Supreme Court Panel's Clean Chit To Adani Group: Prima Facie No Violation

A Supreme Court-appointed panel of experts examining India's regulatory mechanism in an investigation linked to the Hindenburg allegations has given a clean chit to the Adani Group and has said it appears there was no regulatory failure on the part of market regulator SEBI.

The experts' committee comprising domain experts has also said there was no price manipulation on the part of the Adani Group and that the conglomerate had taken necessary steps to comfort retail investors. The mitigating measures taken by the group had helped in building confidence in the stock and the stocks are stable now, the panel said.

"At this stage, taking into account the explanations provided by SEBI, supported by empirical data, prima facie, it would not be possible for the committee to conclude that there has been a regulatory failure around the allegation of price manipulation," the panel said in the report submitted to the Supreme Court.

It also said there is a need for an effective enforcement policy that is "coherent and consistent" with the legislative position adopted by SEBI or Securities and Exchange Board of India.

The Supreme Court had appointed the committee of domain experts alongside the investigation that SEBI was conducting into Hindenburg's allegations against the Adani Group.

The committee, which recently submitted its findings to the Supreme Court, said SEBI had found out some entities had taken a short position before the Hindenburg report and had profited after the price crashed following the report.

The committee found no pattern of artificial trading or wash trades among the same parties multiple times.

No coherent pattern of abusive trading came to light either, said the committee.

No regulatory failure was found regarding Minimum Public Shareholding and there was no violation of compliances, the committee said.

The committee clearly stated that the regulator had not been able to prove that its suspicion can be translated into a firm case of prosecuting an allegation of violation.

Foreign portfolio investors in Adani Group stocks are compliant with SEBI's regulations, the committee said.

SEBI was asked to examine allegations of price manipulation in Adani stocks around the Hindenburg report. Several entities had taken short positions prior to the publication of the Hindenburg report, and since SEBI's investigation into it is ongoing, the committee has chosen not to comment on the merits of this issue.

However, the Indian market was not unduly volatile during the period. The impact of Adani Group-related events on the overall market was low, as its index weightage was nil in Sensex-30 and around 2% in the Nifty 50.

The members of the Supreme Court-appointed group are retired Supreme Court judge Justice AM Sapre, retired Bombay High Court judge Justice JP Devadhar, former State Bank of India Chairman OP Bhatt, former ICICI Bank chief KV Kamath, Infosys co-founder Nandan Nilekani and securities and regulatory expert Somasekhar Sundaresan.

The Supreme Court had earlier this week granted SEBI time till August 14 to complete its probe into the Hindenburg allegations.