SC grants SEBI time till Aug 14 to complete probe into Adani stock manipulation row

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Gautam Adani | Photo: AP

New Delhi: The Supreme Court on Wednesday granted the Securities and Exchange Board of India (SEBI) time till August 14 to complete its probe into the allegations of stock price manipulation by the Adani group and asked the market regulator to place on record an updated status report of the probe.

A bench headed by Chief Justice D Y Chandrachud also directed that copies of the report submitted before it by the apex court-appointed Justice (retd) A M Sapre expert committee be made available to the parties to enable them to assist it in further deliberations in the matter.

When Solicitor General Tushar Mehta, appearing for SEBI, requested the top court to consider extending the deadline till September end, the bench said, "We are not granting an indefinite extension of time. If there is some genuine difficulty, you let us know."

The bench, also comprising Justices PS Narasimha and JB Pardiwala, was hearing the pleas filed on the Adani-Hindenburg row. It was also considering the SEBI's application seeking extension of time by six months to complete the probe into allegations of stock price manipulation by the Adani group.

"SEBI is granted an extension of time till August 14, 2023 to submit its report," the bench said, adding, "SEBI shall place on record an updated status report with regard to the course of investigation."

The remit of the Justice Sapre panel was to provide an overall assessment of the situation, including the relevant causal factors which have led to volatility in the securities market in the recent past.

The panel was asked to suggest measures to "(i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors", the court had earlier said.

At the outset on Wednesday, the CJI observed, "The committee has submitted its report. It is a tentative report and now SEBI has asked for an extension of time to complete their investigation."

Advocate Prashant Bhushan, appearing for one of the petitioners, referred to a reply given by the minister of state for finance in Parliament in July 2021 about SEBI investigating some Adani group companies with regard to compliance with SEBI regulations.

"What I am saying is they (SEBI) have to put on record as to what has happened to these investigations which they have been doing since at least 2016 ... They have to put this on record what has happened to those because otherwise what is happening is, that there is clearly, I mean one can see that so clearly, somehow an attempt to shield the Adani companies in recent years," Bhushan said.

He argued in recent times, despite many complaints having been made to SEBI over the last six-seven years, it appeared that they are doing "absolutely nothing despite it being written on the wall".

"You pick up something in 2016, something in 2020 and connect them with the present issue which is arising from the Hindenburg report," Mehta said while responding to Bhushan.

"I want to just clear the air. 2016 is something totally different, distinct and completely separate. My friend now wants that whatever investigations or proceedings were taken against a particular company till now should be placed on record. I don't think that is the remit but I have no difficulty," the top law officer said.

He said the minister of state for finance in his reply to Parliament on July 19, 2021 had confirmed that SEBI is investigating some Adani group companies with regard to compliance with regulations.

"It may be noted that the investigation referred to was in respect of possible non-compliance with Minimum Public Shareholding (MPS) norms, and consequential violations. This investigation had commenced in October 2020. It is hereby confirmed that the investigation referred to by the minister had not commenced in 2016," Mehta said.

He said SEBI has made a statement to the apex court that it is examining or investigating the allegations made in the Hindenburg report and one of these allegations was related to non-compliance with MPS norms.

Mehta said SEBI has also submitted to the court that current status of this investigation has been placed before the expert committee constituted by the apex court.

"SEBI has also submitted to the court that in the context of investigation into MPS norms, SEBI has already approached eleven overseas regulators under the Multilateral Memorandum of Understanding (MMOL) with International Organization of Securities Commissions (IOSCO). Various requests for information were made to these regulators. The first request to overseas regulators was made as early as on October 6, 2020," he said.

"It is this investigation that had commenced in October 2020 that was referred to by the minister of state for finance in his reply to the Parliament," Mehta said.

He said in 2016, SEBI had passed an order pertaining to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies and no listed company of the Adani Group was part of the list.

"However, there were some FPIs including Cresta Fund limited, Albula Fund Limited and APMS Fund Limited, the GDR relevant accounts of which were frozen as a consequence of the 2016 order. It is hereby clarified that this action was purely a consequence of the GDR matter and not related to any examination into any Adani Group company," Mehta said.

He said six-month period is the "compressed time limit" and the court may consider extending the time available till September end for the probe to conclude.

"You tell us what you have done because we had already granted you two months. We have granted you now further extension of three months which makes it five months. So, effectively you are asking for six months. We have granted you already five months," the CJI said.

"We have not specifically dealt with each individual issue but we have said that you will give us an updated status report on the course of the investigation...," Justice Chandrachud said.

One of the petitioners said SEBI may submit the findings which they have drawn till now.

"When the investigation is on, can we tell them tell us what is your prima facie finding until today?" the bench asked sharply.

In its order, the bench noted the expert committee has submitted a report bearing in mind the timeline of two months stipulated in the order constituting the panel.

"In order to enable the court and counsel to analyse the report and reflect on the suggestions which have been made by the expert committee, the proceeding shall be listed after the summer recess on July 11," it said.

"The expert committee is requested to continue to assist the court. The committee may hold further deliberations in the meantime. The committee would be requested to take up any further aspects or suggestions as may be formulated by the court following the course of deliberations when the proceedings are next listed for hearing," it said.

After the bench dictated the order, Bhushan said the court may ask SEBI to place the result of probe which they have admittedly been doing into Adani companies.

"We are dealing right now with the fallout of the Hindenburg report. The purpose of these proceedings is not for us or for any public interest petitioner to conduct a roving inquiry...," the CJI said.

During the arguments, Bhushan said if Adani group's shares increase abnormally by 10,000 per cent, 5,000 per cent etc. over a period of less than a year, then obviously "alarm bells have to be rung".

Adani Group stocks had taken a beating on the bourses after Hindenburg Research made a litany of allegations, including those about fraudulent transactions and share-price manipulation, against the business conglomerate.

The Adani Group dismissed the charges as lies, saying it complies with all laws and disclosure requirements.


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