SEBI suppressed material facts in Adani probe, Supreme Court told [Read Affidavit]

NEW DELHI: The Supreme Court has been told that there have suppression of several important facts as well as the conflict of interest in SEBI conducting probe against Adani firms, following a report by US short seller firm Hindenburg on January 24.

In an affidavit, Anamika Jaiswal, one of the petitioners in Adani- Hindenburg case, claimed though the investigation against the Adani group was on in the over invoicing case, the Directorate of Revenue Intelligence (DRI) sent a letter to the then SEBI chairperson, U K Sinha 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.

"It is shocking that SEBI has not disclosed the receipt of the said letter and evidence from the DRI till date before this court. Rather, they have categorically stated before the Expert Committee that the investigation into possible contraventions of rules and regulations by the Adani group of companies started on 23.10.2020 after receipt of complaints in June-July 2020," it said.

The affidavit claimed 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 letter also stated that more documents may be obtained from the Mumbai Zonal Unit of the DRI, it added.

It claimed then SEBI chairperson Sinha instead of acting on the DRI letter preferred to close the ongoing investigations. Interestingly, he is currently serving as "Non-Executive Independent Director of NDTV," acquired by Adani in 2022, it alleged.

"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," it alleged.

"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 shows a clear conflict of interest," it alleged.

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 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.

SEBI has initiated probe against Adani firms on a direction issued by the Supreme Court in a batch of PILs seeking independent investigations into charges of accounting fraud, stock price manipulation and improper use of tax havens as alleged by Hindenburg report on January 24 against Adani group.

On August 25, SEBI told the Supreme Court that out of 24 investigations into Adani-Hindenburg issue, 22 are final in nature and two are interim at this stage, awaiting response from external agencies or entities.

The Supreme Court had earlier declined SEBI's plea for further time in terms of the orders issued on March 2 and May 17, 2023 to conclude the investigation and submit the status report in the matter.

The petitioner said that the 24 investigation reports by SEBI should be made available to the Expert Committee headed by former SC judge Justice Abhay Manohar Sapre and to the petitioners on an immediate basis.

"SEBI's amendments to the FPI regulations and the lax provisions of the PMLA 2002 and PMLA Rules 2005 had facilitated concealment of beneficial ownership. As the Regulator, SEBI has failed to either detect or act against these violations in a timely manner, affecting the integrity of the securities market and causing financial losses to unsuspecting small investors which run into crores," the affidavit said.

[Read Affidavit]