Foreign funds move SAT against Sebi over adjudication procedure dispute

Five FPIs named in Hindenburg Research's Adani report have challenged Sebi's adjudication process, alleging procedural lapses in the handling of show-cause notices

Five foreign portfolio investors (FPIs) have moved the Securities Appellate Tribunal (SAT) against the Securities and Exchange Board of India (Sebi), alleging procedural lapses in an ongoing adjudication process. The matter is scheduled to be heard on Friday.

 

The appeals have been filed by LTS Investment Fund, Cresta Fund, Asia Investment Corporation (Mauritius), APMS Investment Fund, and Albula Investment Fund — entities that were named by now-defunct short-seller Hindenburg Research in its 2023 report on the Adani Group.

 

The dispute relates to show-cause notices issued by Sebi over alleged compliance lapses, including deficiencies in filings and disclosures made to designated depository participants, according to a legal representative for the FPIs.

 

Senior counsel representing the funds said the FPIs had responded to the notices, but contended that Sebi had failed to provide reasons for proceeding with adjudication despite considering their replies.

 

The appellants argue that under Rule 4(3) of the Sebi (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, an Adjudicating Officer (AO) must first examine the noticee's response and form an opinion on whether a formal inquiry is warranted. According to the FPIs, a copy of such opinion, along with the reasons for initiating adjudication, has not been furnished to them.

 

The funds appeared before Sebi for hearings in the matter, but claim that the AO declined to provide the reasons sought, prompting them to approach the tribunal.

 

"The opinion has to be recorded and communicated. If that is not done, the inquiry cannot proceed. This is essentially a procedural issue concerning the rights of the noticees," said a legal practitioner representing the FPIs.

 

Another source familiar with the matter said the proceedings may also be linked to Sebi's examination of the ultimate beneficial ownership of the FPIs.

 

Emails sent to Sebi seeking comment remained unanswered until press time.

 

In September 2025, Sebi closed proceedings against Adani group companies, chairman Gautam Adani, and related entities in connection with allegations raised by Hindenburg Research, including claims of fund diversion and lapses in related-party transactions.

 

In separate orders, the regulator found no violation of the Listing Obligations and Disclosure Requirements (LODR) Regulations or the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, effectively clearing the group of the allegations. 

All about the row 

• All five FPIs were named in the 2023-report of Hindenburg Research against the Adani Group
• Hearing in the tribunal scheduled for June 12 
• FPIs claim Sebi needs to provide opinion after their responses to the show-cause notices
• Cite Rule 4(3) of Sebi (Procedure for Holding Inquiry and Imposing Penalties) rules for mandatory opinion requirement
• Matter may involve issues around ultimate beneficial ownership