The Supreme Court made significant remarks in its judgment on four Public Interest Litigations seeking CBI or SIT enquiry into Hindenburg’s allegations of ‘frauds’ and ‘wrongdoings’ against Adani Group. The judgment set the tone of the top court’s attitude toward PILs on such issues.
In the last week of January 2023, a US-based firm named Hindenburg Research took over headlines when they made some serious allegations of manipulating share pricing and fraud against the Adani group. After that, shares of the Adani group nosedived. Although Adani shares experienced many ups and downs later, the fact remains that a major industrial house was attacked from foreign soil. The company’s economic interests have been badly hurt due to a misinformation campaign and media trial.
Since the matter is related to the stock market, the obvious agency to investigate it was the Securities and Exchange Board of India (SEBI). However, without waiting for the outcome of the probe, Hindenburg’s allegations started circulating in the media. As it happens in such situations, Adani Group faced a ‘media trial’, and the obvious victims were the public, who lost the value of the shares they held, and CEO Gautam Adani, whose reputation was at stake.
Caution to petitioners
As courts typically take time to deliberate and reach decisions, the Supreme Court spent the past year on the matter and concluded that the PILs lacked sufficient proof to seek a third-party investigation. The court cautioned the petitioners and said, “PILs that lack adequate research and rely on unverified and unrelated material tend to, in fact, be counter-productive. This word of caution must be kept in mind by lawyers and members of civil society alike.”
The Supreme Court has asked SEBI to complete its investigation into the remaining two of 22 matters related to the case within three months.
“Supreme Court was not an expert to substitute the view of expert bodies like SEBI with its own view and that courts were not to act as appellate bodies over policies framed by statutory regulators. It would interfere only after finding that the regulator’s actions were arbitrary or violative of constitutional or statutory mandates,” the court added.
Although Hindenburg Research calls itself a financial investment research firm, its main business is short-selling in the stock market. The short seller, who doesn’t have shares in his possession, benefits when the share price goes down. And so did Hindenburg when the price of Adani’s shares declined. In the past, the US-based firm has profited from its short-selling business by accusing 16 other companies of fraud, including electric truck company Nikola Corporation. Hindenburg also took a long position on Twitter Inc. shares after the site sued its current owner Elon Musk in 2022 for backing out of his $44 billion deal.
Hindenburg is accused of making disclosures related to their business, creating a potential ‘conflict of interest’ in this endeavour. The firm was sued in July 2022 by a company named EbixCash in Tis Hazari Court of New Delhi. The court instructed Google and X to remove the information given by Hindenburg. Interestingly, there was no retaliation from the short-seller.
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India’s strategic affairs and Adani
It is significant to note that after the Narendra Modi government came to power in 2014, the Adani Group has expanded rapidly. Opposition parties, which had already been criticising the government for allegedly providing undue support to the company, got a bullet in their hands from Hindenburg’s report. In other words, the Opposition and Hindenburg had a common target—Adani—for their respective reasons, namely political and business.
It also needs to be understood that after 2014, and especially in the last three to four years, the government of India led by Prime Minister Narendra Modi has been emphasising industrialisation and infrastructure building based on domestic capital. The expansion of the Adani Group is believed to be part of the same process. Adani has become the fastest-growing conglomerate in the country in a variety of businesses, including infrastructure and other logistics, mining, metals, energy, etc. Many airports in India—Mumbai, Ahmedabad, Lucknow, Bengaluru, Jaipur, Guwahati, and Thiruvananthapuram—are being developed and operated by Adani Group. Before it, the companies that had contracts for airport construction were all supported by foreign capital.
A closer look reveals that the Adani Group has helped India move toward self-reliance by investing more than Rs 1.79 lakh crore in the fields of ports, electricity transmission, airports, solar energy, road construction, and agri-storage among other fields. It plans to add another 7 lakh crores over the next 10 years.The conglomerate has also set an example in renewable energy by creating a capacity of 20,000 MW of solar energy. The recently launched Adani Green Energy is manufacturing solar panels and other equipment in large quantities.
As a result, India’s dependence on other countries such as China has started decreasing. Adani operates 13 sea terminals in India and controls 24 per cent of India’s maritime commerce. Winning tenders at Sri Lanka’s Colombo Port and participation in the privatisation process of Israel’s Haifa port—both valued by China—have made it clear that this Indian businessman is helping the country in strategic affairs also. It is believed that the semiconductors made by the Adani Group will hit the market soon.
Western organisations and anti-India forces are making all efforts to obstruct India’s progress. Be it Hindenburg’s report or George Soros’ attack on the government of India, all such endeavours make us believe so. The World Hunger Index report by the Welthungerhilfe and the activities of the international rating agencies are also considered to be a part of the same propaganda.
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Building India
As far as influencing the prices of shares in the stock markets is concerned, Adani’s case is not the first instance in the country or the world. The bottom line is that the Adani Group has created real assets. In recent years, the prices of shares of many companies also skyrocketed, despite not having any physical assets of their own. These companies expanded their market and increased their valuation by ‘acquiring’ customers and offering various types of discounts by burning cash. Companies such as PayTm, Zomato, and Nykaa raised money from common investors through IPOs regulated by SEBI. Most of the investors who participated in these IPOs have lost 40 to 70 per cent of their money.
Whether it’s a company’s share or the stock market, their ups and downs depend on public sentiments. Because the Adani Group’s business is strong, the shares started rebounding soon despite the narrative created by the Opposition parties and Hindenburg.
While some affluent individuals are leaving India, perceiving it as no longer conducive for living and business, certain high-net-worth Indians (HNIs) chose to stay and rapidly expand their businesses. Companies such as Reliance, Adani, Tata, Mahindra, Birla group companies, ITC, and L&T have actively contributed to India’s growth journey. And they have received substantial support from the Indian government. They are certainly doing better compared to cash-burning businesses. In this context, it is crucial to protect them from attacks by foreign agencies. In case of any wrongdoing, the law of the land and regulatory institutions can address and take corrective measures.
Sensing the ill intention of Hindenburg’s report, the Supreme Court, rightly so, has trusted SEBI. This decision not only signals India’s robust regulatory mechanism but also highlights the strength of the judiciary in handling such matters. It is hoped that this judgment will bring an end to Hindenburg’s conspiracy.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi. Views are personal.
Disclosure: PayTM is among the distinguished founder-investors of ThePrint.