Finance Ministry contradicts Sebi, stands by Parliament reply on Adani investigation

The Ministry has stood by its reply in Lok Sabha, saying that SEBI had been investigating the Adani Group since 2016, a day after SEBI denied the same before the SC

As a political row erupted over Sebi telling Supreme Court that it has not been probing the Adani group since 2016, the Finance Ministry on Monday said it stands by its July 2021 written reply in Parliament that had stated that the stock market regulator was investigating some Adani group companies.

After Sebi filed a fresh affidavit with the Supreme Court to strengthen its case for a six-month extension of the deadline to complete the probing allegations of fraud and money laundering against Adani Group, Congress and other opposition parties cited the finance ministry's July 2021 replies in Parliament to ask who was misleading.

"The government stands by its reply in Lok Sabha on 19th July 2021 to Q. No. 72, which was based on due diligence and inputs from all concerned agencies," the Finance Ministry tweeted.

This was in response to Congress spokesperson Jairman Ramesh posting a screenshot of the written reply made by Minister of State for Finance Pankaj Chaudhary on July 19, 2021.

Also Read | Investors expect SEBI will faithfully fulfil mandate of protecting their interests: Cong on Adani issue

In the reply, the Minister stated that "Sebi is investigating some Adani Group companies with regard to compliance with SEBI regulations. Further, the Directorate of Revenue Intelligence (DRI) is investigating certain entities belonging to the Adani Group of companies under laws administered by it."

He had gone on to state that Enforcement Directorate was not carrying out any investigation and that "Sebi had vide order dated January 16, 2016, directed depositories to freeze particular beneficiary accounts of certain foreign portfolio investors including Albula Investment Funds, Cresta Funds Ltd and APMS Investment Ltd".

The damning January 24 report of US short seller Hindenburg had alleged that some of these funds based out of Cyprus and Mauritius were proxies of Adani's that were used to manipulate stock markets and funnel money.

Adani Group has denied all allegations.

On petitions seeking probe into the allegations, the Supreme Court had asked Sebi to wind up its probe against the Adani Group in two months. That deadline ended earlier this month and Sebi sought six more months to complete the probe.

Also Read | Sebi cautions against premature conclusion of Adani probe

Petitioners however contested that Sebi had been probing Adani group since 2016 and shouldn't be given a six-month extension.

In rejoinder to the petitioners, Sebi in a fresh affidavit on Monday said that the allegations that it "is investigating Adani since 2016 is factually baseless".

Sebi, however, did not say since when it was probing the Adani group.

"Now Sebi tells the Supreme Court that they have not been investigating any of the serious allegations against Adani! Which is worse—misleading Parliament, or being fast asleep as lakhs of investors are duped by alleged money laundering and round-tripping using offshore shell companies? Or even worse, was there a restraining hand from above?" Ramesh tweeted.

Priyanka Chaturvedi, Rajya Sabha MP from Shiv Sena-UBT, tweeted: "So, Sebi denies any investigation into Adani companies since 2016, denies its own statement to the court? Was the junior finance minister lying to the country regarding the investigation in his answer on 19 July 2021? This smells of a cover-up but at whose behest?

"If what Sebi saying to the court is correct, goes to prove that Adani Group has almost been given a free rein to manipulate markets through offshore companies since 2014 and with the regulatory body turning a blind eye to the illegalities. What a shame, again I repeat, only a JPC can uncover the extent of damage. Also the exposure of banks, LIC, EPFO in the group. Public loss for private gain, at whose behest?" she asked.

She even raised doubts at Sebi using a junior employee to file the affidavit.

"Wow. A 22-year-old has been hired by @SEBI_India to file an affidavit in the Supreme Court on their behalf! Must be either super experienced from kindergarten days to file such replies or naive enough to be part of something as big as this," she said in another tweet.

The Sebi affidavit was filed by one Satyanshu Maurya, who said he was presently working as an Assistant Manager in the Securities and Exchange Board of India (Sebi).

TMC leader and MP Mahua Moitra, who has been leading the tirade against the Adani group and who had put the July 19, 2021 questions, hasn't yet commented on the issue.

She had, however, last week warned of Adani being allowed to raise funds through share sale before a probe is completed.

Also Read | Court probe of Adani shortseller saga tests India’s institutions

"Let me tell @Sebi_india loud & clear that we will raise Cain if Adani allowed to raise even a rupee of equity without investigation being completed," she had tweeted on May 12 with '#FraudstersBeware' hashtag.

On May 12, lawyer Prashant Bhushan opposed the plea for the extension of time, saying Sebi was seized of some kind of investigation in the matter since 2016. Sebi in the fresh affidavit said that the application for extension of time is meant to ensure "carriage of justice keeping in mind the interest of investors and the securities market" since any incorrect or premature conclusion of the case arrived at without full facts material on record would not serve the ends of justice and hence would be legally untenable. It said the 'investigation' referred to in its earlier reply affidavit has “no relation and/or connection to the issues referred to and/or arising out of the Hindenburg report.

"The matter referred to in paragraph 5 pertains to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies in respect of which investigation was conducted. However, no listed company of the Adani group was part of the aforesaid 51 companies. Pursuant to the completion of the investigation, appropriate actions were taken in this matter."

It termed as “factually baseless” the allegation that the Sebi has been investigating the Adani group since 2016 and said, “I, therefore, say and submit that reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced.”

Chaudhary in the July 19, 2021 reply to the Lok Sabha also mentioned of the GDRs. "In a matter pertaining to issuances of Global Depository Receipts (GDR) by certain Indian companies, SEBI vide order dated June 16, 2016, had directed depositories to freeze particular beneficiary accounts of certain FPIs including Albula Investment Ld, Cresta Funds Ltd and APMS Investment Fund Ltd. However, no order in respect of other beneficiary accounts of these three FPIs has been passed by Sebi," he had said.