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Supreme Court appointed Sapre Committee submits report on Adani-Hindenburg issue

Supreme Court appointed Sapre Committee submits report on Adani-Hindenburg issue

The Supreme Court-appointed Expert Committee recently made a significant announcement regarding the Adani-Hindenburg controversy. According to the committee, it is currently unable to determine whether SEBI’s handling of the alleged securities law contravention by the Adani Group or other companies constitutes “regulatory failure.”

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The committee’s goal is to assess the situation and recommend measures to promote investor awareness, strengthen the statutory framework, and ensure compliance with existing regulations.

Sapre Committee submits report on Adani-Hindenburg issue: Key Points

  • The committee is investigating three specific areas of concern: whether Rule 19A of the Securities Contracts (Regulation) Rules, 1957 has been violated (which mandates a minimum public shareholding of 25%); whether SEBI has been provided with all relevant information regarding transactions with related parties, as required by law; and whether existing laws have been violated by the manipulation of stock prices.
  • The committee’s finding with regards to Rule 19A depends on whether the 13 overseas entities (including 12 foreign portfolio investors) have complied with the disclosure of their beneficial owners, as required by law.
  • SEBI has stated that there is currently no evidence to suggest that the individuals listed as “beneficial owners” are not genuine, a determination that is essential for identifying “ultimate beneficial owners” and enforcing the relevant regulations.
  • According to the expert committee, SEBI has not presented a convincing case based on prima facie evidence, but more investigation is needed to confirm this.
  • However, the publication of the Hindenburg Report has raised suspicion and SEBI is seeking more time to investigate further.

The committee emphasizes the importance of an effective and consistent enforcement policy aligned with legislative policies to ensure regulatory resources are not wasted on retrospective actions. SEBI has an active surveillance framework in place and has analyzed potential market abuse alerts for Adani stocks, finding no evidence of artificial trading.

Some entities did profit from short positions after the publication of the report, but based on SEBI’s explanations and empirical data, the committee cannot conclude that there has been regulatory failure regarding the allegation of price manipulation.


The US-based Hindenburg company released a report on January 24 in which it accused the Adani Group of engaging in extensive stock price manipulation and other unethical behaviour.

The Adani Group responded to the accusations with a 413-page response. The court established a committee on March 2, 2023, and named the following individuals as its members: Mr. OP Bhat (former Chairman of SBI), retired Justice JP Devadhar, Mr. KV Kamath, Mr. Nandan Nilakeni, and Mr. Somasekharan Sundaresan.

The former Supreme Court justice Justice AM Sapre was said to be in charge of the Committee. The committee was ordered by the court to present its report to this court in a sealed cover within two months. The court stated that SEBI’s authority to continue its probe into the volatility in the Indian securities market was not diminished by the creation of the expert committee. Additionally, SEBI was instructed to provide a status report within a two-month window.

Later, the SEBI requested a six-month extension from the Supreme Court in order to finish its investigation into the charges. The regulatory body stated that examinations and investigations for which additional time would be needed would fall into three general categories:

  • those for which prima facie violations have been discovered and a period of six months would be required to reach a conclusive finding;
  • those for which prima facie violations have not been discovered, a period of six months would be required to revalidate the analysis and reach a conclusive finding;
  • and those for which additional time would not be a decisive conclusion is anticipated to be reached in 6 months in cases where further inspection or inquiry is needed and the majority of the data needed for this purpose is anticipated to be fairly accessible.

SC Bench on SEBI Investigation

  • Earlier this month, a bench made up of Chief Justice DY Chandrachud, Justices PS Narasimha and JB Pardiwala stated that it could only give SEBI a maximum of three months to complete the investigation after hearing an application for a six-month extension.
  • The two months initially permitted by the top court in accordance with its order from March 2 came to an end on May 2, the day of the final hearing.
  • SEBI submitted a response affidavit to the Supreme Court in support of its motion, outlining further justifications for needing more time to look into the Adani-Hindenburg matter.
  • According to SEBI, the transactions are complicated and take more time to evaluate.
  • The petitioner claimed that the Securities Board has been looking into Adani since 2016, however this claim has been refuted by the Securities Board.
  • According to some reports, the probe focused on the issuing of Global Depository Receipts by 51 Indian listed firms, none of which were members of the Adani Group.

According to the Multilateral Memorandum of Understanding (MMOU) between SEBI and the International Organisation of Securities Commissions (IOSCO), which relates to its investigation into Minimum Public Shareholding (MPS) norms, SEBI has already contacted eleven foreign regulators. The Supreme Court decided to give SEBI until August 14, 2023 to finish its investigation into claims of stock price manipulation filed against Adani Group firms by a US-based short selling firm.

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