JPC to Probe Adani Group’s Market Manipulations Inevitable

By P Sudhir

The latest revelations by the US based firm Hindenburg Research have raised serious questions about the role of SEBI chief Madhabi Puri Buch as chief of the regulatory body investigating the Adani group’s various contraventions of the law and manipulation of stock prices.

According to the Hindenburg report, the SEBI chairperson Buch had invested funds in 2015 in an offshore fund, “Global Dynamic Opportunities Fund”. Her investment in the fund was transferred to her husband in 2017 before Buch joined as a whole time member of SEBI. In 2018, the investment was redeemed through an email sent by Buch herself, even though it was her spouse who was operating the fund.

Citing a whistleblower’s statement, Hindenburg has established that Buch had invested in an offshore entity, which was part of the same Bermuda-Mauritius fund structure used by Vinod Adani, the brother of Gautam Adani, who was already under SEBI’s investigation.

It may be recalled that Hindenburg had released in January 2023, an explosive report which accused the Adani group of “brazen stock manipulation and an accounting fraud scheme over the course of decades”. The forensic analysis amply documented the way the Adani group used a maze of offshore funds to roundtrip their own funds to invest in Adani companies.

The Supreme Court in March 2023 had set up a six-member expert committee to investigate if there was regulatory failure in dealing with the alleged contravention of law by the Adani group of companies. The court further asked SEBI to specifically investigate if there was any violation of various public shareholding norms in public limited companies or failure to disclose transactions with related parties or any manipulation of stock prices by the Adani group.

In May 2023, the expert committee informed the Court that the “SEBI had drawn a blank” in its investigation into alleged violations in money flows from offshore entities into Adani companies. It must be noted that prior to this SEBI had already been looking into various allegations against the Adani group of companies.

The failure of SEBI to make any substantive progress in unravelling the use of offshore entities for roundtripping and stock manipulation by the Adani companies becomes suspicious and questionable in the light of the latest Hindenburg revelations that chairperson Buch had invested in an offshore entity which has involved with Vinod Adani.

The responses of chairperson Buch and SEBI have been to dismiss the charges levelled in the Hindenburg report as “inappropriate” and “character assassination”. Buch, in a statement, claims that the investment was made because of her husband’s childhood friend, Anil Ahuja, who had set-up the fund. It is not mentioned that he became a director in Adani’s company. Though SEBI says disclosures were made of investments and stakes in companies at the appropriate time and also that recusal had been done when required, the SEBI’s response does not make it clear whether she made a full disclosure of the fund linked to Adani. There is also no specific answer as to whether she had recused herself from the Adani investigation.

There is no information to show that Buch had disclosed her involvement in the offshore fund to the Supreme Court or to the six-member expert committee which was set-up by the court in March 2023.

The SEBI informed the Supreme Court in January 2024 that it had finished the probe of 20 of the 22 allegations against the Adani group and was told to complete the probe on the other two within three months. In May 2024, the SEBI informed that one more matter had been completed and only one issue was left.

The fact that SEBI has not come up with any adverse findings against the Adani group and the fact that Buch, as chairperson, had two meetings with Gautam Adani while the investigations were on, gives credence to the serious charges against her in the Hindenburg report.

The issue is of the personal integrity of the SEBI chief and whether she has maintained the high standards of probity expected from the head of an independent regulatory authority. On both these counts, Madhabi Buch needs to step down from her position immediately.

The BJP and the Modi government are trying to counter the serious charges against the SEBI chief by alleging that the Congress party and the opposition are in league with foreign entities to destabilise the Indian stock markets and the economy. Such a wild and preposterous defence of the serious failings of the SEBI chief will not reassure small investors or the public.

The Buch affair shows how regulatory bodies can be open to capture by big finance and big business in a neo-liberal regime.

It would be better, in the light of the new evidence, for the Supreme Court to order a court-monitored probe into the Adani group’s brazen flouting of the law and manipulation of stock market prices. Otherwise, a joint parliamentary committee to look into the whole affair is the only option.

(IPA Service)