In a 63-page order, the regulator said that the allegations made against Adani and his group companies Adani Ports & Special Economic Zone (APSEZ), Adani Power and two others were not established.
“…having considered the matter holistically, I find that the allegations made against Noticees in the SCN are not established. Considering the above, the question of devolvement of any liability on Noticees does not arise and hence the question of determination of quantum of penalty also does not require any deliberation. I, therefore, in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sub-sections (1) and (4) of section 11, sub-section (4A) of section 11 and sub-sections (1) and (2) of section 11B of the SEBI Act, 1992 and sub-sections (1) and (2) of section 12A of the SCR Act, 1956 hereby dispose of the instant proceedings against Noticees without any direction,” the order said.
Hindenburg’s allegations
The report published by Hindenburg on January 24, 2023 claimed that Adicorp Enterprises Pvt. Ltd. was a conduit to route funds within the Adani Group. It said that 4 Adani companies lent Adicorp Rs 6.2 billion ($87.4 million) in 2020, despite its weak financial profile. The report also alleged that the loans were undisclosed in lenders’ financials, though some were listed entities.The report said that given Adicorp’s financial profile, it would take the company 900 years to repay. In 2020, Adicorp then lent Rs 6.1 billion ($86 million) to Adani Power, which was 98% of funds received—suggesting funds were just routed to support the listed entity, the report claimed.
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The transactions were made during FY12-13 to FY20-21.
Adani Group denied these allegations, stating Adicorp is not a related party under Indian law or accounting standards. It also asserted that transactions with Adicorp were not related party transactions (RPTs) and maintained that all transactions were carried out in compliance with the applicable laws.
3 key findings
1) No violation of Sebi’s Listing Agreement/LODR RegulationsSebi noted that the transactions do not qualify as related party transactions (RPTs). At the time, transactions with unrelated parties were not included in RPT definition.
The 2021 amendment to LODR expanded RPT scope prospectively (effective April 1, 2022, with glide path till April 1, 2023).
Since the amendment is substantive, it cannot be applied retrospectively.
SEBI’s past precedents also confirm that earlier definitions did not cover such cases.
The Supreme Court-appointed Expert Committee also held that these transactions fell outside RPT scope before the amendment, and the amendment itself was valid and prospective.
2. No violation of Section 12A of SEBI Act / PFUTP Regulations
Alleged violations stemmed from treating the transactions as RPTs, which was incorrect. Sebi found no siphoning/diversion of funds and all money returned with interest before investigation, and transactions not fraudulent or manipulative.
3. Consequence
Sebi order noted that there is no violation of the above two key issues and also no violation that were alleged in the show cause notice.
Case 2
In another case, Sebi was probing allegations levelled by Hindenburg Research that Adani Enterprises and Adani Power Mundra (now merged with Adani Power) were funded by Milestone Tradelinks Pvt. Ltd. and Rehvar Infrastructure Pvt. Ltd. through Adani Infra (India) Limited. The regulator was investigating if the transaction made during FY18-19 to FY22-23 was a related party transaction.
The regulator noted that there was no violation of the Sebi regulations as alleged by the short-seller as the alleged transactions did not qualify as related party transactions. “Plain reading of the LODR Regulations reveals that transactions between a listed company with an unrelated party is not covered within the definition of “related party transactions” as it existed during the time when impugned transactions took place,” the 44-page order said.
Adani Group on clean chit
The Adani group came out with a statement, exuding relief after over two years of regulatory scrutiny. Gautam Adani Thursday said that Sebi ending proceedings a reaffirmation” of what the conglomerate had maintained from the beginning — the claims were “baseless”
Also Read: ‘Deeply feel the pain of investors who lost money’: Gautam Adani says after Sebi clean chit
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