A bureaucrat's job is a balancing act. Most Indian Administrative Services officers in high-profile positions are often walking the thin red line on political correctness and the chief of the Securities and Exchange Board of India (SEBI) is no exception.
Upendra Kumar Sinha, one of the longest-serving Sebi chairman between 2011 and 2017, had a unique style of setting the cat amongst the pigeons. He presided over Sebi at a time when the co-location trading scandal at the National Stock Exchange (NSE) was a raging controversy and the role of his predecessor Sebi chairman was conspicuous due to the acts of omission in the commission of duty. Had Sebi not acted under Sinha's tenure in ordering investigations, the co-location scandal would have remained buried. Despite the NSE being a cosy club of retired bureaucrats and its two top bosses calling the shots in New Delhi's power circles, Sebi under Sinha, managed to order two forensic investigations of NSE's systems that opened the pandoras box. On his last day in office in February 2017, Sinha wrote a letter to the NSE board asking them to also get the audit extended to NSE's cash segment. With powerful people backing NSE, the investigations were slow and Sinha can be accused of muted action, yet the credit fully goes to him for setting the ball roiling. Similarly, he also set the ball rolling on investigations into the Adani group.
Currently, Sebi is in the eye of the political storm for the closure of its investigations into the alerts generated by the Directorate of Revenue Intelligence (DRI) with regard to the Adani Group, where it was alleged that the conglomerate had sent money outside the country by over-invoicing of bills and the same proceeds was used to manipulate group stocks. But amidst the cacophony and political mudslinging on social media, nobody is paying attention to what exactly happened to the DRI's case and its allegations. Instead, stones are being pelted on SEBI for cowing down to the political pressure in ignoring the alerts sent to it by DRI and closing its investigations against Adani.
Did Sebi close its case against Adani on the DRI alerts by turning a blind eye?
Sebi insiders say that after DRI red-flagged certain transactions involving the Adani group in 2014 and sent a show cause notice (SCN) to the group in 2015, the same year the regulator actually launched an investigation into the matter. It was Sebi's probe that found that the alleged transactions were routed through the Dubai branch of Bank of Baroda (BoB).
What did Sebi do? It first wrote to BoB in Dubai for more information and when the reply was not forthcoming, it even approached the bank's head office in Mumbai. The buck did not stop here, Sebi also wrote to the Reserve Bank of India (RBI), which was then presided by Governor Raghuram Rajan. Like the Adani Group is perceived to be close to the current ruling dispensation led by Prime Minister Narendra Modi, the former RBI Governor Rajan was perceived to be close to the Congress party.
Sebi hit a roadblock since RBI, the banking regulator, did not pay much heed to the issue and BoB cited legal restrictions that its branch faced in Dubai for its inability to share information with Sebi.
Did Sebi keep quiet after its plea to BoB and RBI went unheard for more information? Sources close to the regulator's office say, that before Sinha left Sebi in 2017, the watchdog also wrote to IOSCO- International Organisation of Security Commissions and sought its help in decoding the Adani transactions. There too, SEBI hit a wall since the information was not forthcoming and IOSCO did not help.
What happened to DRI's case against Adani?
Before Sebi could peruse further, in 2017, the adjudicating authority of DRI, the same authority that had issued the SCN, set aside all the allegations and dropped the SCN against the Adani Group. Propogandists and political animals may say that DRI was acting under PM Modi but that would now amount to shifting the goal post from targeting SEBI to DRI.
Those dealing with legal issues in SEBI say, the regulator actually closed its investigations against the Adani group on the specific issue in 2022, nearly eight years after it first started the probe. This was after the adjudicating authority in DRI had rejected the SCN issued and the basic premises of the case had lost its sheen. In March 2023, the Supreme Court dismissed a petition filed by DRI challenging orders issued in 2022 by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), the tribunal which had quashed the over-invoicing allegations levelled by the DRI against three Adani group companies.
Allegations in social media and politically charged petitions in the Supreme Court ahead of the 2024 national elections still make for a great theatre.