Market regulator Securities and Exchange Board of India (SEBI) and its then chairman, UK Sinha, did not act on an alert raised by the directorate of revenue intelligence (DRI) on the Adani group and failed to conduct an investigation based on the DRI alert, alleges a petitioner in a recent affidavit filed before the Supreme Court in the Adani-Hindenburg matter.
The affidavit sworn by Anamika Jaiswal, one of the petitioners, says that, in 2014, DRI was investigating a case of overvaluation of the import of equipment and machinery by various entities of the Adani group from a UAE-based subsidiary. "...while DRI investigation against Adani was ongoing in the over-invoicing case, DRI sent a letter dated 31 January 2014 to the SEBI chairperson alerting that there may be stock market manipulation being committed by Adani group of companies using the money siphoned off using the modus operandi of overvaluation in the import of power equipment by Adani group. The letter was accompanied by a compact disc (CD) containing evidence of siphoning of Rs2,323 crore and two notes on the case being investigated by DRI."
"It is shocking that the SEBI has suppressed and concealed this important information from the Court and never conducted any investigation based on the DRI alert...," the affidavit states.
Further, Ms Jaiswal alleges that SEBI has suppressed facts and provided false information, which amounts to perjury. "The then SEBI chairperson UK Sinha, instead of acting on the DRI letter, preferred to close the ongoing investigation into the Adani group. It is pertinent to mention that Mr Sinha was appointed SEBI chairman from 18 February 2011 to 1 March 2017. Interestingly, he is currently serving as 'non-executive independent director-chairperson' of NDTV, which has been acquired by the Adani group in 2022."
The petitioner also alleged that the market regulator has a conflict of interest in investigating the violations of law committed by it. "Cyril Shroff, managing partner of Cyril Amarchand Mangaldas, has been a member of SEBI's committee on corporate governance, which looks at offences like insider trading…Mr Shroff's daughter is married to Karan Adani, son of Gautam Adani, showing a clear conflict of interest," says the affidavit, adding that five out of the 24 SEBI investigation reports on Adani group companies are on insider trading allegations.
The affidavit further claimed that the frequent amendments brought into the regulations and definitions have "provided a shield and an excuse to the Adani group, due to which their regulatory contraventions and price manipulations remained undetected."
It says that all 24 investigation reports prepared by SEBI should be made available to the expert committee appointed by the apex court and to all the petitioners, adding that the market regulator has failed to either detect or act against violations promptly, thereby causing financial losses to unsuspecting small investors which run into crores of rupees.
Meanwhile, the apex court is slated to consider on 15th September the fresh status report filed by SEBI in the Adani-Hindenburg matter.
On 25th August, the market regulator, in a fresh status report, said that it had examined 24 matters in compliance with orders of the top court, adding that SEBI will take appropriate action based on the outcome of the investigations in the Adani-Hindenburg matter.
"Out of the said 24 investigations, 22 are final in nature and two are interim in nature. As on date, the said 22 final investigation reports and one interim investigation report are approved by the Competent Authority in accordance with SEBI's extant practice and procedures," said the status report filed by the executive director VS Sundaresan of SEBI.
Earlier this month, a non-profit global network of investigative journalists, Organised Crime and Corruption Reporting Project (OCCRP), said in an that article that crores of rupees were invested in listed stocks of India's Adani group via 'opaque' funds from Mauritius that 'obscured' the involvement of alleged business partners of the Adani family. OCCRP also reported that two men, Nasser Ali Shaban Ahli (Nasser) of the United Arab Emirates (UAE) and Chang Chung-Ling (Chung-Ling) (Chinese/Taiwan), who are treated as public investors in stock exchange filings, are actually Adani insiders, which is a violation of Indian laws. This also reduced the free float of the stock, helping to manipulate the prices with less funds.
The controversial Hindenburg Research's report, inter alia, alleged that the Adani group of companies has manipulated its share prices, failed to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI and violated other provisions of securities laws.