The Supreme Court-appointed committee, led by retired judge A M Sapre, has concluded its investigation into the Adani-Hindenburg controversy. The committee stated that there was no regulatory failure regarding compliance with the minimum public shareholding stipulation. According to the committee’s report, the “Hindenburg Report…contained no new data but was substantially a collection of inferences from data in the public domain.”
The committee emphasized that the feedback on the Hindenburg Report highlighted that it lacked new data and mainly relied on inferences from publicly available information. It further clarified that the foreign portfolio investors (FPIs) involved in the controversy had complied with the declarations of the beneficial owner as required by the Prevention of Money Laundering Act (PMLA). The Securities and Exchange Board of India (SEBI) had been investigating the ownership of the 13 overseas entities involved since October 2020.
Regarding SEBI’s requirements for disclosure of beneficial owners, the committee stated that the legislative policy under the FPI Regulations aligned with the PMLA. However, it noted a discrepancy between the provision in 2018, which eliminated the requirement to disclose the ultimate natural person at the end of the chain of every owner of economic interest in the FPI, and the investigation’s current direction in 2020, which sought such information. This contradiction has led to SEBI facing challenges in ascertaining the ultimate owners despite its efforts.
The committee highlighted the dilemma faced by SEBI, where suspicions of wrongdoing arise, but compliance with regulations remains intact, resulting in a “chicken-and-egg situation.” It emphasized that its focus was solely on determining whether there was a regulatory failure, stating that it was not possible to conclude such failure based on the regulations in effect at the time of the transactions.
Constituted on March 2, the expert committee, headed by Justice Abhay Manohar Sapre and comprising O.P. Bhatt, Justice J.P. Devadhar (retired), K.V. Kamath, Nandan Nilekani, and advocate Somashekhar Sundaresan, was assigned the task of assessing the situation, identifying causal factors behind market volatility, suggesting measures to enhance investor awareness, investigating alleged contraventions of securities market laws, and recommending measures to strengthen the regulatory framework and ensure compliance with existing regulations for investor protection.
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