Hindenburg matter: SEBI concealed January 2014 DRI alert about alleged Adani Group manipulations, petitioner tells SC

New Delhi [India], September 11 : One of the petitioners in the Hindenburg matter has informed the Supreme Court that SEBI has concealed a January 2014 DRI alert about Adani having siphoned off the money and invested them in Adani-listed companies through entities based in Dubai and Mauritius.
In the affidavit filed before the SC, the petitioner said that the Securities and Exchange Board of India (SEBI) had concealed a January 2014 DRI alert about Adani having siphoned off money and invested it in Adani listed Companies through entities based in Dubai and Mauritius.
In 2014, DRI investigated a case of overvaluation of the import of equipment and machinery by various entities of the Adani Group from a UAE-based subsidiary. In this regard DRI had also issued a Show Cause Notice against Adani group dated 15.05.2014, the petitioner said.
The petitioner Anamika Jaiswal has said that it is shocking that the SEBI has suppressed and concealed this important information from the top court and never conducted any investigation based on the DRI alert.
The petitioner said that SEBI has not disclosed the receipt of the said letter and evidence from the DRI to date before this Court. "Rather, they have categorically stated before the Expert Committee that the investigation into possible contraventions of rules and regulations by the Adani group of companies started on 23.10.2020 after receipt of complaints in June-July 2020," the affidavit read.
The petitioner said that it is evident from the letter of the DRI that SEBI has suppressed facts and provided false information which amounts to perjury.
"The then SEBI chairperson UK Sinha instead of acting on the DRI letter preferred to close the ongoing investigations into the Adani group. It is pertinent to mention herein that the said SEBI chairperson in January 2014, was appointed on February 18, 2011, and retired on March 1, 2017.
Interestingly, he is currently serving as "Non-Executive Independent Director-Chairperson" of NDTV, which has been acquired by the Adani group in 2022," the affidavit read.
Petitioner also said that new revelations by the Organised Crime and Corruption Reporting Project (OCCRP) show how opaque investment funds based in Mauritius owned/controlled by persons linked to the Adani promoter group had invested and traded in millions of dollars worth of Adani companies' stocks.
The petitioner also apprised the court that more incriminating facts have come to light against the Adani Group which have been described by various publications.
SEBI not only slept over the matter but it brought about a series of amendments only to benefit Adani, the petitioner further added.
The petitioner alleged that Violation of Rule 19A of the Securities Contract (Regulation) Rules 1957. Rule 19A of the Securities Contracts (Regulation) Rules, 1957 inserted by (Second Amendment) Rules, 2010 provides for the maintenance of minimum public shareholding and its attainment within a specified period. It stipulates that every company listed in the stock market has to maintain at least 25 per cent public shareholding.
The petitioner mentioned that the promoter group shareholding in all of the five Adani Group companies till March 2020 was between 74 per cent and 75 per cent, as per their own disclosures. "These companies would be in clear violation of Rule 19A of the SCRR, 1957 if the 13 suspected overseas entities were/are front companies for the Adani group promoters," read the affidavit.
"The 24 investigation reports by SEBI should be made available to the Expert Committee and to the Petitioners on an immediate basis. SEBI's amendments to the FPI regulations and the tax provisions of the PMLA 2002 and PMLA Rules 2005 had facilitated such concealment of beneficial ownership. As the Regulator, SEBI has failed to either detect or act against these violations in a timely manner, affecting the integrity of the securities market and causing financial losses to unsuspecting small investors which run into crores," the affidavit read.
Recently Securities and Exchange Board of India (SEBI) filed a fresh status report before the Supreme Court apprised it that out of 24 investigations arising out of the Hindenburg report, 22 are final in nature and 2 are interim in nature.
SEBI had submitted that with respect to the interim investigation reports SEBI has sought information from external agencies/entities and upon receipt of such information will evaluate the same vis-a-vis the interim investigation report to determine further course of action, if any, in the said matters.
SEBI had submitted that it shall take appropriate action based on the outcome of the investigations in accordance with law in various aspects.
The investigation was carried out in compliance with the directions of the top court's order dated March 2, 2023.
In the mid of May, the top court gave three months more time to the Securities and Exchange Board of India (SEBI) to conduct a probe into the Hindenburg report SEBI was granted time till August 14, 2023, to conduct the probe.
On March 2, the apex court directed the capital market regulator SEBI to investigate any violations of securities law by the Adani Group in the wake of the Hindenburg report, which led to a massive wipeout of more than USD140 billion of the Adani Group's market value.
Supreme Court, on March 2, set up an expert committee on the issue arising from the Hindenburg Research report on Adani Group companies. The committee will consist of six members, headed by former apex court judge Justice AM Sapre.
The top court had then asked SEBI to file a status report within two months.
Various petitions were filed in the Supreme Court pertaining to the Hindenburg report, including the constitution of a committee relating to regulatory mechanisms to protect investors' interests.
The January 24 Hindenburg report alleged stock manipulation and fraud by the conglomerate.
The Adani Group has attacked Hindenburg as "an unethical short seller", stating that the report by the New York-based entity was "nothing but a lie". A short-seller in the securities market books gains from the subsequent reduction in the prices of shares.