Hakenburg Case: Sebi finds no merit in accusations against Adani Group, the procedure ends

Capital markets Regulator Sebi discovered that accusations against Adani Group could not be established in the Hindenburg case. That is why there is no survival of any liability for the group and there is no fine, the regulator said in an order.

The supervisor has also removed the direct procedure against group companies Adani Ports, Adani Power, Gautam Adani and Rajesh Adani.

Sebi also rejected the claim that Adani had entered into a scheme to hide transactions with connected parties, so that the broadened definition that indirect transactions covers was only introduced prospectively via the 2021 amendment to the LODR rules.

Applying retrospective, the regulator said, would be legally unacceptable.

In a justification for the Adani Group, SEBI research has shown that alleged loans and fund movements were fully repaid and not qualified as non -known transactions with connected parties or fraudulent market practices.

In January 2023, Hindenburg Research published a report in which the Adani Group of accounting irregularities, stock manipulation and hiding transactions hide through layers of Shell companies. The report led to a sharp sale in Adani shares, whereby more than $ 100 billion in market value was deleted at its peak and the Supreme Court encouraged to lead Sebi to investigate. One of the accusations aimed at the question of whether Adani Group intermediaries such as Milestone and Rehvar used to use route funds between group entities, effectively used by the disclosure rules.

Sebi probe discovered that Adani ports had loans on Mijlpaal and Rehvar, which in turn lends to Adani Power and Adani Enterprises.

These funds, together with the applicable interest, were repaid later. The regulator noted that although such regulations can be worried, they could not be mentioned as “transactions with related parties” under the definition that the prevention of the 2021 amendment on LODR rules.

“The widened definition for indirect transactions only came into force from 1 April 2022 and the application of this retrospective is legally rejected,” the order explained.

The regulator also emphasized that there was no evidence from fund deviation, transfer of money or loss for shareholders. “The allegations against the notification have not been established,” concluded Sebi, adding that transactions with connected parties are not necessarily illegal, provided that they are properly announced and approved.

The order marks an important relief for the Adani group, which fought questions around his board, transparency and financing structures since the Hindenburg report appeared in January 2023.

While Adani companies denied the allegations from the first day, the Guideline of the Supreme Court had kept the issue alive in investor discussions for a probe led by Regulator.

The SEBI closure of this strand can help relieve the overhang of the regulations, although it does not entirely end the group’s investigation. Some other cases related to bribery and overseas investments are still being investigated.

American public prosecutors who accused the Adani group last year of bribing Indian officials to convince them to buy electricity produced by Adani Green Energy, a subsidiary of his Adani Group.

Cleaning up the indictment of hidden transactions that connect the parties, however, removes one of the most harmful claims from the short seller.