Whalesbook
Five foreign portfolio investors, previously named by Hindenburg Research in its report on Adani Group, have lodged appeals with the Securities Appellate Tribunal. They allege procedural irregularities by the Securities and Exchange Board of India (Sebi) in an ongoing adjudication process concerning alleged compliance lapses.
Five foreign portfolio investors (FPIs) have escalated a dispute with the Securities and Exchange Board of India (Sebi) to the Securities Appellate Tribunal (SAT). The funds, including LTS Investment Fund and Cresta Fund, are contesting the procedural fairness of an ongoing adjudication process initiated by Sebi.
Allegations of Procedural Lapses
The FPIs, identified in the now-infamous 2023 report by short-seller Hindenburg Research concerning the Adani Group, contend that Sebi has not adequately addressed their responses to show-cause notices. These notices were issued over alleged compliance failures, including deficiencies in filings and disclosures to designated depository participants.
Tribunal Appeal
According to legal representatives for the funds, Sebi proceeded with adjudication despite the investors providing replies to the notices. The core of their argument rests on Rule 4(3) of the Sebi (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995. This rule mandates that an Adjudicating Officer (AO) must first review a noticee's response and determine if a formal inquiry is indeed warranted. The FPIs claim they have not received a copy of this crucial opinion or the reasons behind initiating the adjudication, despite attending hearings before Sebi.
Unanswered Questions
Legal practitioners representing the investors highlighted that the AO's opinion must be formally recorded and communicated to the noticee. Failure to do so, they argue, invalidates the continuation of any inquiry. This procedural issue, they assert, directly impacts the rights of those being scrutinized. Sources close to the matter suggest the FPIs' ultimate beneficial ownership may also be under Sebi's examination. Sebi officials did not immediately respond to requests for comment.
Meanwhile, Sebi concluded its proceedings against Adani Group companies and chairman Gautam Adani in September 2025, finding no violations related to allegations of fund diversion and related-party transactions raised by Hindenburg.