Adani-Hindenburg matter: Fresh plea filed in SC for contempt case against SEBI

Adani-Hindenburg case: A fresh application has been filed in the Supreme Court seeking contempt proceedings against the Securities and Exchange Board of India (Sebi) for not completing its probe into the Adani-Hindenburg matter within the timeline given by the court. PIL petitioner Vishal Tiwari in his plea said that despite the deadline given to the SEBI it has failed to comply with the direction of the court and has not submitted the final conclusion/report as directed by the court.
The application also seeks inquiry into allegations by the Organised Crime and Corruption Reporting Project (OCCRP) against the Adani Group.

According to the Supreme Court website, the matter is tentatively listed for November 24.  

“To initiated contempt proceedings against SEBI for the violation of timeline framed by this Court in the order dated 17-5-2023 in Writ Petition civil 162/2023 and other connected matters for completing the investigation and submit its report,” the fresh application filed by petitioner Vishal Tiwari. The said order had granted an extension till August 14 to SEBI to submit its report. It was also said that SEBI shall place on the record an updated status report regarding the course of the investigation. It was also for directing SEBI to submit an explanation for not complying the timeline and submit the report without any delay.

The Supreme Court had set August 14 as the deadline for Sebi to submit the report after the capital market regulator requested it to complete the investigation and submit the report.

Sebi then asked for 14 more days to file the status report. As per the last report submitted by Sebi, the regulator said it has wrapped up the investigation in 22 cases of the 24 cases.

The Sebi, in its report, had said that it has completed the probe in all but two allegations against the Adani group and is still awaiting information from five tax havens on actual owners behind foreign investors investing in the conglomerate.

Without divulging the outcome of its investigations, the Sebi had given a detailed breakdown of the steps taken by it during its probe, including related party transactions.

"Sebi shall take appropriate action based on the outcome of the investigations in accordance with law," the regulator had said.

The fresh application said that Sebi has raised objection on the suggestion of the necessary timeline. The Sebi objection is contrary to the present need of a strong and efficient regulatory mechanism because timeless investigations lead to the disappearance of evidence and vital information against any entity, which is under investigation and it also reduces the confidence of the investors in the market, Tiwari said in his plea.

“The inordinate delay in investigation impacts upon investigation and its also raises suspicion in the minds of investors and refrain them from investing in future,” the plea noted.

The application also mentioned the report by OCCRP. “To further direct the Expert committee constituted to conduct a detailed investigation in respect to the report and Allegations of Stock manipulations and Secret Investments published by OCCRP,” the plea noted. 

It also sought direction to the Government and Sebi for the Implementation of the Suggestions and measures given by the Expert Committee.

Hindenburg report

Adani Group stocks were hit hard after US-based Hindenburg Research made a barrage of allegations, including fraudulent transactions and share-price manipulation, against the port-to-energy conglomerate.

The report said four of Adani’s listed companies are on the brink of the delisting threshold due to high promoter ownership. It added that five companies in the group (all but Adani Ports and Adani Wilmar) have current ratios below 1.0, suggesting a heightened short-term liquidity risk.

The report said that for many Adani listed companies, a large portion of their “public” shareholders are funds based in the opaque jurisdiction of Mauritius. “Importantly, funds identified in this section, which we believe should be classified as “promoter” (insider) entities, hold enough shares of Adani listed companies to put four of them well over the 75% threshold, triggering delisting.

Hindenburg Research said the Adani Group companies are intricately and distinctly linked and dependent upon one another. None of the listed entities are isolated from the performance, or failure, of the other group companies. “We believe it could take only one serious liquidity event at a single entity to trigger a negative cascade of events at other group entities which could affect the entire Adani Group.”

OCCRP report

In September, the Organised Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists, alleged "opaque" Mauritius funds were used to funnel substantial investments into the publicly traded stocks of the Adani Group. In the process, it has masked the involvement of business partners associated with the Adani family.

George Soros-backed OCCRP, after reviewing of files from multiple tax havens and internal Adani Group emails, said its probe has found at least two cases where the investors bought and sold Adani stock through such offshore structures.

A day after OCCRP's claims, another report said that the offshore shell companies, mentioned by the Financial Times, are indeed linked to the Indian conglomerate. It was reported that offshore corporate service provider Trident Trust, which is part of the Pandora Papers investigation, has suggested two offshore shell companies registered in British Virgin Islands (BVI), named by Financial Times, are linked to the Adani Group. 

According to Financial Times, the two individuals behind these firms were associates of Adani Group chairperson Gautam Adani’s brother Vinod Adani. These are United Arab Emirates national Nasser Ali Shaban Ahli and Taiwan national Chang Chung-Ling.  

(With agency inputs)

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