Sebi seeks six month’s time to probe Adani-Hindenburg issue

After hearing a bunch of petitions, the Supreme Court had set up an expert panel led by a retired judge and asked Sebi to present its inquiry report on stock manipulation within two months (by May 2)

Probe in Adani Group

New Delhi: Indian market regulator, the Securities and Exchange Board of India (Sebi) on Saturday filed an application before the Supreme Court, seeking six months’ time to conclude its probe in the Adani-Hindenburg matter. It has told the apex court that given the complexity of the case, the probe would take at least 15 months to complete, but it would try to finish it in six months.

Sebi told the court that the 12 suspicious transactions mentioned in the Hindenburg Research report looked quite complex at first glance. They need to be investigated thoroughly. “Therefore, we have requested the Supreme Court to give at least six more months for the probe,” said a Sebi officer.

SC’s two-month deadline expires on May 2

Two months ago, in March, the Supreme Court had set up a six-member expert committee in the Adani-Hindenburg case. Up on hearing a public interest litigation (PIL), the court had asked for the formation of a committee. Along with entrusting the investigation into the matter to this committee, it had also asked the Sebi, to submit an inquiry report into the manipulation of stock prices. Sebi was supposed to submit the status report within two months, with the deadline ending on May 2, i.e. Tuesday. As the investigation is not complete, Sebi has now sought additional time from the court.

Retired judge AM Sapre heads the panel

The committee set up by the Supreme Court is headed by retired judge AM Sapre. He is joined by Justices JP Devdhar, OP Bhat, MV Kamath, Nandan Nilekani and Somasekhar Sundaresan. A bench of Chief Justice DY Chandrachud, Justices PS Narasimha and JB Pardiwala had issued the order on March 2.

Also Read: Mutual funds too have exposure to Adani group companies

SC committee to examine case in two aspects

The SC constituted panel of experts is expected to suggest measures to strengthen the regulatory framework of the stock market. In other words, trading in the market will be monitored and reinforced.

It will probe controversies surrounding the sharp decline in Adani Group shares. Group shares had fallen after the Hindenburg report came out.

SEBI tasked to probe another two aspects of case

  • Was there a violation of Rule 19(A) of the Securities Contract (Regulation) Act?
  • Was there any manipulation of stock prices in violation of existing laws?

Also Read: Adani group calls off FPO, set to return proceeds to investors

What is Rule 19(A) of the Securities Contract (Regulation) Act?

Rule 19 (A) of the Security Contract (Regulation) Act pertains to minimum public shareholding of listed companies in the stock market. Under Indian law, at least 25% of the shareholding in any listed company must be owned by the public, ie non-insiders.

A report by US-based short-selling firm Hindenburg Research had alleged that Gautam Adani’s brother Vinod Adani manages shell companies abroad. Through them, billions of dollars were transferred to listed and private companies of the Adani Group in India. It helped the Adani Group evade the laws.

Also Read: Adani Group companies’ shares continue to bleed on BSE

Important directions of Supreme Court

  • Sebi chairman will have to provide all necessary information to the expert committee
  • Agencies affiliated to the Central Government shall cooperate with the committee
  • The SC- constituted committee may consult outside experts for its work
  • The payment of the committee members will be fixed by the chairperson and the government will be bear the expenses
  • Union finance minister Nirmala Sitharaman will nominate a senior officer
  • He will act as the nodal officer to provide logistical assistance to the committee
  • All expenses of the Committee shall be borne by the Central Government

Four petitions reached the SC in the Adani-Hindenburg case

Four PILs were filed in the SC in the case. The petitions were filed by advocates ML Sharma, Vishal Tiwari, Congress leader Jaya Thakur and social worker Mukesh Kumar. The first hearing in the case was held on February 10 by Chief Justice D Y Chandrachud, Justices PS Narasimha and JB Pardiwala.

Also Read: Adani’s stock rout a company specific issue: Nirmala Sitharaman

Petitioners sought lodging of FIR and thorough probe

In the petition, Manohar Lal Sharma sought an inquiry and FIR against Hindenburg Research founder Nathan Anderson and his associates in India. It also sought a moratorium on media coverage of the case.

Vishal Tiwari had demanded that a committee headed by a retired SC judge be formed to enquire into the Hindenburg report. In his petition, Tewari detailed about the issues people might have to face when stock prices fall down.

Jaya Thakur has questioned the role of Life Insurance Corporation of India (LIC) and State Bank of India (SBI) in the case. He has demanded an inquiry into the role of LIC and SBI in investing huge amounts of public money in Adani Enterprises.

Also Read: SEBI cracks whip on actor Arshad Warsi, YouTube channels

In his petition, Mukesh Kumar sought directions from Sebi, Enforcement Directorate (ED), Income Tax Department and Directorate of Revenue Intelligence (DRI) to conduct an inquiry. Mukesh Kumar filed the petition through his lawyers Rupesh Singh Bhadoria and Mahesh Praveer Sahay.

SC refused to stay media coverage of the case

Earlier, the Supreme Court had rejected a petition seeking a ban on media coverage of the case. The court had said it could not stop the media from reporting. The court, meanwhile, had said it had reserved its verdict on the constitution of a committee to probe the matter and would pronounce it soon.

Also Read: Mutual funds too have exposure to Adani group companies

Damage to investors from Hindenburg’s report

The petitions claimed that investors in Adani stock had to incur huge losses due to Hindenburg reports.’ It also said the report had tarnished the image of the country. It is affecting the economy. At the same time, media hype on the report affected the markets and Hindenburg founder Nathan Anderson also failed to substantiate his claims to Indian regulator Sebi.

Hindenburg made allegations such as share manipulation

On January 24 Hindenburg Research published a report on Adani Group. The report leveled allegations against the group ranging from money laundering to share manipulation. Group shares had fallen sharply after the report was made public. However, Adani’s share recovered a bit from the massive fall later.

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