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Experts warn of severe legal fallout for Adani group and associates

Experts say that under the provisions of US law, particularly the FCPA, an indictment of this nature is a serious offence

Adani, Gautam Adani

Nagpur: In this Thursday, April 27, 2023 file photo, Adani Group Chairman Gautam Adani during an event, in Nagpur. (Photo: PTI)

Bhavini Mishra New Delhi

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The US Department of Justice (DoJ) has criminally indicted Adani group Chairman Gautam Adani and several of his business associates on five counts, including promising over $265 million in bribes to Indian government officials to secure solar energy contracts, conspiring to commit securities and wire fraud, and orchestrating a multi-billion-dollar scheme to defraud US investors and global financial institutions by issuing false and misleading statements.
 
In another move, the US Securities and Exchange Commission (SEC) has also charged Gautam Adani, Sagar Adani (Gautam’s nephew and head of Adani Green Energy), and Cyril Cabanes, a top executive at Azure Power (a New Delhi-headquartered renewable energy company once listed on the New York Stock Exchange), with a massive bribery scheme involving Adani Green and Azure Power.
 
 
While the DoJ charges are criminal, the SEC charges are civil.
 
The indictment against Gautam Adani and others, as announced by the SEC, involves serious allegations of securities and wire fraud, as well as violations of the Foreign Corrupt Practices Act (FCPA) and the Foreign Extortion Prevention Act (FEPA).
 
Under US law, particularly in cases involving multiple counts of conspiracy, securities fraud, wire fraud, and obstruction of justice, legal proceedings typically begin with an indictment, formally charging the defendants with the alleged crimes.
 
Experts say that under US law, particularly the FCPA, an indictment of this nature constitutes a serious offence, potentially leading to severe consequences such as arrest, monetary penalties, and custodial sentences.
 
The FCPA explicitly prohibits the payment of bribes to foreign officials to obtain or retain business advantages, and its extraterritorial reach allows for the prosecution of foreign nationals if their actions have a demonstrable connection to US commerce or financial systems.
 
“The question of whether Gautam Adani, an Indian national, can be prosecuted by US courts hinges on the extraterritorial application of the FCPA. The statute stipulates that any individual or entity engaging in corrupt practices involving US-linked financial systems — such as dollar-denominated transactions or the use of US-based intermediaries — may fall within its jurisdiction. If it is shown that any element of the alleged bribery scheme involved US interests, such as financial institutions, listed companies, or contracts implicating US commerce, US courts may assert jurisdiction. While India’s domestic law does not preclude such extraterritorial claims, enforcing a conviction would require cooperation from Indian authorities, who typically approach such matters with caution, mindful of sovereignty and diplomatic concerns,” said Tushar Kumar, advocate, Supreme Court of India.
 
Kumar notes that a parallel investigation by Indian authorities remains a plausible scenario, particularly if US prosecutors submit a formal request under the mutual legal assistance treaty or a similar bilateral arrangement.
 
“Since the allegations reportedly involve the payment of bribes to unnamed Indian officials, there may be a prima facie case for inquiry under India’s Prevention of Corruption Act, 1988, among other statutes. However, the decision to initiate such proceedings rests with the Government of India, and any action would depend on the sufficiency of evidence provided by US authorities, along with political and institutional considerations,” he said.
 
Given the severity of the charges and the extraterritorial jurisdiction, authorities will likely initiate extradition procedures to bring the defendants within US jurisdiction, said Kunal Sharma, partner at Singhania & Co.
 
“Upon arrest, the defendants would be required to make an initial appearance before a magistrate judge. During this appearance, they would be informed of the charges, and the judge would determine the conditions of their release, which could include bail,” he said.
 
Regarding Gautam Adani’s freedom of movement, Kumar explained that there appears to be no immediate legal obstacle preventing him from travelling internationally unless an Interpol Red Notice or similar international warrant is issued by US prosecutors.
 
“Such measures would require cooperation from the host jurisdiction and could restrict his movement to countries that have extradition treaties with the US. Further, domestic action by Indian authorities, such as suspending or revoking his passport under the Passports Act, 1967, remains a theoretical possibility, although one requiring procedural justification,” he said.
 
Meanwhile, Sharma points out that while Indian courts emphasise due process, international obligations under bilateral treaties or multilateral conventions — such as the UN Convention Against Corruption — could override Indian laws in cases involving serious crimes like bribery or corruption.
 
“In such cases, the Indian government may be compelled to act according to these international agreements, which could include restricting Gautam Adani’s ability to travel abroad,” he said.
 
What’s next for Adani?
 
In terms of legal strategy, Gautam Adani has several defences at his disposal, says Kumar.
 
“The primary defence would likely challenge the jurisdiction, arguing that the alleged acts lack a sufficient link to the US territory or extraterritorial jurisdiction. Further, his defence could question the evidentiary basis of the allegations, particularly where the prosecution relies on circumstantial evidence or the testimony of compromised witnesses. He may also argue that he lacked direct knowledge or involvement in any alleged misconduct, citing the principle of mens rea to suggest that liability, if any, lies with other executives or intermediaries. Demonstrating the existence of robust corporate compliance mechanisms could also serve as a mitigating factor, countering claims of institutional complicity,” he explained.
 
Meanwhile, Alay Razvi, managing partner at Accord Juris, noted that the Supreme Court of India had directed the Securities and Exchange Board of India (Sebi) to submit a report on the Adani investigation within a specified time frame, and failure to do so would constitute contempt of court.
 
“This reflects poorly on the regulator’s efficiency. These actions could lead to a downturn and negatively affect the stock,” he said.
 
Nilesh Tribhuvann, managing partner at White & Brief Advocates & Solicitors, emphasised that beyond the financial markets, the indictment could have far-reaching implications for India’s regulatory and business landscape.
 
“Domestically, agencies such as Sebi and the Reserve Bank of India might face mounting pressure to investigate Adani’s operations to reassure investors about the integrity of Indian capital markets. Internationally, this incident could strain India-US business relations and dampen foreign investment enthusiasm, as global stakeholders may view Indian conglomerates with increased caution,” he said.
 
“The ramifications of these accusations underscore the importance of holding individuals accountable at all levels of leadership, demonstrating how financial misbehavior can harm a company’s reputation, disrupt markets, and undermine investor confidence,” said Ayush Jindal, advocate, Supreme Court of India. 

Serious Offence

- Charges involve serious allegations of securities and wire fraud, as well as violations of the FCPA and the FEPA
  - Under US law, in cases of securities fraud and wire fraud, legal proceedings begin with an indictment
  - Under the FCPA, an indictment of this nature constitutes a serious offence
  - FCPA explicitly prohibits the payment of bribes to foreign officials to obtain or retain business advantage
 

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First Published: Nov 21 2024 | 8:23 PM IST

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