Supreme Court Rejects SIT Probe for Adani-Hindenburg Case, Extends SEBI’s Investigation Period by 3 Months in Two Ongoing Probes
Supreme Court Grants More Time for SEBI Probe in Adani-Handanburg Case
In the Adani-Handanburg case, the Supreme Court granted an extension of more than three months for the Securities and Exchange Board of India (SEBI) to conduct its investigation. The bench, comprising Chief Justice N.V. Ramana, Justice J.B. Pardiwala, and Justice Manoj Mishra, made this decision today.
Chief Justice Ramana emphasized that the court’s authority to interfere in SEBI’s regulatory framework is limited. The court noted that SEBI has completed investigations in 20 out of 22 cases and directed SEBI to complete the probe in the remaining two cases within three months. The Solicitor General assured the court that SEBI would investigate the two remaining cases in the specified timeframe.
The Supreme Court highlighted that concerns raised in the OCCPR report regarding SEBI’s investigation should not be considered as a doubt on the probe. The court reiterated that there is no basis to transfer the investigation from SEBI to the Special Investigation Team (SIT).
This decision comes after the court had kept its decision safe on November 24th last year. CJI Ramana stated that they do not need to consider the Hindenburg Research report as an absolute truth. He emphasized that Hindenburg is not present here, and the court has directed SEBI to conduct the investigation.
On January 24, 2023, Hindenburg Research accused Adani Group of engaging in share price manipulation. A six-member committee was formed by the Supreme Court to investigate the case. Besides the market regulator SEBI, the court had also ordered a probe into the matter by the Special Investigation Team (SIT).
Supreme Court Rejects Plea for Reconstitution of Nishnat Committee
In a recent petition, there was a demand to reconstitute the Nishnat Committee. The Supreme Court bench stated that this committee might face considerable injustice, and people would lose confidence in its functioning if it were to work under the Supreme Court’s appointed committee. Additionally, the court declared that SEBI must complete investigations in all 24 cases.
SEBI had previously reported that out of 24 cases, it had completed investigations in 22 cases. The Supreme Court, while addressing the delays, asserted that SEBI must finalize its investigations and submit its reports. Previously, on August 25, SEBI had mentioned in its status report that it had completed investigations in 22 out of 24 cases.
Furthermore, the court rejected a plea that sought action against SEBI for its alleged inaction against contemptuous conduct. The petitioner argued that SEBI failed to carry out enforcement proceedings despite the court’s directions. However, the court highlighted that SEBI had been conducting investigations for the past eight months.
The rejection of the plea for reconstitution of the Nishnat Committee suggests that the Supreme Court remains confident in the committee’s ability to carry out its responsibilities independently. The court also emphasizes the importance of SEBI completing its investigations within a reasonable timeframe.
SEBI Investigation and Nishnat Committee Reconstitution Plea
In the recent case involving SEBI’s investigation into the alleged violation of Regulation 19(A) of the Securities Contract Regulation Rules, questions were raised regarding the breach of current regulations concerning stock market manipulation and share price manipulation.
Regulation 19(A) pertains to the minimum public shareholding concerning companies listed on the stock exchange. According to Indian law, any listed company must have at least a 25% public shareholding, excluding holdings by non-residents.
The controversy arose as Gautam Adani’s brother, Vinod Adani, reportedly manages overseas shell companies of the Adani Group, and funds were transferred to listed and unlisted companies in India. This raised concerns about potential violations of SEBI rules and the need for an investigation.
The Supreme Court formed a committee on March 2nd to investigate the matter, granting SEBI two months for the investigation. SEBI submitted its report by May 2nd, and during the hearing, SEBI requested an extension of six months for a thorough investigation.
The bench extended the time frame until August, giving SEBI a total of five months to complete its investigation and submit the report. Subsequently, on August 14th, SEBI requested an additional 15 days to complete the investigation and submit the report. The Supreme Court granted an extension of 15 days, making the total time available to SEBI for investigation and report submission five months and 15 days.
On August 25th, SEBI submitted the status report to the Supreme Court, stating that investigations in 22 out of 24 cases were completed, leaving two cases pending. The Supreme Court, in a decision on November 24, 2023, preserved the confidentiality of the Hindenburg Research report and stated that there was no need for further investigation into SEBI’s actions.
Committee’s Findings on SEBI Report Public Disclosure and Nishnat Committee’s Observations
The committee overseeing the investigation into the Adani-Hindenburg case released the SEBI report to the public on May 19, 2023. The committee stated that SEBI’s attempts to address the alleged discrepancies in Adani Group’s shares had been unsuccessful, and the resolution to this issue is yet to be achieved. The committee also expressed concerns about the ineffectiveness of SEBI’s investigations into foreign fund promoters with alleged links to 13 overseas entities associated with the Adani Group.
In the committee’s report, it was mentioned that there is suspicion that 13 foreign fund promoters might be involved in manipulating Adani Group’s shares. The report highlighted that no discernible patterns of Wash Trades, which involve buying and selling shares to artificially inflate trading volumes, were found in the shares of Adani Group. Wash Trades are typically used to increase trading volumes without changing beneficial ownership.
The Hindenburg report, published before the committee’s findings, had suggested that some institutions might have taken short positions before a decline in share prices, indicating potential knowledge of adverse events. However, certain entities managed to exit their positions profitably. The committee stated that these aspects needed further scrutiny.
The committee has underscored the need for a deeper investigation into the trading patterns of specific entities, aiming to identify any irregularities that might have led to the decline in share prices. As the findings stand, the matter remains complex, requiring a meticulous examination of trading activities and potential market manipulation.
Developments in the Investigation Into the Adani-Hindenburg Case
Overview: As of now, a total of six petitions have been filed in connection with the investigation into the Adani-Hindenburg case. Manohar Lal Sharma, along with support from Nathan Anderson, the founder of Hindenburg Research, and his associates, initiated the call for an inquiry and sought the intervention of agencies like SEBI, ED, the Income Tax Department, and the Directorate of Revenue Intelligence (DRI).
Key Petitions and Requests:
- Media Coverage Restriction: Manohar Lal Sharma, in his plea, urged for restrictions on media coverage related to the case to ensure a fair investigation.
- Formation of a New Committee: Justice Jaya Thakur, a retired Supreme Court judge, led a committee formed to investigate the Hindenburg report. Mukesh Kumar filed a petition requesting a new committee to scrutinize the roles of LIC and SBI in Adani Enterprises’ alleged financial irregularities.
- Inquiry Into Share Price Manipulation: Manohar Lal Sharma and Mukesh Kumar separately demanded inquiries into share price manipulation, with Mukesh Kumar specifically focusing on LIC and SBI’s roles.
- Anonymity Protection: Another anonymous individual, referred to as Anamika Jayaswal, filed a petition to form a new committee with individuals who have an untarnished reputation and no connection to the case.
Committee Formation and Challenges: Justice Jaya Thakur, leading the retired SC judge committee, sought to address the concerns raised in the petitions. The committee is tasked with investigating the Hindenburg report and examining the roles of LIC and SBI in the case. However, the release of the SEBI report was delayed, leading to additional petitions, including one that demanded action against SEBI for failing to adhere to the court’s suggested timelines.
Media Restrictions and Late SEBI Report: Manohar Lal Sharma emphasized the need for a media blackout to prevent influence and ensure a fair investigation. Additionally, Mukesh Kumar filed another petition due to the delay in the SEBI report, highlighting concerns over SEBI’s failure to meet suggested timelines.
Conclusion: The investigation into the Adani-Hindenburg case continues with various petitions addressing different aspects of the alleged financial irregularities. The formation of committees, media coverage concerns, and delays in SEBI reports highlight the complexities and challenges in addressing the case comprehensively. Ongoing developments indicate a multifaceted inquiry into the roles of the entities involved.
