Allegation That Adani Companies Were Being Investigated Since 2016 Is Baseless, SEBI Tells Supreme Court

“The application for extension of time filed by SEBI 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.”

Last week, while hearing an application filed by SEBI to grant an extension of six months to complete the probe, a bench comprising Chief Justice DY Chandrachud, and Justices PS Narasimha and JB Pardiwala indicated that it could not allow more than three months to finish the entire exercise. The two months’ time originally allowed by the apex court as per its March 2 order ended on the day of the last hearing, i.e., May 2.

During the hearing, the bench pointed out that the SEBI’s stand had been that it had started probing the matter long before the court’s directions. Solicitor-General of India Tushar Mehta, appearing for the regulatory body, said that at least six more months would be required considering the complexities of the matter. “At least 15 months is actually needed, but the SEBI will make best possible efforts to complete the investigation in six months’ time,” the law officer had told the bench.

In a fresh affidavit filed today, the Securities and Exchange Board has sought to substantiate its plea by highlighting the complexity of the transactions referred to in the controversial report. It has said:

“In respect of the investigation/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. Thereafter, analysis would have to be conducted on the documents received from various sources before conclusive findings can be arrived at.”

Besides this, the securities board has also denied the allegation made by the petitioner that it had been investigating Adani since 2016. It has been claimed that the investigation actually pertained to the issuance of Global Depository Receipts by 51 Indian listed companies, which did not include any listed company of Adani Group. The affidavit states, “The allegation that Securities and Exchange Board of India is investigating Adani since 2016 is factually baseless. The reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced.” No listed company of Adani Group was part of the aforesaid 51 companies, SEBI said. It may be recalled that in the last week's hearing, Advocate Prashant Bhushan had contended that SEBI has admitted to have been investigating Adani transactions since 2017 and hence their request for more time is not acceptable.

Finally, SEBI has informed the apex court bench that it has already approached eleven overseas regulators under the Multilateral Memorandum of Understanding (MMOU) with International Organisation of Securities Commissions (IOSCO) with respect to its investigation into Minimum Public Shareholding (MPS) norms.

“Various requests for information were made to these regulators. The first request to overseas regulators was made as early as on October 6, 2020. A detailed note has been submitted to the expert committee constituted by this court covering the steps taken, responses received and the current status of information gathering under the MMOU of IOSCO.”

Background

It was on January 24 that US-based Hindenburg published its report accusing Adani group of widespread manipulations and malpractices to inflate its stock prices. Adani Group refuted the allegations by publishing a 413-page reply.

On March 2, 2023, the court constituted a committee and appointed the following persons as the members of the committee– Mr OP Bhat (former Chairman of SBI), retired Justice JP Devadhar, Mr KV Kamath, Mr Nandan Nilakeni, Mr. Somasekharan Sundaresan. The Committee was held to be under the head of former Supreme Court judge Justice AM Sapre. The court directed the committee to submit its report in a sealed cover before this court within 2 months. However, the court remarked that the constitution of the expert committee did not divest SEBI of its powers or responsibilities in continuing with its investigation into the volatility in the securities market in India. SEBI was also directed to submit a status report within a period of two months.

Later, the SEBI filed an application in the Supreme Court seeking a six-month extension to complete its probe into allegations. The regulatory body said that examinations/investigations for which further time would be required would fall into three broad categories:

1. Those where prima facie violations have been found and a period of 6 months would be required to arrive at a conclusive finding.
2. Those where prima facie violations have not been found, a period of 6 months would be required to revalidate the analysis and arrive at a conclusive finding.
3. In cases where further examination/investigation is required and most of the data that is required for this purpose is expected to be reasonably accessible, a conclusive finding is expected to be arrived at in 6 months.

On the last day of the hearing, the solicitor-general urged the top court to grant SEBI an extension of at least six months to wrap up the ongoing investigation.

“There has to be alacrity,” the chief justice shot back, expressing his disinclination to allow an ‘indefinitely long time’. He added, “Six months is an unfair time...We will place the matter around August 14. You complete your investigation in three months and come back to us.”

When the solicitor-general persisted in his request, the bench agreed to adjourn the hearing to Monday, May 15, saying that it wished to read the report of the expert committee led by Justice AM Sapre, which the Supreme Court has constituted on this issue.

Case Title

Vishal Tiwari v. Union of India & Ors. | Writ Petition (Civil) No. 162 of 2023 and other connected matters