Market regulator SEBI suppressed important facts from the Supreme Court and “slept over” Directorate of Revenue Intelligence’s letter on alleged stock manipulation by the Adani firms, one of the PIL petitioners in the Adani-Hindenburg row has alleged in the top court in an affidavit.
The apex court is seized of four PILs on the Adani-Hindenburg controversy including those by lawyers M L Sharma and Vishal Tiwari, Congress leader Jaya Thakur and law student Anamika Jaiswal.
On August 25, SEBI had informed the apex court it has completed the probe in all but two allegations against the Adani group, and is still awaiting information from five tax havens on the actual owners behind the foreign entities that have invested in the conglomerate.
The Securities and Exchange Board of India (SEBI), in a status report to the Supreme Court, said out of the 24 matters it was probing, findings in as many as 22 are final.
In an affidavit filed before the top court, Anamika Jaiswal has said while the investigation against the Adani group was going on in the over invoicing case, the Directorate of Revenue Intelligence (DRI) sent a letter to the then SEBI chairperson in 2014 alerting him that the group may be committing stock market manipulation using the money allegedly siphoned off using the modus operandi of over-valuation in the import of power equipment.
The letter was accompanied by a CD containing evidence of siphoning off Rs 2,323 crore and two notes on the case being investigated by the DRI, the affidavit claimed. The letter, the affidavit said, also stated that more documents may be obtained from the Mumbai Zonal Unit of the DRI.
“The petitioner herein submits that not only has the SEBI suppressed important facts from this court and slept over DRI alerts, but there is also an apparent conflict of interest in SEBI conducting Adani investigation.
“Mr. Cyril Shroff Managing Partner, Cyril Amarchand Mangaldas has been a member of SEBI’s Committee on Corporate Governance, which looks at offences like insider trading,” the affidavit said, adding his daughter is married to Gautam Adani’s son. This, the affidavit said, shows a clear conflict of interest.
The petitioner submitted that five out of the 24 SEBI investigation reports are on insider trading allegations against the Adani group companies.
Referring to documents that have been unearthed during investigation by a journalist consortium ‘Organized Crime and Corruption Reporting Project’, the affidavit said two Mauritius based companies- Emerging India Focus Fund (EIFF) and the EM Resurgent Fund (EMRF)- had invested and traded in a large volume of shares of four Adani companies between 2013 and 2018.
“The names of these two companies figure in SEBI’s list of 13 suspected Foreign Portfolio Investments /overseas entities but SEBI has been unable to trace their ultimate beneficial owners or economic interest shareholders,” Jaiswal has claimed in the affidavit.
The petitioner said frequent amendments brought in by SEBI to the regulations and definitions have benefitted Adani Group.
“These amendments have in fact provided a shield and an excuse to the Adani Group, due to which their regulatory contraventions and price manipulations remained undetected.
“Even now, the expert committee has cited the said amendments as an excuse to declare that the investigation with regard to issues as mentioned in Hindenburg Report may be a journey without a destination,” the affidavit said.
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Hindenburg Research, in a January 24 report, had alleged accounting fraud, stock price manipulation and improper use of tax havens, triggering a stock market rout of the Adani group shares that erased close to USD 150 billion in market value at its lowest point.
Following this, the Supreme Court asked SEBI to look into the allegations and submit its findings. In March, a separate six-member expert panel was formed which included a retired judge and veteran bankers, to go into regulatory aspects of the allegations.
That panel said in May the SEBI has so far drawn a blank in its investigations and its ongoing pursuit of the case is a “journey without a destination”.
The apex court set August 14 as the deadline for SEBI to conclude its probe and submit the report. The regulator sought a 15-day extension to conclude the investigation. It has now submitted a status report on its probe.
On its part, the Adani group has rejected all allegations.
