Lawyers for Adani Group chair Gautam Adani and nephew Sagar in the US on Tuesday filed a motion in a New York federal court to dismiss the securities fraud case brought against them over 15 months ago by the Securities and Exchange Commission (SEC).
Mint takes a look at the arguments made by the high-profile Adani counsels and the road ahead in the case.
What is the case?
The SEC has alleged that billionaire businessman Gautam Adani and Sagar Adani, among others, paid $250 million in bribes to unnamed government officials in India to secure favourable power-supply contracts for Adani Green Energy Ltd.
The regulators further claimed that when raising capital from American investors, the Adanis did not tell them about the alleged bribes while stating the company’s anti-bribery policies, thus misleading investors and committing securities fraud.
The Adani Group has denied any wrongdoing.
What did the Adani lawyers argue?
The Adani lawyers filed a motion to dismiss the SEC case based on a lack of personal jurisdiction. The Adani kin are neither residents of the United States nor did they purposefully direct their activities towards the country, the counsels said in their motion.
Gautam Adani did not personally authorize the issuance of the $750 million bonds under question or direct the sale of these bonds in the US, they said. While the senior Adani was the chairman of Adani Green Energy’s management committee, which reviewed and approved the offering circular for the bonds, he did not attend a single meeting of the committee between 2020 and 2024, they argued.
Sagar Adani, who is an executive director at Adani Green Energy and was part of the management committee meetings, did not direct any sale of the said bonds in the US, the lawyers argued. All the bonds were sold to non-US underwriters by Adani Green Energy, who later sold a part of these bonds to US investors. The company was not part of the secondary transactions in selling to Americans, they said.
What are their other arguments?
Besides citing lack of personal jurisdiction, the lawyers also argued that the SEC has no jurisdiction over the bonds concerned. Just because $175 million worth of bonds out of the $750 million total issued were purchased by American investors in a secondary sale does not give the SEC jurisdiction over the issue, the lawyers argued.
“The SEC’s claims here solely involve Indian Defendants, an Indian issuer, securities not registered with the SEC and not traded on any U.S. exchange, and underlying conduct alleged to have occurred exclusively in India,” the lawyers noted. The bonds were under-written by non-US institutions and the subscription agreement between the parties was not governed by US law.
“This case is thus conclusively beyond the reach of the U.S. securities laws,” they argued.
Meanwhile, Adani Green Energy’s ESG and anti-bribery commitments and other claims made as part of the bond issuance were general statements about reputation and “inactionable puffery,” the lawyers said. Essentially, these were generic claims that companies make, they said, and not a guarantee of a specific outcome.
The US courts have repeatedly rejected similar statements as vague claims that are not actionable, the lawyers said in their motion.
Who are Adani’s lawyers?
The Adani kin have hired a battery of prominent attorneys in the US. Gautam Adani has appointed law firm Sullivan & Cromwell LLP with Robert Giuffra leading the team representing him. Giuffra is known for leading US President Donald Trump’s appeal against his conviction in a hush money case, in which a Manhattan jury found him guilty of falsifying business records to pay a former adult film actor to keep their alleged involvement private. Giuffra also represented auto giant Volkswagen in its multibillion dollar ‘diesel-gate’ scandal when it was caught cheating on emissions tests.
Sagar Adani has hired Timothy D Sini, a partner at Nixon Peabody LLP and a former US district attorney, to represent him. He has also appointed Sean Hecker, founding partner of boutique law firm Hecker Fink LLP, as his attorney. Hecker Fink most notably represented American journalist E. Jean Carroll in her successful lawsuits against Donald Trump.
What’s next?
The court has accepted the plea of the Adani counsels. They will now have a conference to hear their motion to dismiss the case. There it will be decided if the case should be dismissed or go ahead for trial.
The attorneys of SEC and the Adanis had in January agreed to a legal schedule providing them a clear timeline to file motions and oppositions in a staggered manner. As per the agreement, which was disclosed in court on 30 January, the Adanis had 90 days to file a motion to dismiss. They filed the motion on 7 April.
Next, the SEC has 60 days to amend its complaint or to serve an opposition to this motion. Subsequently, the Adanis will have 45 more days to file any response to the SEC’s filings.