May 03 2023,
Other group firms (Adani Green Energy, Adani Power, Adani Ports & SEZ, Adani Wilmar, Adani Total Gas, and Adani Energy Solutions) in separate exchange filings also disclosed the receipt of similar notices “with regard to the transactions entered in the earlier years with certain parties, essentially, from a substance over-form perspective.
” None of the firms provided details of the allegations or names of the related-parties involved. Sebi has been probing the Adani group after a report by Hindenburg Research alleged violation of RPT norms, circumvention of minimum public shareholding norms, improved use of tax havens, and stock manipulation. Legal experts said the allegations don’t seem to be very serious in nature and, hence, the markets have taken it in their stride. They added that violations of Listing Obligations and Disclosure Requirements Regulations can often be settled under the consent route or attract minimal penalties.
“A show cause notice from Sebi isn't a conviction; it's a legal notice. If the regulator is satisfied with the response, the matter usually concludes there. However, if unsatisfied, Sebi may proceed with conviction. Generally, for first-time violations, Sebi tends to be lenient, imposing fines ranging from %25,000 to %5 lakh. Subsequent violations may incur harsher penalties,” said Jidesh Kumar, managing partner at King Stubb & Kasiva, Advocates and Attorneys. Experts said in the case of serious violations, Sebi can even bar the company or the management from accessing the capital markets.
They said the regulator can serve more notices if pending investigations reveal further violations. “The allegations are that the company has not obtained the requisite approvals, and have not made the required disclosure in the financial statements/ annual report (ii) Not recalling security deposits against terminated contracts leading to not using the funds for company's core business purposes and thus not complying with the company's code of conduct. The amounts dues in respect of these transactions along with interest thereon have been received in full before March 31, 2023, and there are no transactions with these parties in the current financial year and there are no losses suffered by the company,” said Adani Ports.
It further said that it has already replied to Sebi and “the company has denied the charges in it's entirety, inter alia, on the basis that these transactions are in full compliance with the prevailing laws and regulations”. Adani Wilmar said the SCN received from Sebi was related to “validity of peer review certificate (PRC) of the predecessor auditor in earlier financial year, which the company has responded to”. Following the Hindenburg Research’s allegations against the group in January 2023, the group initiated an independent review by a law firm of the transactions mentioned in the report. It said the assessment confirmed that “none of the alleged related parties mentioned in the SSR were related parties to the parent company or its subsidiaries, under applicable frameworks; and the parent company is in compliance with the requirements of applicable laws and regulations”.
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