The Supreme Court on Friday said it will use the weekend to pore over the report submitted by an expert committee led by former of apex court judge, Justice Abhay Manohar Sapre, on Hindenburg Foundation’s allegations of manipulation of share prices and fraud against the Adani group before taking a call on a request by Securities and Exchange Board to grant it a “minimum” of six months to complete its investigation.

“We have received Justice Sapre’s report in the Registry. We did not have the time to read it. We will read it during the weekend and list your [SEBI] application for Monday,” a three-judge Bench headed by Chief Justice of India DY Chandrachud addressed Solicitor General Tushar Mehta and advocate Pratap Venugopal, representing the market regulator.

But the Bench, also comprising Justices PS Narasimha and JB Pardiwala, clearly indicated its disagreement with SEBI’s request for a six-month extension of time to complete its probe.

“There should be some alacrity on your part… We are thinking of giving you another three months. We cannot agree with you when you say a ‘minimum’ of six months... you put a team together,” Chief Justice Chandrachud told Mehta.

The Solicitor General said SEBI was “compressing” the time required to six months. He hinted that the investigation may extend overseas. “We will need a minimum of six months to reach any conclusion, considering the inquiry may go out,” Mehta submitted.

Advocate Prashant Bhushan, for the petitioners, said the SEBI had been investigating since 2017, for the past six years. However, Mehta countered that Bhushan was referring to an unconnected issue.

Bhushan said the market regulator ought to at least come clean and disclose to the Supreme Court “what they have done so far”. But the court said such a disclosure may not be proper at this stage. “But we agree with you that they cannot go on indefinitely,” Chief Justice Chandrachud said.

“We will go through Justice Sapre’s report and come back on Monday. We will pronounce further orders on Monday in this case,” the Chief Justice said.

Expert panel formed

On March 2, the apex court had formed the expert committee headed by Justice Sapre to investigate the causal factors and existence, if any, of regulatory failure which led to investors losing crores due to the volatility in the securities market following Hindenburg Research’s report accusing the Adani Group of “brazen stock manipulation and accounting fraud schemes over the course of decades”.

The SEBI and other agencies were directed by the court to cooperate with the committee and provide it with all “material and requisite information”. SEBI, at the time, was already investigating the Hindenburg report.

However, the SEBI’s application for extension of time by six months said that “where prima facie violations have been found, a period of six months would be required to arrive at conclusive finding. Where prima facie violations have not been found, six months would be required to revalidate the analysis and arrive at conclusive finding. Where further investigation is required and most of the data required for this purpose is expected to be reasonably accessible, a conclusive finding is expected to be arrived at in six months”.

12 ‘suspicious’ transactions

The market regulator said it was probing 12 “suspicious” - a term borrowed from the Hindenburg report - transactions.

“Prima facie, these transactions are complex and have many sub-transactions and a rigorous investigation of these transactions would require collation of data/information from various sources along with detailed analysis including verification of submissions made by the companies,” SEBI has noted.

Adani versus Hindenburg: A perennial battle between the bulls and the bears  Adani versus Hindenburg: A perennial battle between the bulls and the bears  

The “analysis” would include pouring over the financial statements of offshore entities involved in the transactions, disclosures filed with the stock exchanges, minutes of the meetings, connections/relations among entities both domestic and overseas and examination of contracts and agreements, its application has explained.

It has said the “detailed investigation process” of the SEBI would include depositions from key managerial personnel, statutory auditors and other “relevant” persons. It would also entail obtaining bank statements from multiple domestic and international banks for transactions that may date over 10 years ago.

“Various information/documents were sought from entities such as the seven listed Adani companies (Adani Enterprises Limited, Adani Power Limited, Adani Transmission Limited, Adani Green Energy Limited, Adani Ports and Special Economic Zone Limited, Adani Total Gas Limited and Adani Wilmar Limited), including subsidiaries, step down subsidiaries and other private entities, allegedly involved in the transactions,” SEBI has informed.

The SEBI is probing into whether the Adani Group has violated laws like the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; SEBI (Prohibition of Insider Trading) Regulations, 2015; SEBI (Foreign Portfolio Investors) Regulations, 2019, Offshore Derivative Instruments (ODI) norms, short selling norms, if any.

The court had asked the SEBI to also investigate alleged violations of the Securities Contract (Regulation) Rules of 1957.

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