Clean Chit To Adani Group? Sebi Did Not Bring Any Charge In Supreme Court
In what seems more like a clean chit to the Adani Group, the Chief Justice of India (CJI) DY Chandrachud questioned the credibility of the US-based short seller Hindenburg Research report that had rocked India's stock markets and led to a whopping $125 billion crash in the share price of Adani Group in January and February. Also, stock market regulator SEBI, which was probing the Adani Group for various violations as alleged in the Hindenburg report, did not bring any charges against the business conglomerate and did not demand any extension of time to probe the matter. This simply means that Adani Group is likely to get a clean chit from the SC and SEBI on the majority of the allegations against it, whenever the CJI issues his order, legal experts say.
But it is likely that SEBI will issue its findings and final punishment and penalty against the dubious short selling in Indian markets and Adani Group shares following the Hindenburg report. SEBI was probing allegations that short sellers did front running on the Hindenburg report, which simply means that those with the knowledge of the publication of the report built short positions in Adani group companies and markets ahead of the publication of the sensational report.
In a report that was circulated in the stock markets on January 25, Hindenburg had levelled a barrage of allegations against Adani Group chiefly saying that the share price of its listed companies was highly inflated by the way of curbing the supply of shares. Among other allegations, Hindenburg had said that several foreign funds holding stakes in Adani Group's listed companies were just front entities of billionaire businessman Gautam Adani and his family.
Adani Group invokes heightened emotions in the stock markets since the group is perceived to be close to Prime Minister Narendra Modi and India's opposition parties have used businessman Gautam Adani's name to attack the image of PM Modi.
"We cannot treat the Hindenburg report as the true state of affairs. That is why we asked SEBI to probe," CJI Chandrachud said during the hearing.
Socialist lawyer Prashant Bhushan, who for years has been an activist against corruption and fighting the government, was the petitioner in the Adani matter. During the hearing it was also revealed that Bhushan had passed several documents to the George Soros-funded organisation OCCRP, which calls itself a global network of journalists, to write stories against the Adani Group, which has called the attacks on it as motivated.
Solicitor General Tushar Mehta told the SC that there was a growing tendency to plant stories in media outside of India to influence matters in India.
Following the Hindenburg report in January, the SC had appointed a six-member expert committee to monitor the probe by market regulator SEBI against Adani based on the allegations made in the Hindenburg report. It came out during the hearing that the expert committee did not find any breach of existing disclosure rules. Hindenburg had alleged that Adani Group was in severe violation on disclosure rules with regard to related party transactions.
The key members of the committee included retired judge AM Sapre, OP Bhat (former chairman of SBI), Justice JP Devadhar, KV Kamath, Nandan Nilekani for ace Mumbai-based lawyer Somasekharan Sundaresan.
The SC warned petitioner Bhudhan against casting any aspersions on the SC appointed six-member expert committee. The apex court also barred Bhushan from reading the Hindenburg report and said that reports by Hindenburg and OCCRP cannot be treated as gospel truth.
Solicitor General Mehta said that when they contacted OCCRP, the organisation told them that it was not their policy to share details of the documents, which were with an NGO operated by Bhushan.
"A publications works cannot be treated as gospel trust," Justice Chandrachud said.
CJI Chandrachud's big remarks
-WE CANNOT TREAT THE HINDENBURG REPORT AS “TRUE STATE OF AFFAIRS”
- THAT IS WHY WE ASKED SEBI TO PROBE: CJI
-WE HAVE TO BE CAREFUL: CJI TO BHUSHAN
-THIS WHEN PRASHANT BHUSHAN TOLD CJI THERE WERE MANY FACTUAL REVELATIONS IN HINDENBURG REPORT
Advocate Bhushan: There were many factual revelations in the Hindenburg report. If you see the executive summary for the findings
CJI: We do not have to consider it an ipso facto determination of facts and conclude that is the true state of affairs…that is why we asked SEBI to probe Also that entity is not before us. Also Bhushan, tell us from the report what additional direction you require to be given to SEBI to improve the regulatory network
Bhushan: We are saying that unfortunately, SEBI's role in this is suspect. A lot of information was available to it in 2014. A formal letter was given by the DRI (directorate of revenue intelligence) Chairman.
Before the lunch break in SC
Tushar Mehta (TM): We (SEBI) are not seeking any extension.
TM: There are 24 cases that were identified.
TM: Investigation on 22 are already over by SEBI.
TM: Balance 2, we need information from foreign regulators. Here is where we are not in control of the time.
CJI: What is SEBI intending to do to arrest the loss to investor due to short selling?
CJI: Have you found any wrongdoing so far as short selling is concerned?
TM: We are taking action.
TM: So far as regulatory framework is concerned, we are actioning expert committee’s suggestions.
TM: In principle the suggestions are not objective. They have given suggestions. There is no objection. Any suggestions to improve regulatory framework.
CJI: Show us suggestions
TM: Para 104. Conclusions. SEBI has been getting feedback from markets and has been amending. Nov 21 SEBI took a call on RPT (related party transactions).
