The court should have directly addressed the issues arising out of the Hindenburg report on the Adani Group. Instead, it came to the issue in a roundabout fashion by talking about protecting the interests of investors in cases of market manipulation.
The court expects the constituted committee to suggest safeguards against manipulated hike and fall in share prices of companies. But it would appear that this is a generalised approach, and it skirts around the Adani question. Why did the court feel that it is not right to address the Adani issue directly?
Perhaps the court felt that it cannot take cognisance of the report of a New York-based short-seller whose motive is to make profits, and the manipulation had happened in shell companies operating in Mauritius. Had the court ordered an inquiry into the charge of the Adani Group manipulating the markets to leverage the share value of their companies, it would have been interpreted that the court is stepping into the turf of the Securities and Exchange Board of India (SEBI).
The court, it can be said, took the most prudent step under the circumstances. The Union government had indeed tried to dissuade the court from going into the issue of market volatility and the losses suffered by investors. It also tried to suggest to the court names of those who should be members of the inquiry committee. But Chief Justice Dr. Chandrachud fended off the government ploy.
But it does seem that the court should have taken up the Adani question suo motu because it could have brought to light how companies operate to raise funds from the markets, and what do the different instruments such as Initial Public Offering (IPO) and Further Public Offering (FPO) availed by the Adani Group mean. As the Supreme Court is a constitutional court, it would not have been appropriate for the highest court to probe the Adani Group's affairs.
“The government following the ruling of the court as to how elections commissioners are to be appointed raises questions about who should be doing what in a constitutional framework based on the three distinct wings of the legislature, the executive and the judiciary.
Could the Supreme Court have asked SEBI to submit a report on the Adani Group companies in the wake of the Hindenburg report and the beating that the Adani companies' shares got, which involved the loss of investments of thousands of investors? Could it have asked a lower court or the committee it had constituted to probe the Adani Group?
On the other hand, the court laying down the method for choosing an election commissioner comprising the Prime Minister, the Leader of Opposition in the Lok Sabha or of the largest party in opposition, and the Chief Justice of India raises more questions than it answers. Is there a recommendation to the Parliament to make a suitable law to uphold the independence of the Election Commission, or is it a direction to be followed?
Asking the Parliament to make a suitable law passes muster in a sense, but it is for the Parliament to decide whether it would make such a law. Till then, the government following the ruling of the court as to how elections commissioners are to be appointed raises questions about who should be doing what in a constitutional framework based on the three distinct wings of the legislature, the executive and the judiciary.
The other key issue is whether the Supreme Court can declare a ruling of the Election Commission invalid? Even as the laws passed by the Parliament and decisions taken by the government come under the ambit of judicial review, the rulings of the Election Commission would logically also be amenable to the same. And they will relate to particular decisions and rulings.
The Supreme Court should not be saying how an election commissioner is to be appointed, but it can say that a particular decision of the Election Commission violates the constitutional principle of free and fair election, a line of argument adopted by Justice K.M. Joseph in his majority judgment.
The general mood seems to be that this is not the time to scrutinise the merits of these two decisions of the Supreme Court because they provide a measure of relief from the arbitrary decisions of an executive that enjoys untrammelled power because of its parliamentary majority.