Adani-Hindenburg : Minister's 2021 Statement In Parliament Not Related To 2016 Investigation, SEBI Tells Supreme Court

In the Adani-Hindenburg matter, Securities and Exchange Board of India (SEBI) on Wednesday filed an affidavit before the Supreme Court clarifying that the statement of the Minister of State for Finance Pankaj Chaudhary in his 2021 reply in the Parliament had no connection with SEBI's 2016 probe over GDR issue against 51 Indian listed companies, of which the Adani group was not a part. As per SEBI, the investigation referred to in the reply by the minister was in respect of non-compliance with Minimum Public Shareholding (MPS) norms and consequential violations. The said investigation had commenced in October 2020 and not 2016. 

The SEBI said that it is making these statements to "bring abundant clarity to issues raised in social media comments". It may be recalled that on May 15, SEBI had filed an affidavit explaining reasons for seeking additional time of 6 months to complete the probe on the Hindenburg report allegations against Adani group companies. In that affidavit, SEBI had denied the allegation made by petitioner that it had been investigating Adani group companies since 2016. Petitioner's lawyer Advocate Prashant Bhushan had earlier made this statement in the Supreme Court to oppose SEBI's plea for more time.

SEBI's denial of investigating Adani group companies since 2016 created an uproar in social media, with several persons citing the reply given by Minister of State for Finance to Mahua Moitra MP in the Parliament in 2021 which stated that "SEBI is investigating some Adani group companies with regard to compliance with SEBI regulations". This reply of Minister was cited by several social media users to question the SEBI's stand that it had not been probing Adani since 2016.

In this background, the market regulator filed a second affidavit in the Supreme Court today, clarifying that Minister's statement pertained to investigation of MPS norms issue, which started in October 2020. SEBI also said in the affidavit that the issue related to MPS norms is one of the allegations in the Hindenburg report.

 What happened in today's hearing?

During the hearing, Advocate Prashant Bhushan, appearing for the petitioner seeking probe into the Hindenburg report, questioned the SEBI's claim that it has not been investigating Adani group companies since 2016. On the previous day, he had opposed SEBI's plea for more time by saying that it had been investigating the matter since 2016.  Bhushan read out the July 2021 written reply in Parliament by Minister of State for Finance Pankaj Chaudhary, that had stated that SEBI was investigating some companies. As per the reply, SEBI was investigating some Adani group companies with regard to compliance with SEBI regulations. 

"In a matter pertaining to issuances of Global Depository Receipts (GDR) by certain Indian companies, SEBI vide order dated June 16, 2016, had directed depositories to freeze particular beneficiary accounts of certain FPIs including Albula Investment Ld, Cresta Funds Ltd and APMS Investment Fund Ltd," the reply had added, said Bhushan.

After reading the reply, Bhushan asked–

"These are the precise companies which Hindenburg in its report points out have invested more than 95% of their funds in Adani companies. What has happened? How is it that SEBI missed out the fact that these three investment companies had been investing all their money in Adani? How is it that Adani companies did not come to be investigated?"

Responding to the allegations, Solicitor General Tushar Mehta, appearing for SEBI said–

"You pick up something in 2016 and connect it with the present petition is as if it is arising from the Hindenburg report. I want to clear the air. 2016 is something totally different and distinct. My learned friend now wants that whatever investigation proceedings were taken against a particular company till now should be placed on record. I don't think that's right but I do not have any difficulty." 

He added that the investigation referred to by the Minister was in respect of possible non compliance with Minimum Public Shareholding (MPS) norms and its consequential violations. He stated that the investigation referred to by the Minister had not taken place in 2016 but in 2020. He added that in the context of investigation into the MPS norms, SEBI had approached 11 overseas regulators under Multilateral Memorandum of Understanding (MMoU) with International Organisation of Securities Commission. SG Mehta then said–

"Various requests for information pertaining to these regulators was made. The first request was made as early as October 6 2020. It is this investigation that has commenced in October 20 that was referred to by the minister for finance in his reply...This is completely different than the investigation in 2016. In 2016, SEBI passed an order pertaining to issuance of global depository receipts by 51 Indian listed companies. No listed company of this group (Adani group) was part of the aforesaid list of 51 companies which have been specifically stated in the rejoinder..."  

In its earlier affidavit SEBI had stated–

"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.” 

In its affidavit filed today, SEBI submitted–

"However, there were some FPIs including Albula Investment Ld, Cresta Funds Ltd and APMS Investment Fund Ltd, the GDR relevant accounts of which, were frozen as a consequence of the 2016 order. It is here by clarified that this action was purely a consequence of the GDR matter and not related to any examination into any Adani group company."

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