SEBI has ruled that Adani Group did not violate listing or related party rules, dismissing Hindenburg’s allegations. Gautam Adani hailed the verdict, calling the claims “baseless” and reaffirming his commitment to nation building.
A Supreme Court-appointed expert panel had earlier conducted a detailed review and similarly found no prima facie evidence of wrongdoing by the Adani Group.
The SEBI investigation also noted that all loans and transactions between Adani Group companies and entities like Adicorp Enterprises, Milestone Tradelinks, and Rehvar Infrastructure were fully repaid with interest, with no diversion or siphoning of funds.
Applying the “substance over form” principle, the regulator clarified that these dealings did not qualify as related party transactions under the rules in effect at the time.
SEBI emphasized that the 2021 amendment to the SEBI (LODR) Regulations, which expanded the definition of related party transactions, was deferred and prospective, and could not be applied retroactively.
Furthermore, SEBI dismissed allegations under Section 12A of the SEBI Act and PFUTP Regulations, concluding there was no fraudulent or manipulative intent, and disposed of the proceedings against the Adani Group without any directions.
The Securities and Exchange Board of India (SEBI) has finally given its verdict on the high-profile allegations made by Hindenburg Research against the Adani Group. The regulator has concluded that there has been
“no violation of the Listing Agreement or SEBI (LODR) Regulations”
and that the questioned transactions do not fall under the definition of “related party transactions” as it existed during the relevant period.
Hindenburg Research, in its January 24, 2023 report, had alleged that entities like Adicorp Enterprises Pvt. Ltd., Milestone Tradelinks Pvt. Ltd., and Rehvar Infrastructure Pvt. Ltd. were used as conduits to route funds between Adani Ports & Special Economic Zone Ltd., Adani Power Ltd., and Adani Enterprises Ltd.
The SEBI investigation found that loans were indeed given by Adani Ports to these private entities, which then extended them to Adani Power and Adani Enterprises. However, the loans were fully repaid with interest.
The regulator noted:
“Plain reading of Listing Agreement and SEBI (LODR) Regulations reveals that transactions between a listed company with unrelated party is not covered within the definition of ‘related party transactions’ as it existed during the time when impugned transactions took place, though included specifically after the 2021 amendment.”
Even while applying the “substance over form” principle, SEBI clarified that the earlier definition of related party transactions never intended to include such dealings.
The order observed:
“This conclusion is derived based on deferred prospective 2021 amendment to the SEBI (LODR) Regulations which enlarged the scope of the definition of ‘related party transaction’ and included for the first time transactions between a listed company/its subsidiary and unrelated party, the purpose and effect of which is to benefit a related party of the listed entity/its subsidiary.”
Importantly, SEBI stressed that this amendment was made effective only from April 1, 2022, with a glide path till April 1, 2023.
The order further noted:
“2021 amendment to the SEBI (LODR) Regulations is substantive amendment and as per accepted legal jurisprudence cannot apply to past transactions.”
The regulator also pointed to past precedents, highlighting consistency in its interpretation:
“Past precedents in SEBI also shows that SEBI has consistently taken a view that before 2021 amendment to the SEBI (LODR) Regulations, definition of ‘related party transaction’ did not include within its scope the enlarged scope introduced though 2021 amendment.”
Adding more weight, SEBI referred to the findings of the Expert Committee appointed by the Supreme Court in the Vishal Tiwari case:
“Expert Committee, appointed by Hon’ble Supreme Court in Vishal Tiwari case, also held that the deferred prospective amendment of 2021 to the SEBI (LODR) Regulations makes it clear that the impugned transactions were not included within the scope of ‘related party transaction’ for the period before the amendment.”
The Supreme Court had also rejected the plea to revoke this amendment, holding that:
“Hon’ble Supreme Court rejected the plea of the petitioner and held that procedure followed in arriving at the current shape of regulations is not tainted with any illegality. Hon’ble Supreme Court also held that no valid grounds have been raised to direct SEBI to revoke its amendments to the SEBI (LODR) Regulations which have been tightened by this amendment.”
On the allegations of fraudulent and unfair trade practices under Section 12A of the SEBI Act and SEBI (PFUTP) Regulations, the regulator concluded:
“The main allegation of violation of Section 12A of the SEBI Act and SEBI (PFUTP) Regulations in the SCN flows from non-classification of impugned transactions as ‘related party transaction’. Once it is held that there is no violation on that account, the charge under Section 12A of the SEBI Act and SEBI (PFUTP) Regulations do not stand.”
The order also clarified that the transactions cannot be considered manipulative or fraudulent since:
“(i) there is no allegation of siphoning off of money or diversion of fund; (ii) all the money has come back with interest before the start of the investigation; and (iii) the impugned transactions have not been held as related party transactions.”
Finally, SEBI disposed of the matter, stating:
“In view of the above, the proceedings in the matter was disposed of against the Noticees without any direction.”
Soon after the SEBI order, Adani Group Chairman Gautam Adani reacted on social media platform X (formerly Twitter).
Read On X:
In his statement, he said:
“After an exhaustive investigation, SEBI has reaffirmed what we have always maintained, that the Hindenburg claims were baseless. Transparency and integrity have always defined the Adani Group. We deeply feel the pain of the investors who lost money because of this fraudulent and motivated report. Those who spread false narratives owe the nation an apology. Our commitment to India’s institutions, to India’s people and to nation building remains unwavering. Satyamev Jayate! JAI HIND!”
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