Adani-Hindenburg crisis: Supreme Court adjourns hearing

Adani-Hindenburg crisis: The Supreme Court on Monday adjourned hearing on the Securities and Exchange Board of India's (SEBI) plea seeking a six-month extension to conclude the investigation in the Hindenburg Research's report.

The bench led by the Chief Justice of India (CJI) Dr. Dhananjaya Yeshwant Chadrachud and also comprising Justices P S Narsimha and J B Pardiwala, adjourned the matter. Solicitor General Tushar Mehta informed the SC that SEBI is seeking an extension of time for conducting the probe and needs six months to reach any conclusion.

SEBI told the SC that the investigation done earlier by SEBI pertains to the issuance of Global Depository Receipts ("GDRs") by 51 Indian listed companies, in respect of which investigation was conducted. SEBI submitted before the Supreme Court that no listed company of Adani Group was part of those 51 companies it was investigating.

"Pursuant to the completion of the investigation, appropriate enforcement actions were taken in this matter. Hence, the allegation that the Securities and Exchange Board of India is investigating Adani since 2016 is factually baseless. I, therefore, say and submit that reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced," the rejoinder affidavit read.

SEBI submitted before Supreme Court that in the context of an investigation into Minimum Public Shareholding (MPS) norms, SEBI has already approached eleven overseas Regulators under the Multilateral Memorandum of Understanding (MoU) with the International

Organization of Securities Commissions (IOSCO). Various requests for information were made to these Regulators. The first request to overseas Regulators was made as early as on October 6, 2020, the SEBI apprised the court.

SEBI submitted before the Supreme Court that the application for extension of time filed by it is meant 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.

SEBI has informed Supreme Court that in respect of the investigation and examination relating to 12 transactions referred to in the Hindenburg Report, 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.

On March 2, the apex court directed the capital market regulator SEBI to investigate any securities law violations by the Adani Group in the wake of the Hindenburg report, which led to a massive wipeout of more than USD 140 billion of the Adani Group's market value.
Supreme Court, on March 2, set up an expert committee on the issue arising from the Hindenburg Research report on Adani Group companies.

The committee consist of six members, headed by former apex court judge Justice AM Sapre. The top court had then asked SEBI to file a status report within two months. The apex court was then hearing petitions pertaining to the Hindenburg report, including on the constitution of a committee relating to regulatory mechanisms to protect investors' interests.

The January 24 Hindenburg report alleged stock manipulation and fraud by the conglomerate. The Adani Group has attacked Hindenburg as "an unethical short seller", stating that the report by the New York-based entity was "nothing but a lie". A short-seller in the securities market books gains from the subsequent reduction in the prices of shares.