Adani-Hindenburg case: Plea filed in SC seeks review of Jan 3 verdict

A review plea has been filed against the Supreme Court judgment of January 3 that said there is ‘no ground’ to transfer the Securities and Exchange Board of India’s (Sebi) investigation into allegations against the Adani Group by US-based short-seller Hindenburg Research to a special investigation team (SIT) or Central Bureau of Investigation (CBI).

The review petition, filed by Anamika Jaiswal, said there are many instances through which Sebi's regulatory failures are readily apparent. 'Such failures have eventually contributed to alleged regulatory contraventions and statutory violations,' the plea stated.

The court had directed the markets regulator to complete its probe within three months. It also directed the market regulator and the Centre to probe if the Hindenburg report on short-selling amounted to a violation of law and caused harm to investors.

'Sebi has completed twenty-two out of the twenty-four investigations into the Adani group. It submits that the remaining two are pending due to inputs being awaited from foreign regulators. We also record the assurance given by the Solicitor General on behalf of Sebi that the investigations would be concluded expeditiously. Sebi cannot keep the investigation open-ended and indeterminate in time. Hence, Sebi shall complete the pending investigations preferably within three months,' the January 3 order said.

Jaiswal said that Sebi in its status report has only updated the status of the 24 investigations as complete or incomplete and failed to disclose any findings or details on action taken. 'It cannot be concluded that there has been no regulatory failure unless the findings of the Sebi investigations are publicly reported,' the plea said.

The apex court had also said there are no valid grounds raised to direct Sebi to revoke its amendments on FPI (foreign portfolio investment) and LODR (listing obligations and disclosure requirements) regulations.

The petitioner said that the amendments made to the FPI Regulations, 2014 by Sebi in 2018 and 2019, continuously and decisively, diluted the regulations in three significant ways, namely the term ‘ultimate beneficial owner’ in FPI Regulations, 2014 (in accordance with the definition of the 2010 Sebi Master Circular) was replaced with the term ‘beneficial owner’; the term ‘beneficial owner’ was redefined as per the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 which mandated 25 per cent shareholding thresholds for identifying beneficial ownership; and the term ‘opaque structure’ was deleted altogether from the FPI regulations.

The petitioner alleged that the Adani group companies have been in flagrant violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957. 'The modus operandi for the same involved funds being invested by Chang Chung Ling and Nasser Ali Shaban Ahli on behalf of Vinod Adani, a member of the Adani promoter group, into stocks of Adani Group Companies through Global Opportunities Fund, Emerging India Focus Fund, and Emerging Market Resurgence Fund,' the plea said.

The plea also pointed out that the Supreme Court’s judgment 'failed to appreciate that while the issue of over-invoicing may have not been proved, the aspect of Adani promoters investing into Adani group stocks in Indian stock market, has never been investigated and calls for a thorough probe.'

The petitioner had also raised concern over the inclusion of two members of the court-appointed expert committee -- advocate Somasekhar Sundaresan (now appointed Bombay High Court judge) and former State Bank of India chairman O P Bhatt.

The plea said that the court said 'the allegations against certain members of the committee were raised by the petitioner for the first time only on 18 September 2023, almost six months after the constitution of the committee and several months after the Committee had submitted its report in May 2023'.

'This is factually wrong because the Petitioner had raised objection to the appointment of Sh. Sundaresan as a member of the expert committee for the first time in Para 19 of its affidavit dated May 10, 2023, and thereafter it was again raised in Para 6 of its affidavit dated July 7, 2023,' said the plea.

In regard to O P Bhatt being a member of the court-appointed expert committee, the plea said, 'This Hon’ble Court noted that the petitioner has also raised vague accusations against Mr O P Bhatt. It is submitted that the objections to the appointment of O P Bhatt were raised by the Petitioner in its affidavit dated 18.09.2023. That the allegation against Mr O P Bhatt, director of Greenko, was substantiated with a press release issued by Greenko about its long-standing partnership with Adani for supply of energy to Adani Group’s facilities in India, which was duly annexed by the petitioner,' the review plea said.

In January 2023, Hindenburg Research came up with a report accusing the Adani group of improperly using offshore tax havens and flagging concerns about high debt. It also alleged that there was 'brazen stock manipulation' using offshore shell companies. Several pleas were filed in the Supreme Court after the report was published. The court on March 2, 2023, formed an expert committee of five members headed by a former judge to investigate the regulatory failure, if any, that led to investors losing crores after the Hindenburg report.