US probe disclosure not mandated: Adani group companies tell bourses

Group said to have made submission stating it didn't disclose US probe as matter was sub judice, no charges were affirmed

Adani group firms, in its reply submitted to the stock exchanges, have claimed that the disclosure of the probe carried out by the US agencies was not mandatory under the regulations of the Securities and Exchange Board of India (Sebi) as the matter was sub judice and no charges had been affirmed, sources familiar with the developments said. 

 

 

The stock exchanges, which are also considered first-level regulators, had sought clarifications on allegations that the group gave misleading statements and did not give timely disclosures on the searches carried out by the US investigative agencies. Sebi had directed the exchanges to seek clarity, sources informed, adding there is no formal probe or investigation initiated on this matter against the group by the markets regulator.

 

 

In a short response submitted to the exchanges on Friday, Adani entities claimed that the disclosure on the probe carried by American agencies was not mandatory under the Listing Obligation and Disclosure Requirement (LODR) Regulations as the matter was sub judice and no charges had been affirmed, sources said.

 

The US prosecutors had highlighted that in March 2023, federal agents had provided Sagar Adani the search warrant and served him with a grand jury subpoena identifying the offences, individuals, and entities under investigation.

 

It alleged that Adanis made misleading statements to the media, investors, Indian stock exchanges, and financial institutions in their private communications about the Indian energy company’s awareness of the US investigation.

 

Queries emailed to the Adani group, and both the stock exchanges on the response by the Adani group remained unanswered till the time of press.

 

Meanwhile, Adani group has denied the charges of alleged securities fraud conspiracy levelled by the US prosecutors.

 

“Non-disclosure of material information is against the established norms of good corporate governance. As far as the question of stage of disclosure of search and investigation is concerned, there is no specific regulation which permits the corporate to do the disclosure only after establishment of charges,” said Tushar Agarwal, founder & managing partner, C.L.A.P. JURIS, Advocates & Solicitors.

 

Agarwal adds that according to the norms, material information has to be disclosed as early as it comes into the knowledge of the listed company. While Adani group will defend that search and investigations carried out by US prosecution were not part of material information to be disclosed, it is for Sebi to decide whether the warrants and pending investigations were material information or not, he said.

 

Megha Sharma, an advocate at the Delhi High Court, said, “A matter may be considered material where it has the potential to result in significant financial liabilities, reputational harm, or a substantial adverse impact on the operations or financial standing of the company.”

 

A few other legal players said that the issue of when to disclose matters related to sub judice cases or law enforcement actions has not been clearly defined.

 

Ashish Deep Verma, founder and managing partner at Vidhisastras, Advocates & Solicitors, opines that premature disclosure might risk causing unnecessary panic or speculative behaviour in the market, which could be detrimental.

 

“It is but obvious that early disclosure could lead to market volatility and might potentially harm the company’s reputation if investors or stakeholders react too quickly. Therefore, it is crucial that disclosures are made at the appropriate time and at such well-defined stage of litigation or litigation(s) when the companies have enough concrete information to make an informed disclosure,” said Verma.

 

Meanwhile, the Adani group on Wednesday denied bribery allegations stating that the US Department of Justice (DOJ) indictment lists five counts, none of which names Gautam Adani, Sagar Adani, or Vneet Jaain in connection with bribery or obstruction of justice.

 

Earlier, the Adani group’s CFO had stated that none of the publicly listed companies of the group were subject to indictment or accused of any wrongdoing.