Adani-Hindenburg saga: Sebi warns on premature conclusion to investigation

In its affidavit, Sebi denied claims that it has been investigating the Adani Group since 2016.

India’s market regulator told the Supreme Court on Monday that any incorrect or premature conclusion of its investigation into the Adani Group’s possible lapses of regulatory disclosures will be “legally untenable” and not “serve the ends of justice”.

The Securities and Exchange Board of India (SEBI), in a filing, said it has approached 11 overseas regulators for information relating to whether the Adani Group has violated any norms regarding its publicly available shares.

"(An) analysis would have to be conducted on the documents received from various sources before conclusive findings can be arrived at," the regulator said.

The Supreme Court is hearing an appeal from Sebi to give it an additional six months to complete its probe into the Adani group.

The probe comes after US-based short-seller Hindenburg Research in January raised several governance concerns around billionaire Gautam Adani's group and alleged improper use of tax havens and stock manipulation by the ports-to-energy conglomerate. The group has denied all the allegations.

On Friday, Sebi sought six months to complete its investigation, rather than the two months it was given on March 2.

However, the Supreme Court, in oral arguments, said that it was inclined to give a three-month extension. Oral arguments do not necessarily match the final court order, which will likely be given on Monday.

Ahead of that order, SEBI, in its filing, reiterated that the Adani group's transactions highlighted by Hindenburg for violating Indian laws are highly complex and included many sub-transactions across numerous jurisdictions.

In its affidavit, Sebi denied claims that it has been investigating the Adani Group since 2016. According to the affidavit, the ‘investigation’ referred to by the petitioners pertained to the issuance of Global Depository Receipts (GDRs) by 51 India-listed companies and not the issues referred to in the Hindenburg report.

In the context of an investigation into Minimum Public Shareholding (MPS) norms, the market regulator has already approached 11 overseas regulators under the Multilateral Memorandum of Understanding (MMOU) with the International Organization of Securities Commissions (IOSCO). Various requests for information were made to these regulators. The first request to overseas regulators was sent on October 6, 2020.

With respect to the investigation/examination relating to 12 transactions referred to in the Hindenburg Report, the affidavit notes “prima facie it is noted that these transactions are highly complex and have many sub-transactions across numerous jurisdictions and a rigorous investigation of these transactions would require collation of data/information from various sources including bank statements from multiple domestic as well as international banks, financial statements of onshore and offshore entities involved in the transactions and contracts and agreements, if any, entered between the entities along with other supporting documents. Thereafter, the analysis would have to be conducted on the documents received from various sources before conclusive findings can be arrived at.”

The application for extension of time filed by Sebi is to ensure carriage of justice keeping in mind the interest of investors and the securities market since any incorrect or premature conclusion of the case arrived at without full facts material on record would not serve the ends of justice and hence would be legally untenable.