Adani-Hindenburg:- SC Gives Sebi 3-Month Extension To Submit Report

The Supreme Court has recently provided the Indian Securities and Exchange Board (SEBI) with a six-month extension to submit its findings on the investigation into accusations of stock price manipulation involving the Adani Group.

On Wednesday, the Supreme Court issued this ruling, giving SEBI until August 14 to complete its inquiry into the “brazen” market manipulation claims. The hearing on SEBI’s request for a six-month extension, which aimed to conclude the investigation based on the Hindenburg Research report, was postponed by the Supreme Court on Monday. The court highlighted that it cannot provide any further extension as SEBI has already been given five months to conduct the investigation.

Chief Justice DY Chandrachud presided over the bench and ordered SEBI to provide an updated progress report on the inquiry. As per the Supreme Court’s decision, SEBI is required to produce its final report by August 14. The court also instructed SEBI to grant relevant parties access to its report submitted to Justice A M Sapre’s committee and to provide an updated status report on the ongoing probe.

In recent weeks, the Securities and Exchange Board of India (SEBI), the regulatory body overseeing the securities market in the country, has submitted a formal plea to the Supreme Court (SC) to obtain a six-month extension for conducting an extensive and meticulous investigation into the subject matter at hand. SEBI cited the complexity of the issue, estimating that it would require 15 months to complete the inquiry.

However, earlier this week, the court rejected the request for the extended timeline, emphasizing the need for SEBI to act swiftly and efficiently. The judge stated that SEBI would be given three additional months to complete its investigation, as an indefinite and excessively lengthy duration could not be permitted.

In March, the panel led by the Chief Justice of India instructed SEBI to examine whether the conglomerate had failed to disclose transactions with affiliated parties and engaged in stock price manipulation. At that time, a two-month deadline was set for concluding the probe. Since then, the conglomerate has faced increased scrutiny following concerns raised by Hindenburg Research, a prominent US short-seller, regarding the group’s high debt levels and the utilization of tax havens.

The report prepared by the committee led by Justice AM Sapre has been submitted to the panel, which also comprises Justices PS Narasimha and JB Pardiwala. Additionally, the panel has directed that the concerned parties be granted access to the report to aid the court in its investigation.

Notwithstanding numerous allegations in recent years, SEBI has allegedly taken no action, as stated by lawyer Prashant Bhushan. Bhushan asserts that there should be cause for concern if the shares of Adani’s companies experience an abnormal surge within a short span of one year.

Bhushan has urged the court to review the proceedings of the Parliamentary question-and-answer session in which the government claimed that SEBI was examining specific Adani entities. In response to the opposition’s tweet, the finance ministry affirmed that the statement made by the ruling party in the Lok Sabha on July 19, 2021, still stands.

The Finance Ministry issued a tweet affirming the government’s support for its response in Lok Sabha on July 19, 2021, regarding Question No. 72. The government’s reply was based on a thorough investigation and inputs from relevant authorities. Jairam Ramesh from the Congress party accused the government of misleading Parliament and suggested that SEBI (Securities and Exchange Board of India) was not taking appropriate action. In response, the government clarified that SEBI is currently examining whether certain Adani group companies are adhering to the regulator’s guidelines.

Furthermore, SEBI informed the Supreme Court that its previous inquiry focused on the matter of Global Depository Receipts (GDRs) issued by 51 Indian companies listed on the stock exchange. SEBI clarified that none of the Adani Group companies listed on the stock exchange was included among the 51 entities under scrutiny. In its testimony before the Supreme Court, the market regulator emphasized that the allegations against the Adani Group are “factually unfounded” and that it has been investigating the matter since 2016.

As part of the Multilateral Memorandum of Understanding (MoU) with the International Organisation of Securities Commissions (IOSCO), the Securities and Exchange Board of India (SEBI) presented evidence to the Supreme Court, stating that it has already engaged with eleven foreign regulatory bodies in relation to an investigation regarding the Minimum Public Shareholding (MPS) regulations. These regulatory bodies have received numerous requests for information. SEBI informed the court that the initial contact with foreign regulators was initiated on October 6, 2020. 

Following the release of the Hindenburg report, which resulted in a significant decline of over USD 140 billion in the Adani Group’s market value, the highest court has instructed the capital market regulator SEBI to investigate potential violations of securities laws by the Adani Group.

On March 2, the Supreme Court formed an expert committee to address the concerns raised in the Hindenburg Research study regarding the Adani Group of Companies. The committee consists of six members, headed by Justice AM Sapre, a former Supreme Court member. During this time, the Supreme Court was considering petitions related to the Hindenburg report, including the establishment of a commission to discuss regulatory measures for safeguarding investors’ interests.

The conglomerate faced allegations of stock manipulation and fraud as outlined in the Hindenburg investigation conducted on January 24. The Adani Group responded by labelling Hindenburg as “an unethical short seller” and denounced the New York-based organization’s research as “a complete fabrication.” Consequently, the subsequent drop in share prices favoured short sellers operating in the securities market.

Published By Naveenika Chauhan