New Delhi: The Supreme Court on Wednesday (January 3) refused to transfer the investigation of the Adani-Hindenburg case from the Securities and Exchange Board of India (SEBI) to a special investigation team (SIT). The court said that SEBI had concluded its investigation in 22 out of the 24 cases related to the matter.

The top court also held that there were no valid grounds raised to direct SEBI to revoke its amendments on foreign portfolio investors (FPI) and Listing Obligations and Disclosure Requirements (LODR) regulations. "The regulations do not suffer from any infirmities," said the apex court.

The apex court also dismissed the reliance on the Organized Crime and Corruption Reporting Project (OCCRP) report, saying that "reliance on a third party organisation report without any verification cannot be relied upon as a proof."

“Reliance on newspaper reports and third party organisations to question the statutory regulator does not inspire confidence. They can be treated as inputs but not conclusive evidence to doubt SEBI probe.”

The apex court had initially ordered SEBI to submit its findings by August 14, 2023. It had later asked the regulator to submit its report by November 8, 2023. On Wednesday, it asked SEBI to complete its probe into the pending two cases within three months.

In January 2023, US-based short seller Hindenburg Research released a report accusing the Adani Group of fraud, including the manipulation of stock prices to artificially inflate their value. The report said that "Adani is pulling the largest con in corporate history."

The Adani Group refuted these allegations, dismissing the report as a tactic by foreign entities to undermine India's reputation.

The publication of the report study stirred controversy in the political circles, prompting a closer examination of Prime Minister Narendra Modi's association with Gautam Adani. In response to the uproar, political leaders and activists filed several public interest litigations (PILs) with the Supreme Court.

Hindenburg did not short Adani's shares but instead focussed on its international bonds. In an analytical piece, The Wire delved into the Adani Group's extensive expansion throughout the country, not only in sectors where it was already present, but also in newer sectors like airports, renewables, cement, defence, data centres, agriculture, and others.

Since the report's release on January 24, 2023, The Wire has covered all events related to the Adani-Hindenburg matter. Here are some reports that provide a detailed account of the significant developments since the Hindenburg report's publication:

Gautam Adani’s Brother Behind Undisclosed Pledging of Adani Shares to Russian Bank for Loan: Forbes (February 17, 2023)

Vinod Adani, the elder brother of Gautam Adani, gained prominence following the release of the Hindenburg report.

Forbes reported that Vinod Adani played a key role in expanding Adani Group firms, with an alleged web of companies in various offshore territories that have apparently not been disclosed to regulatory authorities.

Vinod Shantilal Adani's name was also published in the Hindenburg report.

Forbes wrote about a previously undisclosed role of Singapore-based Pinnacle Trade and Investment Pte. Lte, which was “indirectly controlled” by Vinod Adani in allegedly pledging Adani Group promoter stocks for a loan from Russia’s VTB bank.

It claimed that Pinnacle had entered into a loan arrangement with Russia’s second-largest VTB bank in 2020. “By April 2021, Pinnacle had borrowed $263 million and lent out $258 million to an unnamed related party,” said the report.

As per Singaporean filings, Pinnacle offered two investment funds as guarantors for the loan from the Russian state-owned bank. These investment funds were identified as Afro Asia Trade and Investments Limited and Worldwide Emerging Market Holding Limited.

The Forbes articles linked two Indian stock exchange filings in June 2020 and August 2022, showing that Vinod Adani is the “ultimate beneficial owner of Mauritius-based Acropolis Trade and Investments Limited, which in turn owns 100% of Worldwide Emerging Market Holding Limited”.

The article claimed that Afro Asia Trade and Worldwide hold $4 billion worth of promoter stock in Adani Enterprises, Adani Transmission, Adani Ports and Adani Power. Forbes also noted that as per the investment tracking website Trendlyne, Afro Asia Trade and Worldwide do not hold any other securities.

Because of Repealed Provisions, SEBI Hit ‘Opaque Structure’ Wall While Investigating Adani: SC Panel (May 19, 2023)

On March 2, 2023, the Supreme Court constituted a five-member an expert committee to probe any regulatory failure on the Adani issue.

The expert committee, headed by former Supreme Court judge A.M. Sapre, had as its members former SBI chairman O.P. Bhatt, Justice J.P. Devadhar (retired), veteran banker K.V. Kamath, Infosys co-founder Nandan Nilekani and advocate Somasekhar Sundaresan.

On May 19, the expert committee released its report, concluding that SEBI hit an 'opaque structure wall' while investigating Adani.

The term "opaque structure" in this context points to FPIs located in offshore countries. The opacity of these structures arises from the fact that the ultimate beneficiaries or owners are not transparent or easily discernible. The lack of transparency in such financial arrangements makes it difficult to ascertain the true ownership or control of the funds.

This happened because "in 2018, the provision of dealing with an ‘opaque structure’ and requiring an FPI to disclose every ultimate natural person at the end of the chain of every owner of economic interest with the FPI was done away with.”

In 2018, SEBI substituted “the words ‘beneficial ownership’ with the words ‘common ownership or control’.”

The FPI situation raised questions on Adani Group companies' free float position.

Publicly traded companies are required to have at least 25% of their shares held by non-promoters – be it retail investors, mutual funds, FPIs, and insurance companies – to stay listed on exchanges. These shares are called public float or free float or public shareholding.

In March, The Wire had reported, citing data from Trendlyne, that in the case of Adani Group, a few investment funds hold most of the free float. Interestingly, the rest of FPIs, whose details are not available online, keeps on increasing year on year. As mentioned earlier, Andy Mukherjee called these FPIs “Adani’s fortune drivers”.

Vinod Adani's role gained attention with the Adani Group saying that 'he and Adani should be seen as one'. Therefore, it can be assumed he also has influence on the company's management, although he doesn't have any managerial position in the firm.

Deloitte Resigns Because It Was Not Given a “Wider Audit Role” (May 31, 2023)

Several media reports highlighted concerns related to the auditors involved in assessing the group's financial accounts.

On May 2, 2023, barely a year after its reappointment, Shah Dhandharia & Co., an Ahme­dabad-based chartered accountancy firm, resigned as statutory auditor of Adani Total Gas. It's also the independent auditor for Adani Enterprises.

Hindenburg noted that it's a "tiny firm" that "seems to have no current website."

“The audit partners at Shah Dhandharia who respectively signed off on Adani Enterprises and Adani Total Gas’ annual audits were as young as 24 and 23 years old when they began approving the audits. They were essentially fresh out of school, hardly in a position to scrutinise and hold to account the financials of some of the largest companies in the country, run by one of its most powerful individuals,” it said.

According to the Morning Context's October 2022 report, Shah Dhandharia & Co. and Dharmesh Parikh & Co. that audit most of Adani Group companies have links to each other, and therefore, raise concerns over the group’s corporate governance.

Adani Group paid them a little over Rs 7 crore, as compared to Rs 84 crore paid by Mukesh Ambani’s Reliance Industries, it had said.

On May 31, Deloitte raised concerns over Adani Ports' transactions with three entities, which the company said were unrelated parties. However, the auditor said it could not confirm that the parties were indeed unrelated. It has also issued a qualified opinion on the accounts of Adani Ports.

In August, it resigned as the statutory auditors of Adani Ports and Special Economic Zone (APSEZ).

Deloitte’s note said that the company has also refused to get an independent external examination that would help prove so. This is because SEBI is investigating the allegations made by Hindenburg Research against Adani Group.

Deloitte, therefore, said that it cannot comment if the company was fully compliant with local laws, Bloomberg reported.

According to the Telegraph, APSEZ said Deloitte had resigned because it was not given a “wider audit role” covering other listed Adani portfolio companies.

Separately, in December, Bloomberg reported that the Adani Group maintains ties with the controversial contracting firm, Howe Engineering Projects (India) Pvt. Ltd, which is linked to a Taiwanese family, raising governance concerns.

Bloomberg reported that the contracting firm contains the core operations of a business called PMC Projects Pvt. Ltd.

PMC Projects, along with two other firms, was accused of inflating the value of imported power and infrastructure goods to the extent of nearly Rs 1,500 crore.

According to the report, in 2014, the Indian government alleged that the firm was being used by billionaire Gautam Adani’s empire to siphon money overseas.

Adani denied all wrongdoing and the probe’s findings were dismissed in 2017 by the adjudicating authority of DRI, which held that all the imports were genuine. It concluded that the value declared was correct and was not required to be re-determined.

Interestingly, Deloitte’s inability to determine whether Howe should be labelled a related party was why the auditor raised red flags about payments by Adani’s ports company to the contracting firm in May, the report said.

Hindenburg Research directly called out PMC, in its report, alleging it was an Adani related party “used to suck money out of the Adani Group’s publicly listed entities.”

SEBI ‘Concealed’ DRI Letter on Stock Market Manipulation by Adani Group in 2014: Petitioner to SC (September 12, 2023)

On September 1, 2023, the Organised Crime and Corruption Reporting Project (OCCRP), a group of investigative reporters, found that the markets regulator had known about the stock manipulation allegations for nearly a decade, Scroll.in had reported.

A few days later, a petitioner in the Adani-Hindenburg case in the Supreme Court filed an affidavit, accusing SEBI of “concealing” an alert it received from the Directorate of Revenue Intelligence (DRI) in January 2014 about stock market manipulation by the Adani group.

The affidavit claimed the DRI sent a letter to then SEBI chairperson, U.K. Sinha, on January 31, 2014, alerting that “there may be stock market manipulation being committed by the Adani group of companies using the money siphoned off through overvaluation in the import of power equipment”.

Along with the letter, the DRI had sent a CD, containing evidence of siphoning of Rs 2,323 crore and notes on the case being probed by the anti-smuggling agency.

The OCCRP report was also shared with The Guardian and Financial Times.

The affidavit also highlighted that Sinha, the then SEBI head, currently serves as the non-executive director of NDTV, which was acquired by the Adani group in 2022.

Overpricing of Coal Imports by Adani Group Led to Higher Profits, Customers Overcharged for Fuel: FT (October 12, 2023)

Financial Times, in a detailed investigation, titled, The mystery of the Adani coal imports that quietly doubled in value, found that Adani, “the country’s largest private coal importer, has been inflating fuel costs” leading to “millions of Indian consumers and businesses overpaying for electricity.”

The FT report described Adani as ‘Modi’s Rockefeller’, referring to his sharply rising fortunes in the past ten years.

Pegasus Used to Target the Wire’s Founding Editor, Reporter Working On Adani, Amnesty Confirms (December 28, 2023)

An investigation by the Washington Post revealed, citing Amnesty International’s Security Lab, that it has detected evidence that Pegasus spyware was used by an unknown government agency to compromise the mobile phones of two journalists in India, Siddharth Varadarajan of The Wire and Anand Mangnale of the Oraganised Crime and Corruption Reporting Project. The Post reported:

"On Aug. 23, the OCCRP emailed Adani seeking comment for a story it would publish a week later alleging that his brother was partof a group that had secretly traded hundreds of millions of dollars worth of the Adani Group conglomerate’s public stock, possibly in violation of Indian securities law. A forensic analysis of Mangnale’s phone, conducted by Amnesty International and shared withThe Washington Post, found that within 24 hours of that inquiry, an attacker infiltrated the device and planted Pegasus, the notorious spyware that was developed by Israeli company NSO Groupand that NSO says is sold only to governments."

Amnesty said its Security Lab “first observed indications of renewed Pegasus spyware threats towards individuals in India during a regular technical monitoring exercise in June 2023, a number of months after media reported that the Indian government was seeking to procure a new commercial spyware system.”

When Apple issued threat notifications globally to iPhone users who may have been targeted by “state-sponsored attackers”, Varadarajan, Mangnale and a number of other journalists and opposition politicians in India received the notifications. Among those who went public at the time were Mahua Moitra of the Trinamool Congress, a prominent critic of the Adani group, and Ravi Nair, a journalist with OCCRP who was working on an Adani story with Mangnale.

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