Hindenburg’s report, published in January 2023, claimed “brazen accounting fraud” and “stock manipulation” by the Gautam Adani-led group.
New Delhi: The Supreme Court will on Wednesday deliver its judgment on a bundle of petitions, demanding investigation into allegations of accounting fraud and stock manipulation against Adani group companies, published in a research report by US short-seller Hindenburg Research in January 2023.
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A bench comprising Chief Justice of India Dhananjaya Y Chandrachud and justices JB Pardiwala and Manoj Misra will also rule on the steps that the Securities and Exchange Board of India (Sebi) ought to take to protect investors by keeping extreme market volatility in check and the tightening of pertinent regulations. According to the list of business published on the court website, the CJI will pronounce the judgment in the case that was reserved on November 24 after conclusion of the arguments.
Hindenburg’s report, published in January 2023, claimed “brazen accounting fraud” and “stock manipulation” by the Gautam Adani-led group. Though the conglomerate rejected the report as “unresearched” and “maliciously mischievous”, it triggered a massive rout of Adani group stocks, which lost over $140 billion in days and forced the cancellation of a €20,000 crore share sale.
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The SC on March 2, 2023, set up a six-member panel, led by retired Supreme Court judge AM Sapre, to look into regulatory failure by Sebi and alleged breach of laws by the Adani group. In its report submit- ted in May, the committee said the allegations of stock price manipulation or violation of MPS norms by Adani group companies cannot be proved “at this stage”.
At the same time, the panel raised certain red flags regarding the current Foreign Portfolio Investors (FPI) regulations, contending that Sebi, in its legislative capacity, had itself done away with the prohibition against any FPI having an “opaque structure” in 2018 and 2019, which could be a reason why Sebi’s probe to look into possible violation of the MPS norms by Adani companies using 13 overseas entities has “drawn a blank so far”.
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On November 24 when the judgment was reserved, the bench observed that it will not be proper for the court to appoint an SIT to look into alleged violations of MPS norms by Adani group companies without there being evidence of lapses on part of the Sebi, which is already investigating the matter. The court said hat it cannot order a probe based only on media reports and without hearing the entities impacted by its orders. adding that a statutory regulator like Sebi cannot be expected to start issuing show-cause notices on the basis of reports published by Hindenburg or by a news organisation such as Financial Times.
