India’s capital markets regulator, the Securities and Exchange Board of India (Sebi), has dismissed the allegations of stock manipulation against billionaire Gautam Adani and his companies, initially made by US-based short seller Hindenburg Research. In two separate official orders issued on Thursday, September 18, Sebi stated its inability to 'establish' the claims against Adani and the Adani Group companies, including Adani Ports and SEZ Ltd and Adani Power Ltd.

Following Sebi's ruling, Adani Group Chairman Gautam Adani praised the decision, reiterating that Hindenburg Research's claims were “baseless.” In a post on the social media platform X, Mr. Adani expressed deep sympathy for investors who lost money due to what he termed a “fraudulent and motivated report.” He further demanded an apology from those who spread false narratives, emphasizing that “Transparency and integrity have always defined the Adani Group.”

Sebi's whole-time member, Kamlesh C. Varshney, stated in the orders that “I find that the allegations made against the noticees in the show cause notices are not established. Considering the above, the question of devolvement of any liability on the noticees does not arise, and hence the question of determination of quantum of penalty also does not require any deliberation.” This conclusion means no penalty will be levied on Gautam Adani and his group.

Hindenburg Research's report, released on January 24, 2023, alleged that Adani Group's flagship companies, Adani Enterprises Ltd and Adani Power Mundra (now Adani Power), received funding from Milestone Tradelinks Pvt. Ltd and Rehvar Infrastructure Pvt. Ltd via Adani Infra (India) Ltd in 2020-21. The short seller raised concerns about the origin and source of these funds within the conglomerate.

Sebi's investigation addressed several key aspects of these allegations. Firstly, it found “no violation” of the Listing Obligations and Disclosure Requirements (LODR) regulations, determining that the transactions between the companies did not qualify as related-party transactions at the time they occurred. Sebi clarified that the 2021 amendment to the LODR regulations, which widened the scope of the definition of “related-party transaction,” is a substantive amendment and, as per legal jurisprudence, cannot apply to past transactions.

Secondly, an expert committee appointed by the Supreme Court in the Adani-Hindenburg Case concluded that the non-inclusion of these transactions under related party was not “a case of regulatory failure” and that it is legally “impermissible” to attack past transactions in this context. Thirdly, under Sebi's anti-fraud provisions (Section 12A of the SEBI Act and Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market Regulations), the allegations and charges against Adani Group companies and Gautam Adani did not stand, as the regulator found “no violation.” Finally, Sebi determined that the allegations of manipulative or fraudulent transactions or unfair trade practices could not be classified as such, as there were no claims of “siphoning off of money or diversion of funds.”