Facts of the case
Adani is a large Indian multinational company located in Ahmedabad, it was lunched at 1988 by Gautam Adani who was considered as the third richest man in the world.
The company has extensive interests in many sectors, including energy, real estate, logistics
and infrastructure.
Hindenburg Research is an independent investment focusing on criminal financial analysis
and investigative reporting.
The Hindenburg Research made an investigative reporting at 24 January 2023, announced a short-selling campaign targeting the stocks of companies within the Adani Group. And accusing the Adani group with listed allegations including: Stock Manipulation: The report alleged that the Adani Group used offshore shell companies, many controlled by Vinod Adani, the brother of Gautam Adani, to artificially inflate stock prices, Accounting Fraud: It was claimed that the conglomerate employed fraudulent accounting practices to enhance its financial statements, including the use of inflated asset valuations and undisclosed related-party transactions. And High Debt Levels: The report highlighted concerns about the group’s
substantial debt, suggesting that it posed significant financial risks.
Following the publication of the report, the stocks of Adani Group companies dropped
significantly, leading to massive losses for investors.
Adani group responded to this action by saying that report is based on research not evidence and its baseless, additionally the report just for the purpose of Defamation of the company’s
reputation.
In August 2024, Hindenburg Research released another report implicating the Chairperson of the Securities and Exchange Board of India (SEBI) in the alleged misconduct.
Following the publication of the report, the stocks of Adani Group companies dropped significantly, leading to massive losses for investors and in January 2025, Nate Anderson, the founder of Hindenburg Research, announced the closure of the firm, citing personal reasons
and the desire to focus on other pursuits.
The Securities and Exchange Board of India (SEBI) and other Indian regulatory bodies began investigating the allegations against the Adani Group, including their impact on the
market.
After that the Indian stock market experienced significant fluctuations which affected investors wealth.
Later, Vishal Tiwari filed the lawsuit in the Supreme Court of India, seeking an investigation into the impact of the report on the markets and to protect investors’ rights. As a result, the
case was brought before the court in 2023 and culminated in a ruling on January 3, 2024.
Issues Raised:
• Vishal Tiwari raised several questions and concerns related to the Hindenburg
Research report and its impact on the financial market.
• Firstly, Vishal Tiwari demands an investigation into the possible manipulation
of Adani Group’s stock prices, which he claims affects market stability.
• Secondly, he seeks the formation of a Special Investigation Team (SIT) to investigate the allegations made in the Hindenburg Report against the Adani Group. He
requested that this SIT be supervised by a retired Supreme Court judge to ensure impartiality
and accountability in the investigation.
• Thirdly, he calls for an investigation into the role of public sector banks in providing loans to the Adani Group, particularly in light of significant fluctuations in the group’s stock prices following the publication of the Hindenburg report. He expressed concerns about the potential risks to public funds and the broader financial system, emphasizing the need for transparency and accountability in the lending practices of these
banks.
• The petitioners alleged that the Adani Group illegally controls more than 75%
of the shares of its listed companies, leading to stock price manipulation in the market.
• The petitioners demanded court-supervised investigations by a special investigation committee or the Central Bureau of Investigation (CBI) into allegations of fraud
and the potential role played by senior officials in banks and public financial institutions.
Contentions of the First Party:
1. Concern about Market Manipulation and Volatility:
The first party claims that there is manipulation of stock prices in the financial market, which affects market stability and leads to volatility. This manipulation is harming investors in
general.
2. Request for Investigation into Stock Price Manipulation:
The first party demands a thorough investigation into the potential manipulation of stock prices, ensuring that the investigation is independent and supervised by an appropriate
authority to guarantee fairness.
3. Responsibility of Public Sector Banks:
The first party expresses concern over the role of public sector banks in granting loans despite significant fluctuations in the market, fearing these loans may put public funds at risk.
They call for an investigation into the practices of these banks.
4. Request for Transparency and Regulatory Changes:
The first party calls for a review of the regulatory framework to ensure better transparency
and better protection for investors, alongside the need for enhanced monitoring of the market.
Contentions of the Second Party:
1. Acknowledgment of Market Volatility:
The second party acknowledges the presence of volatility in the market and its negative
effects on investors. They confirm that multiple investigations have been carried out to
address this issue.
2. Ongoing Investigations:
The second party points out that 22 out of 24 investigations have been completed, and the
final reports for these investigations have been approved by the relevant authorities.
However, for the two ongoing investigations, they are still awaiting additional information
from external agencies.
3. Commitment to Transparency:
The second party emphasizes its commitment to transparency in the investigations, having
provided details about the number of summons and documents reviewed during the
investigations, showcasing their efforts to address the raised concerns.
4. Role of the Authority in Regulation:
The second party insists that it is working within its regulatory powers to ensure that the
financial market remains fair and transparent. They are also ready to amend regulations if
necessary to improve market operations and protect investors.
The defects of the law in this case:
Firstly: there is no clear legislations that concern with the matter of manipulation of stock and
this is mean there is no a specific legal frame to confront the manipulation of stock leading to
exploitation of legal loopholes.
Secondly: there is no sufficient monetary over the banks in the matters of giving loans and
this is effects public funds by putting it at risk.
Thirdly Lack of coordination between relevant authorities, there is a shortfall in collaboration between regulatory bodies, such as SEBI, and other government entities, which hinders the
effectiveness of investigations and legal measures.
Fourthly Slow and inefficient investigations: Ongoing investigations by SEBI may be slow and ineffective, delaying the implementation of appropriate legal actions and lastly the Weak protection for small investors by the absence of sufficient laws to safeguard the rights of
small investors from manipulation or market volatility leaves them vulnerable to risk.
Inference:
Dependence on the evidence the court inferred that there is manipulation in the stock prices of the “Adani Group” companies, leading to negative impacts on the market and harming the interests of investors, additionally If the current investigations are insufficient or still ongoing, we may conclude that the court should order further investigations, particularly by specialized bodies, to ensure justice is served and the raised issues are properly addressed.
And the court finds that there must be Regulatory reforms to ensure greater protection for
investors and guarantee transparency in financial operations.
Refrences:
1-Vishal Tiwari vs Union of India on 3 January, 2024 Author: Dhananjaya Y Chandrachud.
2-https://m.economictimes.com/news/india/adani-hindenburg-saga-a-chronology-of- how-a-us-short-seller-sent-one-of-indias-biggest-conglomerates-into-
turmoil/articleshow/112440951.cms
3-https://www.business-standard.com/india-news/plea-in-sc-to-take-us-charges-on- adani-on-record-in-the-ongoing-matter-124112400239_1.html
Fatima Ahmed Mahjoub Nasr.
Faculty of law – University of Khartoum.