Supreme Court asks Sebi to check on Adani's related party transactions

By Arpan Chaturvedi

NEW DELHI (Reuters) -India's top court on Thursday asked the market regulator to investigate any possible lapses in securities law or other regulatory disclosures by the Adani group that has been hard by allegations of business malpractice by a U.S. short seller.

The Supreme Court of India also ordered the formation of an investor-protection panel amid sharp falls in the Adani group's shares.

Indian markets regulator SEBI has been investigating a critical Jan. 24 report by Hindenburg Research that alleged the Adani group improperly used offshore tax havens and manipulated stocks. The conglomerate has denied doing so.

SEBI had previously told the court it was investigating the allegations made in the Hindenburg report and market activity immediately preceding and following its publication.

The Supreme Court asked SEBI to check "whether there has been a failure to disclose transactions with related parties" and "whether there was any manipulation of stock prices in contravention of existing laws".

The ruling was announced by a three-judge bench, headed by Chief Justice of India D. Y. Chandrachud, which heard several public-interest litigations on losses investors suffered due to the stock market rout triggered by the Hindenburg report.

Seven listed companies of the Adani group have lost about $135 billion in value since the report was published.

Billionaire Gautam Adani welcomed the Supreme Court order.

"It will bring finality in a time bound manner. Truth will prevail," he said in a post on Twitter.

Hindenburg Research said in its report it had identified numerous "undisclosed related party transactions" by both listed and private Adani companies, allegedly in violation of Indian disclosure laws.

In its rebuttal, Adani said "all related party transactions are at arm's length, properly disclosed and reviewed/audited by statutory independent auditors".

The court also formed a panel to be headed by a retired Supreme Court judge to examine how investor protection mechanisms can be strengthened.

The six-member panel, which is due to report back within two months, will include former chairman of State Bank of India O.P. Bhatt and prominent banker K.V. Kamath.

It has been asked "to provide an overall assessment of the situation", Chandrachud said.

Adani has sought to calm investors and this week held a fixed-income roadshow in Singapore and Hong Kong. The group, according to sources, has told creditors it has secured a $3 billion loan from a sovereign wealth fund.

(Reporting by Arpan Chaturvedi in New Delhi and Nallur Sethuraman in Bengaluru; Editing by Aditya Kalra and Muralikumar Anantharaman)