Adani Indictment: Has Political Cronyism Taken Over India's Regulatory System?

The indictment (known in India as a chargesheet) filed in the United States against Gautam Adani and six other defendants (the "accused" in our parlance) levies five counts/charges.It details a Rs 2,029 crore bribery scheme, a crime under the US Foreign Corrupt Practices Act (FCPA). It also lists criminal violations of the US' securities law with respect to raising funds in American capital markets. It also details acts of conspiracy, wire fraud, securities fraud and other crimes under American law. The elaborate bribery scheme was allegedly conceived and executed in India, and bribes were paid to Indian ministers and officials. This is a crime under the Indian Prevention of Corruption Act (PCA).Despite this elaborate alleged crime taking place in India, no criminal investigating agencies in our country have been approached. Neither have they acted on their own even after the indictment filing.US Court Accuses Adani Group of Paying $250 Million in Bribes to Indian GovtOn the other hand, SEBI, India's securities regulator, is yet to complete an investigation into alleged market manipulation and securities law violations by the Adanis, as alleged in the Hindenburg report.Despite the US indictment detailing specific dates, times, and persons of the Adani Group who knew about the investigations, including the seizure of electronic devices belonging to Adani Green Energy Ltd (AGEL) Executive Director Sagar Adani (the nephew), no action has been initiated against them for misleading investors.What does this reluctance, bordering on intentional cover-up, imply? Has the Indian system of governance, regulation, and investigation become highly compromised? Is this an indictment of the Adanis or an indictment of the Indian government and its regulation system? The Solar Energy Corporation of India (SECI), a Government of India (GoI) public sector undertaking (PSU) which floated the tenders for auctioning 12 GW of manufacturing cum solar power generation capacity, is at the heart of the alleged bribery scheme.It is SECI which entered into power sale agreements (PSAs) with AGEL (8 GW) and Azure Power (4 GW) for buying solar power. It is SECI that entered power purchase agreements (PPAs) for selling this power to five state power distribution companies (DISCOMs), led by Andhra Pradesh's distribution utilities.SECI, therefore, is at the centre of the contracts tainted with the bribery scheme. It also, wittingly or unwittingly, provided the motive for the bribery scheme as well.SECI contracted with AGEL and Azure Power to buy solar power at Rs 2.94 per unit, a considerably higher price than the purchase price prevalent at that time. It could not, however, sell this expensive power to the DISCOMs. To bring them to the table, the Adanis allegedly offered bribes to ministers and officials controlling the DISCOMs, i.e., to buy that expensive power. With the Adanis’ efforts, SECI could finally enter into power sale contracts with the DISCOMs.Madhabi Puri Buch's Brazenness Will Hurt Her, SEBI and the GovernmentThere is another deeper SECI connection. Whether manipulated or voluntarily, Azure Power agreed to sell 2.3 GW of awarded contracts to the Adanis, in lieu of their share of bribes. To that extent, SECI transferred the Azure Power PSAs to the Adanis. SECI, it appears, was at the front and centre of it all. It is a vital Indian governance institution, and therefore, must have a very serious interest in getting the entire matter investigated. It must file a complaint immediately with the CBI. Not so long ago, the Department of Economic Affairs filed a case with the CBI against De La Rue, a British currency company, upon their name being mentioned in the Panama Papers. In the current Adani case, there is a chargesheet filed in a US court detailing an alleged crime. If SECI does not act, it will raise doubts about its own complicity in this gory scheme. The Ministry of New and Renewable Energy (MNRE), which is the administrative department and owner of SECI, has a deep interest in promoting solar power generation in India. Ideally, it too must file a complaint asking the CBI to investigate if there was any corruption within SECI. If none of them act, it will only confirm that the whole system has been compromised.5 Reasons Why SEBI Chief Must Quit Amidst Congress' Allegations and Other IssuesThere were enough reasons and evidence for SEBI to take notice and investigate the allegations against Adani contained in the Hindenburg report released in January 2023. About two years have gone by since the Supreme Court too asked SEBI to investigate the same. SEBI has still not completed its investigations, neither has it released its findings nor taken any action.A second Hindenburg report questioned the bona fides and independence of SEBI chairperson Madhabi Buch, listing instances of blatant misconduct on her part (like continuing to own and earn via consulting firms in India and Singapore despite being in full-time employment at SEBI). It appears that SEBI and Madhabi Buch chose to brazenly cover it up, as the institution has refused to subject her to any independent inquiry. She has carried on with her post, only cutting down her public appearances. The evidence detailed in the Adanis' indictment could not have been more stark and specific. On a certain day in March 2023, US authorities confronted Sagar Adani with a court warrant and provided him with copies of the evidence they had discovered. They confiscated his electronic devices and he was served a subpoena asking for more documents and further evidence. There could not be a more clear case of an investigation having been launched into the affairs of AGEL and the Adanis. Yet, in numerous filings after March 2023 before SEBI and the stock exchanges and in investor conferences, the Adanis and AGEL continued to mislead by asserting that there was no investigation against them or that the investigation was against third parties. This, obviously, is a clear violation of SEBI's listing obligations and disclosure requirements.Yet, SEBI has merely asked the stock exchanges to look into instances of mis-filings. No notice of potential wrongdoing has been served and no investigation has been launched. Neither has any pre-emptive action been taken against the Adanis or AGEL, despite the indictment.SEBI’s handling of the entire Adani affair in the last two years is indicative of the otherwise powerful Indian capital market regulator getting figuratively emasculated. Hindenburg vs SEBI: The Best Course of Action for Madhabi Buch is to ResignSolar power generation is a difficult infrastructure sector with a deep involvement of government agencies at both the central and state levels. It requires an enormous amount of land, which state governments only provide or convert for establishing solar power plants. The contracts for power generation capacities are awarded by SECI and central and state PSUs. The power generated is also practically bought by SECI and DISCOMs. There is no other infrastructure sector that has such a pervasive and intricate involvement of governments. The fact that DISCOMs are in huge losses strengthens the vice-like grip of politicians.In this setting, political cronyism can make all the difference between commercial success and failure. The Adanis are a dominant force in the power sector. Without aligning with politicians and officials across parties, they could not have succeeded so spectacularly within the sector. This political cronyism has crept into the body politic of India. There is no mistaking the fact that our government, regulators, and investigative agencies are differentiating between those closer to them and those not in their good books.Look at how investigations and arrests have been launched by the CBI and the ED (and even state agencies) against Opposition chief ministers, ministers, officials, and businessmen. On the other hand, authorities and agencies hardly act against those close to the powers that be.There is no doubt that political cronyism has taken over India's regulatory and investigative systems. Bribes paid in India and violations of Indian securities laws are getting investigated, charge-sheeted and possibly punished in the US.No action is being taken by the Indian authorities. This is a scathing indictment of our government as well. (The author is former Economic Affairs Secretary and former Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)Adani-Hindenburg Row: Key Highlights From SC-Appointed Committee Report on SEBI

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Adani Indictment: Has Political Cronyism Taken Over India's Regulatory System?

Bribes paid in India and violations of Indian securities laws are getting investigated and charge-sheeted in the US.

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