'No Good Samaritan': Harish Salve demands probe against Hindenburg, says it made money

Adani-Hindenburg issue: Senior lawyer Harish Salve has demanded a detailed probe against the US-based short-seller Hindenburg Research, whose damaging report on the Adani Group caused massive selloffs in company stocks. Salve said Hindenburg 'is no Good Samaritan' and that the committee should find all those who have made huge money by shorting shares.

The Hindenburg report had a massive impact on Adani as most of its company shares recorded a sharp plunge, in some cases losing 70-80 per cent in market capitalisation. On Friday, the Supreme Court set up a six member-committee to probe the routs in Adani stocks following the Hindenburg report. The panel will also look into the existing frameworks to see how investors can be protected from volatility and the factors that caused the volatility.    

Also read: Adani-Hindenburg row triggers audit quality concerns; study finds firms reluctant to share auditor details
 

Salve has said that there is a completely different dimension to this whole story. He said Hindenburg is no Good Samaritan who has exposed wrongdoing - "they have timed the report, they have dropped the report. They do it for shorting".

The senior lawyer said that the committee must find out all those "who have made tonnes of money at the cost of the middle-class investor by shorting shares".

Hindenburg in its report has disclosed that it has taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments.

Hindenburg is a short-seller, which sells (borrowed) shares at current prices and buys them back when stocks decline. In Adani's case, many say that Hindenburg took a short position and published the report. And when stocks plunged, Hindenburg made money.  

Salve said that regulators must treat it as market manipulation "and get them to disgorge and ban them from trading". "We must set an example in our market - that first of all if there is a report, it must go to SEBI, it must go to the Serious Fraud Office, it must go to the Ministry of Corporate Affairs - they will investigate and deal with such matters," Salve told NDTV.

"But if you are going to use reports like this to attack companies, the SEBI will not sit quiet. They will go after the people who are exploiting market volatility, who have moneybags, exploiting volatility, hitting the middle-class investor," the lawyer said.

Salve said the country must have some institutional mechanism to protect investors from another Hindenburg report. He said India is new at this game and is growing its capital markets. "The middle-class investor is petrified that every time he lists in a company, tomorrow if there is another Hindenburg report - by the time it is proved to be false, it is too late, your shares have tanked anyway," he said.

"We must have some institutional mechanism to say that the people who are making money off this misfortune of the middle-class shareholders are held to account," Salve added. The lawyer welcomed the SC's move to set up the committee and said the Adani-Hindenburg incident involves complex financial matters that only subject matter experts can handle.

The six-member committee includes former Supreme Court judge Justice AM Sapre, former SBI chairman Prakash Bhatt, tech entrepreneur Nandan Nilekani, noted banker KV Kamath,  prominent lawyer Somasekhar Sundaresan, and retired Bombay High Court judge Justice JP Devadhar. 

WATCH: 'They are private matters': Antony Blinken on Hindenburg report on Adani