In a significant development, shares of Adani Group companies experienced a sharp decline on Friday, following the United States Securities and Exchange Commission's (SEC) move to seek permission from a New York court to serve summons via email to Gautam Adani, the chairman of the Adani Group, and his nephew Sagar Adani, a senior group executive. This action is related to allegations of bribery and fraud, although no formal charges have been brought against them as of now.
Market Impact and Share Performance
The market reaction was immediate and severe, with Adani Group's listed companies witnessing substantial losses. Adani Enterprises, the flagship company, saw its shares fall by 10.8 percent on the Bombay Stock Exchange (BSE). Other key entities, including Adani Green Energy, Adani Energy Solutions, and Adani Ports and Special Economic Zone, recorded declines of 14.6 percent, 12 percent, and 7.5 percent, respectively. Cumulatively, the ten publicly listed companies of the Adani Group lost over Rs 1 lakh crore in market capitalisation in a single day.
Broader Market Effects
The downturn in Adani stocks contributed to a broader market slump, with the BSE Sensex falling nearly 1 percent, or 769 points, to close at 81,537 points. Additionally, the Indian rupee settled at a record closing low of 91.94 against the US dollar on Friday, reflecting heightened investor anxiety and economic uncertainty.
SEC's Legal Proceedings and Challenges
The SEC has been attempting to serve summons to Gautam Adani and Sagar Adani for over a year, but faced obstacles due to lack of assistance from India's Ministry of Law and Justice. In its court submission, the SEC highlighted that the Indian government rejected two previous requests based on procedural reasons, such as signature and seal requirements. The SEC argued that these requirements are not necessary under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.
Adani Group's Response
In response to the situation, Adani Green Energy filed a statement with the stock exchanges late Friday, clarifying that the company is not a party to the SEC proceedings and that no charges have been filed against it. The filing reiterated that, as per a previous intimation from November 2024, the defendants have not been charged with violations of the United States Foreign Corrupt Practices Act (FCPA), meaning there are no bribery or corruption charges against them. The Adani Group has dismissed the SEC's allegations as baseless and stated its intention to pursue all legal avenues available.
Background of the Allegations
The SEC's involvement stems from allegations that Gautam Adani and others orchestrated a scheme to pay over $265 million in bribes to Indian government officials to secure power supply contracts in India. In November 2024, US prosecutors in New York indicted Gautam Adani and seven others on these charges. Simultaneously, the SEC moved court demanding a jury trial and penalties against Gautam Adani, Sagar Adani, and Cyril Sebastien Dominique Cabanes of Azure Power, a French national, on similar grounds.
Connection to US Laws and Investors
The SEC's jurisdiction in this case is primarily linked to the Adani Group's activities and presence in the United States, including American investors. A key connection involves an Adani Green corporate bond issuance in 2021 that involved US investors. Under US laws, particularly the Foreign Corrupt Practices Act (FCPA), it is unlawful for certain entities, including foreign issuers of securities in the US, to offer bribes to foreign government officials to obtain or retain business.
Future Implications and Legal Recourse
The SEC's formal communication to the Adanis is seen as a prerequisite for the lawsuit to proceed in the US. In its court submission, the SEC stated, "Given Defendants' actual knowledge of this litigation — demonstrated by public statements, regulatory filings and retention of US counsel — email service to their business addresses will provide effective notice." This move could set a precedent for how international legal summons are served in complex cross-border cases involving high-profile individuals and corporations.
As the situation unfolds, market watchers and legal experts are closely monitoring the developments, which could have far-reaching implications for corporate governance, international law enforcement, and investor confidence in Indian markets. The Adani Group's response and any subsequent legal actions will be critical in shaping the outcome of this high-stakes case.
