Hindenburg Research, now a well-known name in India, presented a report on January 24, 2023 which pointed fingers at an Indian industrialist Gautam Adani often accused of being close to Prime Minister Narendra Modi.
The oppositions never misses an opportunity to attack PM Modi using Adani, and Hindenburg Research has provided a potent weapon to India’s opposition against the BJP, and the opposition has continuously raised the issue of Adani in the name of Hindenburg.
Now On Wednesday, 3 January, 2024 the Supreme Court has passed the verdict in the Adani-Hindenburg case. And, the verdict is in favour of Adani group, as the court found no irregularities or illegalities in the procedure.
SUPREME COURT VERDICT:
The Supreme Court has rejected pleas to transfer the probe into allegations made in a report published by the Hindenburg group against the Adani group of companies from the Securities and Exchange Board of India (SEBI) to a Special Investigation Team (SIT). The court stated that the petitioners failed to provide valid grounds for such a transfer. Hence, Adani gets a clean chit.
The judgment concluded that no valid grounds had been presented to direct SEBI to revoke its amendments to the Foreign Portfolio Investments (FPI) and Listing of Obligations and Disclosure Requirements (LODR) regulations, which were made within the scope of its delegated legislative power. The court found no irregularities or illegalities in the procedure followed in amending these regulations.
A three-judge bench, presided over by Chief Justice of India D Y Chandrachud, J B Pardiwala and Manoj Misra noted that SEBI had completed the investigation in 20 out of the 22 cases related to the allegations against the Adani group. The court directed that the investigation into the remaining two pending cases be concluded expeditiously, preferably within three months.
The bench, further instructed the Centre and its investigative agencies to look into whether Indian investors suffered losses due to the actions of Hindenburg Research and other entities engaging in short positions that involved any legal violations. Suitable action would be taken if any violations were found.
The Supreme Court dismissed allegations of conflict of interest raised by the petitioners against some members of its expert committee, deeming them “unsubstantiated”.
The judgment clarified that the court’s power to intervene in SEBI’s regulatory domain when framing delegated legislation is limited.
The court must refrain from substituting its own judgment over SEBI’s regulatory policies. Judicial review is primarily concerned with assessing whether regulations violate fundamental rights, constitutional provisions, statutory provisions, or are manifestly arbitrary.
BACKGROUND:
On January 24, 2023, ‘Hindenburg Research’ released a 32,000-word report on the Adani Group. The report claimed that the group had been involved in stock manipulation and accounting fraud for decades.
It stated that the wealth of Adani Group founder Gautam Adani had increased by one billion dollars to 120 billion dollars due to a rise in share prices over three years.
During this period, shares of 7 companies in the group had increased by an average of 819 percent, prompting 88 questions about the report’s findings.
The ‘Hindenburg Research’ report alleged the existence of several shell companies belonging to the Adani family in tax haven countries, from Mauritius to the United Arab Emirates.
According to Hindenburg’s allegations, these companies were used for corruption and money laundering, with funds misappropriated through them.
The report claimed that dozens of people, including former Adani Group executives, were interviewed for this research report. Thousands of documents were reviewed, and visits were made to half a dozen countries. The report also mentioned loans taken on a large scale by pledging shares.
