SC Verdict on Adani - Hindenburg
News Excerpt:
The Supreme Court dismissed reliance on the report by the Organised Crime and Corruption Reporting Project (OCCRP), asserting that a third-party report lacking attempts to verify the authenticity of its allegations cannot be considered conclusive proof. Moreover, the court noted that SEBI has concluded investigations in 20 out of 22 matters related to the allegations. In addition, the Solicitor General provided assurance, leading the court to direct SEBI to complete the remaining two cases within a timeframe of three months.
More About the news:
- The Adani-Hindenburg saga has been a focal point in financial circles, attracting significant attention and regulatory scrutiny. The recent Supreme Court decision to uphold SEBI's investigation rather than transferring the probe to the CBI or a Special Investigation Team reflects trust in the regulatory body. Also the judgment stated that these reports are insufficient to establish conclusive evidence against the Adani Group.
- The Supreme Court directed the Centre to examine potential violations by short sellers, underscoring the complexity of the situation. Issues such as related party transactions, market manipulation, and foreign entity ownership within Adani Group companies remain unresolved, casting doubt on established market practices like short selling.
- SEBI's challenges in establishing shareholders' economic interest in foreign portfolio investors and peculiar trades during the Hindenburg report's period are compounded by complexities in entities situated in tax havens. This discrepancy between SEBI's suspicions and regulatory stances suggests a potential hindrance to effective investigations.
- While refraining from ordering a comprehensive probe, the Supreme Court highlighted the need for additional resources and expertise to expedite SEBI's investigations. Market volatility, particularly concerning Adani Group stocks post the Hindenburg report, underscores the urgency for conclusive investigations.
Timeline of events:
- Hindenburg Research published a report in January 2023 alleging accounting fraud and stock manipulation within the Gautam Adani-led group.
- Despite the Adani group dismissing the report as unfounded and malicious, the publication led to a significant decline in Adani group stocks, causing a loss of over $140 billion and prompting the cancellation of a ₹20,000 crore share sale.
- In March, the Supreme Court established a six-member panel, headed by retired Supreme Court judge AM Sapre, to examine regulatory oversights by SEBI and purported breaches of laws by the Adani group.
- However, the committee's report, submitted two months later, stated that it couldn't substantiate the allegations of stock price manipulation or violations of norms by Adani group companies at that stage.
- While the panel did not find evidence to prove the alleged violations, it did raise concerns about certain aspects of the Foreign Portfolio Investors (FPI) regulations.
- The Supreme Court, in November, expressed that it would be inappropriate to appoint a Special Investigation Team (SIT) to investigate alleged breaches of norms by Adani group companies without evidence of lapses by SEBI, which is already conducting its investigation.
- The Supreme Court's decision reaffirms its position to defer to SEBI's ongoing investigation, highlighting that without substantial evidence of regulatory lapses, the Court cannot initiate an independent probe based solely on reports like Hindenburg's without SEBI's input or findings.
Conclusion:
The Supreme Court's reliance on SEBI's investigation, while urging timely completion, underscores the necessity for a concerted effort by the regulatory body to address lingering concerns, ensuring market stability and investor confidence. This legal validation emphasizes the significance of SEBI's role in investigating these allegations and the need for thorough, conclusive inquiries for resolving market uncertainties surrounding the Adani-Hindenburg saga.
