Govt must act to eliminate conflict of interest in SEBI probe into Adani: Congress

Following allegations by US investor Hindenburg Research against SEBI Chairman Madhabi Buch, the Congress on Sunday said the government must take immediate action to eliminate all conflicts of interest in the regulator’s probe into the Adani Group and reiterated its demand for a joint parliamentary committee inquiry into the matter. The opposition party also said the “apparent complicity of the country’s top officials” can only be addressed by setting up a joint parliamentary committee to probe the full scope of the “fraud”.

Hindenburg Research on Saturday launched a scathing swipe at market regulator SEBI’s chairwoman Madhabi Buch, accusing her and her husband of having stakes in undisclosed offshore funds that were used in the Adani money-siphoning scandal.

In a blog post, Hindenburg said that 18 months after its damning report on Adani, “SEBI has shown a surprising lack of interest in Adani’s alleged undisclosed network of Mauritius and offshore shell entities.”

SEBI Chairwoman Buch and her husband have denied the accusations made against them as baseless and said their finances are a public record.

In a statement issued late on Saturday night and re-posted on Sunday, Congress general secretary in charge of communications Jairam Ramesh said the “strange reluctance of SEBI to investigate the mega Adani scam” had been noticed for long, including by the Supreme Court’s Expert Committee.

The committee, it said, noted that SEBI in 2018 had watered down and in 2019 completely removed the reporting requirements on the ultimate beneficial (i.e. actual) holding of foreign funds. “This tied the hands to the extent that ‘the securities regulator would suspect wrongdoing but also find compliance with various provisions in the accompanying regulations… It is this dichotomy that led to SEBI finding nothing globally’,” Ramesh said, quoting the Expert Committee. “Under public pressure, after the Adani horse bolted, the SEBI board reintroduced stricter reporting rules on June 28, 2023. It informed the Expert Committee on August 25, 2023, that it was investigating 13 suspicious transactions. However, the investigations never yielded any fruit,” the Congress leader added.

He said facts disclosed by Hindenburg Research on Saturday showed that Buch and her husband had invested in the same offshore funds based in Bermuda and Mauritius where “Vinod Adani and his close associates Chang Chung-Ling and Nasser Ali Shahban Ahli invested funds obtained from inflating invoices for energy equipment.”

“It is also alleged that these funds were used to amass large stakes in Adani Group companies in violation of SEBI regulations. What is shocking is that Buch allegedly had a financial stake in the same funds,” Ramesh said.

The Congress leader said the disclosure raises fresh questions about Gautam Adani’s two meetings with Buch in 2022, which took place just after she took over as the chairperson of the stock market regulator.

“The government must take immediate action to remove any conflict of interest in the SEBI probe into the Adani case. The fact is that the apparent complicity of the country’s top officials can only be addressed by setting up a JPC (Joint Parliamentary Committee) to probe the full scope of the Adani scam,” the former Union minister said in a statement.

Earlier, tagging Hindenburg’s post about the accusations against X, Ramesh said: “Quis Custodiet Ipsos Custodes (Who will guard the guards themselves).”

Congress media and publicity chief Pawan Khera on Sunday said the shocking revelations in the Hindenburg Report not only expose the “cosy relationship” between the SEBI chief and the Adani group, but also show how appointments to regulatory agencies are made in this government.

“A simple analysis conducted by the government before appointing Ms Madhabi Puri Buch as the SEBI Chairperson would have revealed these incriminating details,” he said in a post on X.

Khera said it would be naive to think that government officials were not aware of the foreign investments by Madhabi Puri Buch and Dhaval Buch.

“The responsibility lies at the doorstep of the Prime Minister of India. Only the JPC can get all the answers,” he said.

Last January, Hindenburg Research, which has historically bet against or bet against shares of companies such as electric truck maker Nikola Corp and Twitter (now X), accused Adani Group of “the biggest corporate fraud in history” by using a network of offshore companies to inflate earnings and manipulate stock prices while debt ballooned.

Although the conglomerate vehemently denied all allegations, the devastating report sent the group’s shares plummeting, wiping out more than $150 billion in market value for the 10 listed entities at their lowest point.

Most of the 10 listed companies have already made up for their losses.

Following the Hindenburg Report, the Supreme Court asked SEBI to complete its investigation and constitute a separate panel of experts to look into regulatory shortcomings.

The panel did not issue any adverse report in Adani’s case and the top court also said that no other inquiry beyond that conducted by SEBI was necessary.

Last year, SEBI informed a Supreme Court-appointed committee that it was investigating 13 opaque offshore entities that held between 14 and 20 per cent stake in five publicly listed stocks of the conglomerate.

There was no information provided as to whether the two pending investigations had already been completed.