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The Securities Exchange Board of India (SEBI) on Monday in the Supreme Court said its request for a “minimum” of six more months to inquire into Hindenburg Research’s allegations of fraud against the Adani Group is to ensure “carriage of justice”.
The case came up before a Bench led by Chief Justice of India DY Chandrachud, but was adjourned as the Court had to reassemble for a Special Bench hearing.
The market regulator also denied submissions made by petitioners that SEBI had been investigating Adani since 2016.
In a fresh affidavit, SEBI said its investigation pertained to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies. These 51 did not include any company attached to the Adani Group.
SEBI’s response
SEBI was responding to submissions made in Court in the previous hearing that the request for six months’ time was a ploy to delay its decision on the veracity of the allegations against Adani. The Court had admonished that SEBI ought to conduct its probe with “some alacrity”.
Advocate Prashant Bhushan had further referred to a SEBI investigation dating back to 2016, and accused SEBI of trying a “delaying tactic” on the court.
“The allegation that SEBI has been investigating Adani since 2016 is factually baseless. The reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced,” the affidavit said.
SEBI argued that its plea for an extension of time by six months was well-founded.
“Where prima facie violations have been found, a period of six months would be required to arrive at a conclusive finding. Where prima facie violations have not been found, six months would be required to revalidate the analysis and arrive at a 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,” SEBI said.
The market regulator said it was probing 12 “suspicious” 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.
‘Detailed investigation process’
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, SEBI explained.
It said the “detailed investigation process” of the SEBI would include depositions from key managerial personnel, statutory auditors, and other “relevant” persons.
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It would also entail obtaining bank statements from multiple domestic as well as 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.
Probe background
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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