Investigation which began in October 2020 against Adani companies was for non-compliance with MPS norms, SEBI informs SC

New Delhi [India], May 17 : Securities and Exchange Board of India (SEBI) on Wednesday countered the comments made on social media over the Hindenburg report and also informed the Supreme Court that the investigation which began in October 2020 against Adani companies was for non-compliance with Minimum Public Shareholding (MPS) norms.
Solicitor General Tushar Mehta has apprised this fact to the bench of justices headed by Chief Justice of India DY Chandrachud. The top court today granted a three-month extension to SEBI to conduct its probe into the Hindenburg report.
SEBI said that while the Adani-Hindenburg matter is before the top court, there have been a number of comments made in
social media on this matter.
SEBI said that affidavit is filed to bring abundant clarity to the issues raised in social media comments.
SEBI in a fresh affidavit said that the Minister of State for Finance in his reply to the Parliament on July 19, 2021, had confirmed that "...SEBI is investigating some Adani Group companies with regard to compliance with SEBI Regulations".
SEBI said that the investigation referred to was in respect of possible non-compliance with Minimum Public Shareholding (MPS) Norms, and consequential violations. This investigation commenced in October 2020. It is hereby confirmed that the investigation referred to by the Minister had not commenced in 2016.
SEBI, in the fresh affidavit, said that the investigation that had commenced in October 2020 was referred to by the Minister of State for Finance in his reply to the Parliament.
In a fresh affidavit filed in the top court on May 17, SEBI has submitted to the top court that in the context of the Investigation into MPS norms, SEBI has already approached eleven overseas Regulators under the Multilateral Memorandum of Understanding (MMOU) with International Organization of Securities Commissions (IOSCO). Various requests for information were made to these Regulators. The first request to overseas Regulators was made as early as on October 6, 2020, SEBI has informed SC.
SEBI, in the fresh affidavit, said that the investigation that had commenced in October 2020 was referred to by the Minister of State for Finance in his reply to the Parliament.
SEBI informed the top court that in 2016, SEBI passed an order pertaining to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies and no listed company of Adani Group was part of the aforesaid list of 51 companies, which has been specifically stated in our rejoinder dated May 15, 2023, to the Supreme Court.
However, there were some FPIs including Cresta Fund Limited, Albula Fund Limited and APMS Fund Limited, the GDR relevant accounts of which, were frozen as a consequence of the 2016 order.
"It is hereby clarified that this action was purely a consequence of the GDR matter and not related to any examination into any Adani Group company," SEBI said.
The Supreme Court on Wednesday granted an extension of time for three months to the Securities and Exchange Board of India (SEBI) to conduct a probe into the Hindenburg report against Adani Group.
A bench led by the Chief Justice of India (CJI) DY Chandrachud and also comprising Justices PS Narsimha and JB Pardiwala granted an extension of time for three months to SEBI. The court said that SEBI is granted time till 14th August 2023 to conduct the probe. SEBI shall place on the record an updated status report in regard to the course of the investigation, the court said.
The Expert Committee has submitted a report bearing in mind the timeline of two months stipulated in the order constituting the Committee.
"In order to enable the Court and counsel to analyse the report and reflect on the suggestions which have been made by the Expert Committee, the proceedings shall be listed after the summer recess on 11 July 2023," the court said.
The court also said that the expert committee may hold further deliberations in the meantime.
The court also said that copies of the report of the expert committee shall be made available to the parties and their counsels to assist the court.
In a rejoinder filed recently, the Securities and Exchange Board of India apprised the Supreme Court on Monday that the market regulator is already investigating Adani Group companies since 2016 is "factually baseless".
SEBI has filed a rejoinder affidavit in response to a petition relating to Hindenburg Research's report on the Adani Group.
It had sought an extension to conclude the investigation in the report by US short-seller Hindenburg Research by a period of six months. The top court on Friday orally remarked that they will extend the time for the probe to SEBI, but not for six months and they can extend the time for the probe by three months.
SEBI told the SC that the investigation done earlier by SEBI pertains to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies, in respect of which investigation was conducted. SEBI submitted before the Supreme Court that no listed company of Adani Group was part of those 51 companies it was investigating.
"Pursuant to the completion of the investigation, appropriate enforcement actions were taken in this matter. Hence, the allegation that the Securities and Exchange Board of India ("SEBI") is investigating Adani since 2016 is factually baseless. I, therefore, say and submit that reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced," SEBI said in a rejoinder affidavit.
SEBI submitted before Supreme Court that in the context of an investigation into Minimum Public Shareholding (MPS) norms, SEBI has already approached eleven overseas Regulators under the Multilateral Memorandum of Understanding (MMOU) with the International Organization of Securities Commissions (IOSCO). Various requests for information were made to these Regulators. The first request to overseas Regulators was made as early as on October 6, 2020, and SEBI apprised the court.
SEBI submitted before the Supreme Court that the application for extension of time filed by it is meant to ensure carriage of justice keeping in mind the interest of investors and the securities market since any incorrect or premature conclusion of the case arrived at without full facts material on record would not serve the ends of justice and hence would be legally untenable.
SEBI has informed the apex court, "In respect of the investigation and examination relating to 12 transactions referred to in the Hindenburg Report, prima facie it is noted that these transactions are highly complex and have many sub-transactions across numerous jurisdictions and a rigorous investigation of these transactions would require collation of data/information from various sources including bank statements from multiple domestic as well as international banks, financial statements of onshore and offshore entities involved in the transactions and contracts and agreements, if any, entered between the entities along with other supporting documents".
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.
The apex court was then hearing petitions pertaining to the Hindenburg report, including on 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.