SEBI Gives Clean Chit To Gautam Adani & Adani Group Companies In Hindenburg Case

In a significant development, the Securities and Exchange Board (SEBI) has given a clean chit to Adani Group and its Chairman Gautam Adani in respect of allegations made by US-based short seller-Hindenburg Research.

It may be recalled that in January 2023, Hindenburg Research had published a scathing report accusing the Adani Group of widespread manipulations and malpractices aimed at inflating its stock prices.  

Now, the SEBI has cleared the Adani Group and Gautam Adani of such allegations. The order says that there was no violation of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, since the subject transactions did not qualify as "related party transactions".

"Plain reading of the LODR Regulations reveals that transactions between a listed company with unrelated party is not covered within the definition of “related party transactions” as it existed during the time when impugned transactions took place."

Dropping further proceedings on the show-cause notices issued against Gautam Adani and Adani Group, SEBI order further stated that the subject transactions could not be classified as "manipulative" or "fraudulent" transactions, or "unfair trade practice".

"it is held that impugned transactions cannot be classified as manipulative or fraudulent transactions or unfair trade practice since: (i) there is no allegation of siphoning off of money or diversion of fund; (ii) all the money has come back with interest before the start of the investigation; and (iii) the impugned transactions have not been held as related party transactions. The SCN does not refer to any evidence (other than related to non-classification of impugned transaction as related party transactions) which can be used for considering the impugned transaction as fraudulent transaction in the absence of violation of the LODR Regulations."

The regulator observed that the 2021 amendment to the LODR Regulations, which included within the scope of "related party transactions" a transaction between a listed company and unrelated party, was substantive and could not apply to past transactions.

Also, SEBI dropped further proceedings on the show-cause notices against Gautam Adani, Rajesh Adani, Adani Power Ltd, Adani Ports and SEZ Ltd, Adani Enterprises Ltd, and three other entities.

In January, 2024, the Supreme Court had refused to order a probe by a Special Investigation Team (SIT) or the Central Bureau of Investigation(CBI) into the allegations levelled in the Hindenburg Research report regarding stock price manipulations by the Adani group of companies. A three-Judge bench comprising former CJI DY Chandrachud and Justices JB Pardiwala, Manoj Misra held that there was no ground to doubt the investigation being carried out by SEBI.

The top Court refused to accept the reliance placed by the petitioners on newspaper reports and the report of the Organized Crime and Corruption Reporting Project (OCCRP) to doubt the SEBI probe.

The reliance on unsubstantiated news reports and third-party organizations could not be accepted to doubt the probe by a statutory regulator, it said. A review petition against the January judgment was also dismissed.

Notably, while the matter was being heard, the Supreme Court had constituted an Expert Committee to provide an overall assessment of the situation as well as measures to strengthen investor awareness, the statutory architecture, and secure compliance with the existing framework. In May, 2023, this Committee said that prima facie it could not arrive at a finding of "regulatory failure" of SEBI in dealing with the alleged contravention of securities law by the Adani Group or any other companies.

In related news, the Lokpal recently dismissed three complaints filed against Madhabi Puri Buch after concluding that there was no prima facie case for directing an investigation into allegations of corruption which were levelled by another Hindenburg Report published last year. Primarily based on the Hindenburg report, the complainants alleged that Buch had taken undue advantage and was involved in quid pro quo arrangements with private entities during her tenure at SEBI. However, the Lokpal concluded that the allegations were speculative, lacked supporting evidence, and did not reveal any cognizable offence.

Click here to read the SEBI order