25 Aug 2023 12:39 PM GMT
The Securities and Exchange Board of India (SEBI) has informed the Supreme Court that out of the 24 investigations in the Adani-Hindenburg matter, 22 have attained finality, while the remaining two are currently underway. In an affidavit, the market regulator has stated – “Out of the 24 investigations, 22 are final in nature and two are interim in nature. As on date, the said...
The Securities and Exchange Board of India (SEBI) has informed the Supreme Court that out of the 24 investigations in the Adani-Hindenburg matter, 22 have attained finality, while the remaining two are currently underway. In an affidavit, the market regulator has stated –
“Out of the 24 investigations, 22 are final in nature and two are interim in nature. As on date, the said 22 final investigation reports and one interim investigation report are approved by the competent authority in accordance with the extant practice and procedures of SEBI. In the remaining one matter, interim findings are approved by the competent authority.”
The status report discloses that SEBI’s probe into alleged non-compliance with minimum public shareholding (MPS) requirements specified in Rule 19A of the Securities Contracts (Regulation) Rules, 1957 has not been completed yet. By way of an explanation, the market regulator has said that the investigation covered 13 overseas entities, including 12 foreign portfolio investment (FPI) and one foreign entity, who were classified as public shareholders of the Adani group. Since many of the entities linked to these foreign investors are located in tax haven jurisdictions, establishing the economic interest shareholders of the 12 FPIs remains a challenge. However, the affidavit reveals, efforts are still being made to gather details from five foreign jurisdictions pertaining to the economic interest shareholders of the FPIs to help SEBI in updating its interim report.
The investigation has not been completed with respect to assessing the trading patterns before and after the release of the controversial Hindenburg report. Information from external agencies is ‘actively pursued and awaited’, the affidavit states. The objective is to ascertain whether the short position of certain entities in the Adani group of companies was unusual around the time of the release of this report.
With respect to both interim investigation reports, the securities board has submitted that information has been sought from external agencies or entities. SEBI has told the Supreme Court that on receiving the requisite information, SEBI will evaluate it and determine the further course of action, if any.
Petitioner and advocate Vishal Tiwari is among the public interest litigants who approached the top court for a court-monitored probe into the allegations against the Adani group of companies. In response to the status report which has now been filed by SEBI, Tiwari has alleged non-compliance with the court’s order, claiming that the securities board failed to follow the timeline determined by a bench headed by Chief Justice DY Chandrachud, and even after the expiry of the deadline, it has only furnished information about the investigations, without providing elaborate details about each investigation, especially their result.
In January this year, United States-based Hindenburg published its report accusing the Adani group of widespread manipulations and malpractices to inflate its stock prices. Adani Group refuted the allegations by publishing a 413-page reply.
In March, the court constituted a committee to be headed by former Supreme Court judge AM Sapre and appointed former bankers OP Bhat and KV Kamath, Infosys co-founder Nandan Nilakeni, advocate Somasekharan Sundaresan, and retired judge JP Devadhar as members of the committee. This committee was directed to submit its report in a sealed cover within two months. At the same time, the Securities and Exchange Board of India (SEBI) was also asked to continue its investigation into the volatility in the Indian securities market and submit its report within two months.
Last week, the market regulator sought a 15-day extension from the Supreme Court to wrap up its inquiry into allegations against the Adani group of companies, insisting, in its application that substantial progress has already been made.
This is the second time the market regulator asked for an extension to complete its probe. In May, they requested the court for a six months extension, citing complexities of the transactions being investigated. However, a bench led by Chief Justice Chandrachud only agreed to push the deadline by three months till August 14, when they filed their second extension application.
In defence of its first request, SEBI filed a rejoinder affidavit giving additional reasons for seeking more time to probe. Besides reiterating that the transactions involved were complex, requiring more time to examine, it also denied the allegation that it had been investigating Adani since 2016.
Vishal Tiwari v. Union of India & Ors. | Writ Petition (Civil) No. 162 of 2023 and other connected matters