New Delhi: A petitioner in the Adani-Hindenburg case in the Supreme Court has filed an affidavit accusing the Securities and Exchange Board of India (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.According to the Hindu, Anamika Jaiswal, represented by advocates Prashant Bhushan and Cheryl D’Souza, alleged that SEBI had “concealed a January 2014 DRI alert about Adani having siphoned off money and invested them in Adani listed companies through entities based in Dubai and Mauritius”.Jaiswal’s 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.This is what the latest report by the Organised Crime And Corruption Reporting Project (OCCRP) says, citing documents, which it 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.“It is shocking that SEBI has not disclosed the receipt of the said letter (DRI letter) and evidence from the DRI till date before this Hon’ble Court,” the affidavit said, citing SEBI’s previous statements to the top court that it started the investigation against the Adani group only in June-July 2020The affidavit alleged that this was suppression of facts and providing false information which amounts to perjury.In addition to the 2014 DRI letter, the affidavit brought attention to numerous other key aspects.Also read: Adani’s Acquisitions: The ‘Inorganic Strategy’ Behind the Purchase of Gangavaram PortConflict of interestAccording to LiveLaw, the affidavit pointed out that Cyril Shroff, managing partner, Cyril Amarchand Mangaldas, has been a member of SEBI’s committee on corporate governance, which looks at offences such as insider trading. Shroff’s daughter is married to Karan Adani, son of Gautam Adani. Hence, the relation causes the conflict of interest.Five out of 24 SEBI investigation reports are on insider trading allegations against the Adani group companies, said the affidavit.Amendments of the FPI regulationsThe regulations initially mandated that designated depository participants in the stock market had the responsibility to ensure that foreign portfolio investors (FPIs) did not maintain opaque structures. However, in 2018, SEBI revised this requirement by redefining the term ‘ultimate beneficial owners’ to align with the definition of ‘beneficial owner’ as defined under the Prevention of Money Laundering Act, 2002.The Supreme Court on July 11 asked SEBI to explain why the law was tweaked in 2018, adding that the change is absolutely fatal to its current investigation.In 2019, SEBI repealed the 2014 provisions on “opaque structures”.Also read: 6 Out of 8 Offshore Funds Used for Share Purchases in Adani Firms Shut Down Amid ProbeWhy are the changes significant? Because the Supreme Court-led expert committee was set up to investigate if there was violation of the minimum public shareholding, or free float, norms by the Adani group. Hindenburg Research alleged that overseas entities and shell companies that were tied to Adani group “surreptitiously” owned stock in its listed firms. This indicated a violation of SEBI’s free float norms.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.Being listed is critical as it allows a company to raise money from the market. However, if these rules are not met, there are implications on these companies’ public listing status.Definition of related party amendedUnder the SEBI Listing Obligations and Disclosure Requirement (LODR), the term ‘related party’ was originally defined to align with the definition provided in Section 2(76) of the Companies Act. However, in 2018, SEBI made an amendment to this definition.This amendment introduced a separate provision that enabled a member or entity of the promoter group of a listed company as a related party only if the shareholding of that person was at least 20%.
