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The 106-page Hindenburg expose of the Adani Group in January 2023 brought brazen stock manipulation and accounting fraud to the fore, as well as the use of a labyrinth network of shell companies for surreptitious movements.
September 12, 2023: The Supreme Court has been told that the Securities and Exchange Board of India (SEBI) has suppressed important facts and shown a conflict of interest in its probe against Adani Group companies.
Suppression of facts
The petitioner, Anamika Jaiswal, alleged that SEBI had not disclosed the receipt of a letter from the Directorate of Revenue Intelligence (DRI) containing evidence of alleged stock manipulation by the Adani group. The letter was sent to SEBI in July 2021, but SEBI only took action in January 2023 after Jaiswal filed a petition in the Supreme Court.
Organized Crime and Corruption Reporting Project
According to Jaiswal, during an investigation by the journalist consortium ‘Organized Crime and Corruption Reporting Project’, it was found that two Mauritius-based funds – the Emerging India Focus Fund (EIFF) and the Emerging Resurgent Fund (EMRF) – traded extensively in four Adani companies between 2013 and 2018. SEBI has been unable to trace their ultimate beneficial owners or economic interest shareholders despite their names appearing on its list of 13 suspected foreign portfolio investments/overseas entities.
Conflict of interest
Jaiswal also alleged a conflict of interest in SEBI conducting the probe against the Adani group. She pointed out that Cyril Shroff, a member of SEBI’s Committee on Corporate Governance, is married to the daughter of Gautam Adani, the chairman of the Adani group.
Jaiswal also alleged that SEBI has been unable to trace the ultimate beneficial owners of two Mauritius-based companies that invested heavily in Adani group shares. These companies are named in SEBI’s list of 13 suspected Foreign Portfolio Investments (FPIs), but SEBI has been unable to identify their owners.
Amendments to regulations
Jaiswal also alleged that SEBI has repeatedly amended its regulations to benefit the Adani group. She said these amendments have made it difficult for SEBI to investigate and prosecute the Adani group for alleged regulatory violations. The Supreme Court has asked SEBI to respond to Jaiswal’s allegations. The court has also requested SEBI to provide a copy of the DRI letter to Jaiswal.
The allegations made are serious and need to be investigated thoroughly. If SEBI is found to have suppressed facts and “slept over” information on alleged stock manipulation by the Adani group, it would be a significant lapse on the part of the regulator.
The Supreme Court’s order is a step in the right direction and will hopefully ensure a fair and impartial investigation.