SC Offers 3-month Extension To Sebi On Adani Group Case

The court, however, said it would review the Justice Sapre committee’s report on regulatory failure and breach of laws before deciding on an extension to Sebi, adjourning the proceedings until 15 May.

Sebi told the Supreme Court that it is yet to form a final opinion regarding the “suspicious" nature of transactions and alleged breach of laws by the Adani group, as pointed out in a critical report by US short-seller Hindenburg Research in January that wiped out more than $140 billion in the market value of the conglomerate.

View Full Image

Seeking at least six months to complete its probe into the Adani-Hindenburg episode, solicitor general Tushar Mehta clarified that Sebi’s application on the extension of time did mention “12 “suspicious transactions", but the regulator was only referring to the US short-seller Hindenburg’s report that alleged such transactions to have been possible violations.

“When we said ‘suspicious transactions’, we did not mean ‘suspicious’ in our findings. But these are the ones alleged to be suspicious by the Hindenburg. We are yet to form a final opinion on anything, and for that, we are asking for a minimum period of another six months," Mehta told a bench led by Chief Justice of India Dhananjaya Y. Chandrachud.

In its application last month, Sebi said: “In respect of the investigation/examination relating to 12 suspicious transactions, prima facie it is noted that these transactions are complex and have many sub-transactions and a rigorous investigation of these transactions would require collation of data/information from various sources along with detailed analysis including verification of submissions made by the companies."

The bench, however, pointed out that it gave Sebi two months by the original order on 2 March, and an extension of six months looks unreasonable. “Six months may not be appropriate. We cannot give you a minimum of six months. Let there be some alacrity. We can give you a maximum of three months and put this matter again in August," the bench, which also comprised justices P.S. Narasimha and J.B. Pardiwala, said.

However, Mehta insisted that Sebi can’t conclude its probe within the next three months, contending it would take at least 15 months to investigate such transactions in the normal course.

Advocate Prashant Bhushan, appearing for one of the PIL petitioners in the matter, opposed Sebi’s request, claiming that the regulator has been looking into similar complaints against the conglomerate since 2016.

He added that Sebi is a member of the International Organizations of Security Commissions (IOSCO), which allows it to access information from securities regulators of several foreign countries.

Mehta refuted Bhushan’s claims, saying the 2016 investigation by Sebi relates to an entirely different matter. He also informed the bench that Sebi had already written to IOSCO.

At one point in the hearing, the bench observed that it had not said that there was a regulatory failure by Sebi in the Adani-Hindenburg episode. “That is one of the terms of the references of the Justice Sapre committee," said the bench, adding that a report from the committee has also been received, but the judges were yet to go through it.

The court then adjourned the matter for 15 May, saying it would also peruse the committee’s report before passing an order on Sebi’s application for extending time.

A six-member panel, led by former Supreme Court judge A.M. Sapre, was set up by the court’s 2 March order to investigate allegations of regulatory failure and breach of laws against the Adani group and to suggest steps to bolster the statutory and supervisory regime.

At that time, the Adani group, in a statement, had said it welcomes the investigation, “which represents a fair opportunity for everyone to be heard and for all issues to be addressed".

Hindenburg’s report, released on 24 January, 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 in the group’s flagship.

The Adani Group, however, denied allegations of stock market manipulation and accounting fraud by Hindenburg.