Review plea filed against SC’s clean chit to Sebi probe in Adani-Hindenburg case

A review petition has been filed in the Supreme Court, demanding a reconsideration of the apex court’s January 3 verdict that refused to order a separate probe into the allegations of accounting fraud and stock manipulation against the Adani Group, first aired in a report by US short-seller Hindenburg Research in January 2023.
The petition, filed by Anamika Jaiswal, said that the court judgment suffered from errors apparent on the face of record and that the Securities and Exchange Board of India’s (Sebi) regulatory failures were overlooked by the top court although these lapses eventually contributed to alleged regulatory contraventions and statutory violations.
It further said that the court could not have given a thumbs up to the market regulator in investigating the episode without acknowledging the probe’s outcomes.
“It is pertinent to note that Sebi in its status report has only updated the status of the 24 investigations as complete or incomplete and failed to disclose any findings or details on action taken. Unless the findings of the Sebi investigations are publicly reported, it cannot be concluded that there has been no regulatory failure,” Jaiswal argued in her plea, which also mentioned some other grounds warranting reviewing the judgment.
The review plea sought to re-argue the point about legislative amendments carried out by Sebi in 2018 and 2019 to tweak the Foreign Portfolio Investors (FPI) regulations, contending that these amendments diluted the requirement of disclosure of beneficial owners (BOs) and listing disclosures by doing away with the prohibition against an FPI having an “opaque structure”. According to the petition, the apex court failed to notice the impact of these amendments.
In its January verdict, the top court concluded that there was no material to show “glaring, wilful or deliberate inaction” by Sebi in carrying out its investigation nor anything to suggest regulatory failure by the market regulator.
Noting that the Hindenburg report or any other unsubstantiated news report cannot be treated as conclusive proof of the inadequacy of Sebi’s probe, the top court had shot down a plea jointly made in a bundle of petitions, including the one filed by Jaiswal, seeking the creation of a Special Investigation Team (SIT) to investigate Hindenburg’s allegations. The court maintained that the reliance on newspaper articles or reports by third party organisations as the basis for questioning a comprehensive investigation by a specialised regulator does not make sense.
The judgment recorded that Sebi has completed its investigations in 22 out of the 24 allegations levelled against the Adani group, giving the regulator three months for concluding the two pending investigations.
The bench, led by Chief Justice of India Dhananjaya Y Chandrachud, had at the time also directed that the investigative agencies of the Union government should probe whether the loss suffered by Indian investors due to the conduct of the Hindenburg Research and other entities in taking short positions involved any infraction of law, and if so, suitable action shall be taken.
Hindenburg’s report, published in January 2023, claimed “brazen accounting fraud” and “stock manipulation” by the Gautam Adani-led group. Though the conglomerate rejected the report as “unresearched” and “maliciously mischievous”, it triggered a massive rout of Adani group stocks, which lost over $140 billion in days and forced the cancellation of a planned ₹20,000 crore share sale.
A set of petitions, filed separately by lawyers and activists last year, demanded a court-monitored probe into the matter by setting up a SIT, under the supervision of a retired judge. Some of the petitioners also questioned the validity of the 2018 and 2019 amendments in the FPI regulations.
But the court judgment rejected the petitioners’ contentions, ruling that the impugned amendments had tightened the norms on disclosure of BOs under the FPI and LODR (Listing Obligations and Disclosure Requirements).