New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has cleared the Adani Group and its founder Gautam Adani of a number of allegations of impropriety raised by US-based short seller Hindenburg Research in January 2023.
In two separate orders published on its website Thursday, SEBI said there was no evidence that the Indian conglomerate used a ‘related party’ to route funds into its listed units. As a result, no liability is devolved to the group, and no penalty is imposed, the regulator added.
“Once, it is held that there is no violation of above two main issues, it logically leads to conclusion that there is no violation of all other related violations alleged in the SCN [show cause notice],” SEBI concluded.
The two main issues, in this context, are alleged violation of Section 12A of the SEBI Act and Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market Regulations, 2003 (PFUTP).
On the first count, it said the allegation flows from non-classification of impugned transactions as ‘related party transaction’ and once it is established that “there is no violation on that account, the charge under Section 12A of the SEBI Act and PFUTP Regulations do not stand”.
On the second count, it said impugned transactions cannot be classified as manipulative or fraudulent transactions or unfair trade practice since “there is no allegation of siphoning off of money or diversion of fund; all the money has come back with interest before the start of the investigation; and the impugned transactions have not been held as related party transactions”.
It also said transactions made through Adicorp Enterprises Pvt Ltd, Milestone Tradelinks Pvt Ltd, and Rehvar Infrastructure Pvt Ltd did not amount to fraudulent activity or violation of related-party disclosure standards under norms introduced via the 2021 amendment to the Listing Obligations and Disclosure Requirements (LODR) rules.
With its two orders Thursday, the market regulator disposed of instant proceedings against Adani Group companies Adani Ports, Adani Power, as well as group chairman Gautam Adani and managing director Rajesh Adani, who is his younger brother.
The orders come as a relief to the Adani Group, which has been in the limelight over concerns about its funding, governance, and transparency ever since Hindenburg in January 2023 accused the conglomerate of engaging in a “brazen stock manipulation and accounting fraud scheme over the course of decades”.
It had also accused Adani Group of concealing related-party activities using layers of shell businesses. The allegations sparked a dramatic sell-off in Adani stocks, wiping off more than $100 billion in market value at its peak.
It also prompted the Supreme Court to constitute an expert committee in March 2023 to “investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies” and to suggest measures to strengthen the statutory framework and secure compliance with the existing framework for the protection of investors.
In an affidavit filed in August 2023, SEBI told the top court that it had completed its investigation in 22 of 24 cases filed against the Adani Group.
On its part, the Adani Group challenged the allegations of impropriety levelled against it by Hindenburg, among others, terming it a “calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India”.
(Edited by Amrtansh Arora)
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