"Truth has prevailed." That was how Gautam Adani, chairman of the Adani Group reacted, welcoming the Supreme Court judgement in the Adani-Hindenburg case. The apex court rejected pleas to transfer the investigation into the allegations leveled by US-based short seller Hindenburg against the Adani Group to an SIT, and asked Securities and Exchange Board of India (SEBI) to complete the probe in the remaining two cases within three months.
There are several key takeaways from the Supreme Court judgement. It said the power of the court to enter the regulatory framework was limited, and noted that SEBI had already completed its investigation in 20 out of the 22 matters and there was no ground to transfer the investigation from the SEBI to an SIT.
The court also rejected the petitioners' allegations of conflict of interest against some of the members of the expert committee.
The Supreme Court had, in March 2023, ordered the formation of an expert committee to probe Hindenburg's allegations related to stock manipulation by the Adani Group. The committee, headed by retired Supreme Court judge Justice A.M. Sapre, submitted its report in May stating prima facie there was no regulatory failure on the allegation of price manipulation. The committee had also suggested setting up of a multi-agency investigative committee in complex matters.
Hindenburg Research, a forensic financial research firm, had, in January 2023, published a report claiming the Adani Group had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” The report had further pointed to substantial debt, including pledging of shares of the inflated stock for loans, putting the entire group on a precarious financial footing. The report alleged that Gautam Adani's brother Vinod Adani ran a "massive network" of offshore shell entities that "regularly and surreptitiously" transact with Adani.
Even as the Adani Group had denied all the allegations that the report made, shares of various Adani Group companies had plunged over days following the release of the Hindenburg Report.
Later, towards the end of August 2023, the Organised Crime and Corruption Reporting Project (OCCRP) made more allegations of stock price manipulation against the Adani Group.
The Supreme Court, in its ruling on Wednesday, rejected the petitioners' reliance on the OCCRP report, stating that the OCCRP report could not be taken into account to doubt the SEBI investigation. The reliance on a third-party organisation report without any verification couldn't be relied upon as proof, it said.
Importantly, the top court wants SEBI to probe whether the loss suffered by Indian investors due to the conduct of Hindenburg and any other entity in taking short position involved any infraction of law and if so take suitable action.
Senior advocate Sidharth Luthra told reporters that since the Supreme Court had taken a view that the report on 20 out of the 22 transactions was clear, he thought it was a "clean chit" for the Adani Group.
"The SEBI regulatory system and the regulations have been held to be a strong, robust system. The court has raised a concern that merely on newspaper articles and reports one should not be rushing to courts, especially in PILs, because PIL is a very crucial jurisdiction for this country," said Luthra.
Following the verdict, shares of of Adani Group rose. Among some of the group shares, Adani Green was up 6 per cent, Adani Power rose 5 per cent, Adani Wilmar gained 4 per cent, Adani Enterprises closed 2.5 per cent higher, and Adani Ports ended the day with 1.4 per gain. The broader BSE Sensex, meanwhile, closed down 536 points or 0.8 per cent at 71,356.60 level.
