Hindenburg report on Adani cos: SEBI seeks 6 months further time in Supreme Court to complete probe [Read Order]

NEW DELHI: The Securities and Exchange Board of India has filed a plea in the Supreme Court seeking extension of time by six months to complete its probe into Adani group of companies accused of "accounting fraud" and "brazen stock manipulation" according to January 25 report by the US short seller firm Hindenburg.

On March 2, the court had directed the SEBI to "expeditiously conclude the investigation within two months and file a status report.

Just before end of two-month deadline, SEBI said, "In order to arrive at verified findings, it would be just, expedient and in the interest of justice that the court extends time, at least by six months to conduct and conclude a proper investigation.

It said for ascertaining possible violations related to mis-representation of financials, circumvention of regulations and/or fraudulent nature of transactions in respect of 12 suspicious transactions, given the complexity of the matter, SEBI in the ordinary course would take at least 15 months for completion of the investigation of these transactions, but, is endeavouring to conclude the same in not less than six months.

On the Hindenburg Report allegations related to 12 suspicious transactions, the market regulator said that the information received from the companies would require reconfirmation and reconciliation submitted and independent verification of the replies and documents/information.

In respect of the investigation or examination relating to 12 suspicious transactions, prima facie, the SEBI said, it is noted that these transactions are complex and have many sub transactions and a rigorous investigation of these transactions would require collation of data/information from various sources along with detailed analysis including verification of submissions made by the companies.

"This analysis would include detailed examination financial statements of listed entities and unlisted entities, offshore entities involved in the transactions, disclosures to stock exchanges, minutes of meetings of their board of directors and audit committee, bank statements and their connections/relations are amongst entities, etc," it said.

It also submitted the investigation would also require obtaining bank statements from multiple domestic as well as international banks and as the bank statements would also be for the transactions undertaken more than 10 years ago, this would take time and be challenging.

"As is the case in most investigations, every layer of information received often leads to further layers of information that are required, sought, obtained and analysed and this process is particularly time consuming where there is a complex web of transactions," it said.

The Supreme Court had on March 2 set up a committee headed by the top court's retired judge Justice Abhay Manohar Sapre to investigate if there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies.

It had also ordered the SEBI to look into whether there has been a failure to disclose transactions with related parties and other relevant information and whether there was any manipulation of stock prices in contravention of existing laws in accounting fraud and "brazen stock manipulation".

The court's order had come a batch of PILs filed by advocate Vishal Tiwari and others.

After the court's order, the SEBI officers attended two meetings called by the Committee on April 02 and 26 respectively and gave detailed presentations

"Post the first meeting, detailed queries were sent and information was sought by the Committee from SEBI, and in response thereto, extensive data, supporting notes and other information was provided to the Committee, which information, covered the supporting data and documents related to the first presentation, as well as data and analysis on fresh sets of queries received from the Committee," it said.

"At the second meeting of the Committee, SEBI made a detailed presentation appraising the status, steps taken and interim findings in respect of the examinations and investigations carried out by SEBI as directed by this court," it added.

[Read Order]