Supreme Court Upholds SEBI's Investigation Findings on Adani Group: Hindenburg Allegations Dismissed

By IndraStra Global News Team

 On January 3, 2023, the Indian Supreme Court rendered a decision supporting the Securities and Exchange Board of India's (SEBI) investigation into the Hindenburg case against the Adani Group. In a sweeping victory for the conglomerate, the highest court emphasized that the report issued by the Organised Crime and Corruption Reporting Project (OCCRP) could not be used as a foundation for questioning the regulatory probe conducted by SEBI.
The genesis of this legal tussle dates back to January 2023, when Hindenburg Research made damning allegations against the Adani Group. The report accused the conglomerate of engaging in long-standing stock manipulation, accounting fraud, and substantial debt in its listed companies. This release triggered a sharp decline in Adani companies' share values, purportedly leading to a staggering $100 billion loss.
Chief Justice of India DY Chandrachud, along with justices JB Pardiwala and Manoj Misra, presided over the judgment. The bench firmly stated that there were no substantial grounds to transfer the investigation to a Special Investigation Team (SIT). The SEBI had meticulously examined 22 out of the 24 cases connected to the allegations made by the US-based short seller Hindenburg Research LLC.
Granting the SEBI three additional months to conclude investigations into the remaining two cases, the Supreme Court directed the government and SEBI to scrutinize Hindenburg's adherence to market shorting regulations and take requisite actions as warranted.
Chief Justice Chandrachud asserted, "The reliance on the OCCRP report is dismissed. Relying solely on a third-party organization's report without verification cannot constitute conclusive evidence. There are insufficient grounds to transfer this probe from SEBI."
The Court reiterated its previous stance conveyed to lawyer Prashant Bhushan, emphasizing that Hindenburg's accusations and the OCCRP report targeting the Adani Group should not be accepted as absolute truth. Referring to reliance on newspaper reports and third-party entities to question SEBI, the Supreme Court highlighted that while these could serve as inputs, they were insufficient as conclusive evidence to doubt SEBI's investigation.
The litigation was initiated by lawyers Vishal Tiwari and ML Sharma, Congress leader Jaya Thakur, and activist Anamika Jaiswal. Their petitions alleged share price inflation within the Adani Group and significant falls in the shares of some group entities following Hindenburg Research's report on January 24 the previous year. The Adani Group dismissed this report as a concoction of misinformation and concealed facts aimed at fulfilling ulterior motives.
The Supreme Court justified its denial of the request to transfer the investigation to an SIT, emphasizing that such a step should only be taken under extraordinary circumstances and necessitated robust, logical justifications.
Additionally, the Court highlighted the importance of addressing gaps for the benefit of Indian investors, instructing the Centre and SEBI to implement the committee's recommendations for strengthening investor protections.
During the preceding hearing, Solicitor General Tushar Mehta representing SEBI revealed that 22 of the 24 suspected transactions had been thoroughly investigated, awaiting information from foreign agencies for the remaining two cases. A committee appointed by the Supreme Court previously exonerated the Adani Group in its report submitted in May of the previous year, absolving SEBI of regulatory failures and dismissing claims of price manipulation by the conglomerate. The committee commended the Adani Group for its efforts in reassuring retail investors amidst market turmoil triggered by the Hindenburg report.
Responding to the Hindenburg report, the Adani Group labeled it as a selective and manipulative presentation of publicly available information to fabricate a false narrative. They underscored the attack not merely as unwarranted criticism towards a particular company but as a calculated assault on India's independence, institutional integrity, and growth trajectory.

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