On Thursday (March 2), India’s highest court directed the market regulator to examine potential breaches in securities law or other regulatory disclosures by the Adani group, which has faced allegations of unethical business practices by a U.S. short seller.
In response to the Adani group’s sharp share declines, the Supreme Court of India also mandated the establishment of an investor protection panel.
The Securities and Exchange Board of India (SEBI) has been investigating the Hindenburg Research report from January 24, which claimed that the Adani group had improperly leveraged offshore tax havens and manipulated stocks.
The conglomerate has denied these accusations, and SEBI previously informed the court that it was examining both the Hindenburg report and market activity before and after its publication.
The three-judge bench, led by Chief Justice of India D. Y. Chandrachud, instructed SEBI to investigate “whether there has been a failure to disclose transactions with related parties” and “whether there was any manipulation of stock prices in contravention of existing laws”.
The ruling followed several public-interest litigations on losses investors incurred due to the stock market slump sparked by the Hindenburg report. Since its publication, seven Adani group companies have collectively lost approximately $135 billion in value.
Billionaire Gautam Adani has expressed his approval of the Supreme Court’s decision.
“It will bring finality in a time bound manner. Truth will prevail,” he said in a post on Twitter.
Hindenburg Research said in its report it had identified numerous “undisclosed related party transactions” by both listed and private Adani companies, allegedly in violation of Indian disclosure laws.
In its rebuttal, Adani said “all related party transactions are at arm’s length, properly disclosed and reviewed/audited by statutory independent auditors”.
The court also formed a panel to be headed by a retired Supreme Court judge to examine how investor protection mechanisms can be strengthened.
The six-member panel, which is due to report back within two months, will include former chairman of State Bank of India O.P. Bhatt and prominent banker K.V. Kamath.
It has been asked “to provide an overall assessment of the situation”, Chandrachud said.
Adani has sought to calm investors and this week held a fixed-income roadshow in Singapore and Hong Kong. The group, according to sources, has told creditors it has secured a $3 billion loan from a sovereign wealth fund.