Adani-Hindenburg Case: SC Review Plea Filed

A review petition has been filed in the Supreme Court seeking a review of its January 3 verdict that dismissed the plea for a SIT or CBI probe into the allegations in Adani-Hindenburg Case. The petition claimed that there were errors and oversights in the judgment and that SEBI had failed to regulate the Adani Group properly.

What is the Adani-Hindenburg Case ?

The Adani-Hindenburg case is a controversy that erupted in January 2023, when Hindenburg Research, a US-based investor research firm that specialises in short selling, published a report accusing the Adani Group of “brazen stock manipulation and accounting fraud scheme over the course of decades”. The report alleged that the Adani Group had inflated its market value by creating shell companies and offshore entities, and that it had links with dubious promoters and politicians. The report also questioned the source of funds and the ownership structure of the foreign investors who held large stakes in the Adani Group companies.

The Adani Group denied all the allegations and said that the report was a “calculated attack on India” and its institutions. The group also said that it was fully compliant with all the laws and regulations, and that it had cooperated with SEBI’s investigation into the matter.

What did the Supreme Court say?

The Supreme Court, on January 3, 2024, rejected the plea for a SIT or CBI probe into the Adani-Hindenburg case, and expressed confidence in SEBI’s handling of the matter. The court said that it would not rely on a third-party report, and that it would leave it to SEBI and the government to look into any violation of securities law by the Adani Group. The court also noted that SEBI had completed its investigation in 20 out of 22 matters arising out of the Hindenburg report, and directed it to complete the remaining two within three months.

The court also referred to an expert committee headed by retired Justice AM Sapre, which was constituted by the court in March 2023 to look into the matter. The expert committee, in its report submitted in May 2023, found no prima facie lapse on the part of SEBI in the matter. The committee also said that there was no visible evidence of manipulation in the companies owned by Gautam Adani.

Why has a review petition been filed?

A review petition has been filed by Anamika Jaiswal, one of the original petitioners in the case, who had sought a SIT or CBI probe into the Adani-Hindenburg case. The review petition said that there were many instances through which SEBI’s regulatory failures were readily apparent, and that such failures had contributed to alleged regulatory contraventions and statutory violations by the Adani Group. The petition also said that there were new material received by the counsel for the petitioner, which warranted a review of the judgment.

The review petition also challenged some of the findings of the expert committee, and said that it had ignored some crucial aspects of the case. The petition also alleged that there was a conflict of interest in appointing Justice Sapre as the head of the expert committee, as he had earlier served as an arbitrator in a dispute involving an Adani Group company.

What are the implications of the review petition?

The review petition is likely to prolong the legal battle between the Adani Group and Hindenburg Research, which has already taken a toll on the market value of the group’s companies. The shares of Adani Group companies have lost about half their value since Hindenburg’s report was published in January 2023. The group’s market capitalisation has fallen from USD 218 billion to USD 108 billion as of February 13, 2024.

The review petition may also put pressure on SEBI to expedite its investigation into the remaining two matters arising out of the Hindenburg report, which are related to the ownership and source of funds of foreign investors in Adani Group companies. SEBI has said that it is awaiting information from tax havens on these matters.

The review petition may also raise questions about the credibility and independence of SEBI and other institutions in dealing with such cases, and whether they are adequately equipped to handle complex financial frauds involving offshore entities.

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