Adani group stocks surge up to 13% after this US court order in bribery case against Gautam Adani, nephew

Adani group stocks witnessed a sharp rally of up to 13% in Wednesday's trading session after a US court accepted the plea filed by the counsels of Guatam and Sagar Adani for a pre-motion conference to dismiss a securities fraud case brought against them over 15 months ago by the Securities and Exchange Commission (SEC).

All Adani group stocks traded higher following this development and amid a sharp rebound in the Indian stock market on the US-Iran ceasefire news.

Adani Green and Adani Total Gas led, with a 13% rise each. Meanwhile, the flagship Adani Enterprises shares gained 11%. Both Ambuja Cement and Adani Energy hit the 10% upper circuits, while Adani Ports, Adani Power, and ACC gained between 6-8%. Media stock NDTV gained 12% today.

US court accepts plea

In response to the plea filed by the lawyers of Gautam Adani and his nephew on Tuesday, the New York federal court said it has granted the request. The court also requested and directed the parties to confer and to contact the court's deputy to schedule the pre-motion conference.

The counsels for Gautam and Sagar Adani last evening said they intend to seek to dismiss the US SEC's complaint by April 30.

What are the grounds for seeking dismissal?

In the letter, the Adani lawyers set out their grounds for dismissal of the SEC's complaint, including that the court concerned lacks personal jurisdiction over the defendants and the claims against them are impermissibly extraterritorial, among others.

Gautam Adani did not personally authorise the issuance of the $750 million bonds under question or direct the sale of these bonds in the US, they said. 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.

In September 2021, Adani Green Energy raised $750 million through a bond issue using exemptions under SEC Rule 144A and SEC Regulation S. These rules allow companies to sell securities privately to large institutional investors (QIBs) and to investors outside the US without full SEC registration.

According to the company’s lawyers, Adani Green sold the bonds to non-US underwriters, who then resold them to QIBs. While some of these resales are alleged to have reached “investors in the United States”, Adani Green itself was not involved in those transactions, they argued.

The defence further said that the case should be dismissed because the US SEC has not shown a valid legal claim. They say the defendants are not based in the US and do not carry out business there in a way that would give US courts authority over them. They also argue that the alleged actions involve non-US entities and fall outside the scope of US law.

On jurisdiction, the lawyers have said the Court lacks personal authority over the defendants and that the case should be dismissed under Rule 12(b)(2). They emphasise that the matter “involves Indian Defendants, an Indian issuer, securities not registered with the SEC and not traded on U.S. exchanges, and underlying conduct alleged to have occurred exclusively in India.”

The counsels also pointed out that the SEC has not claimed that the underwriters who bought the bonds were US institutions, nor that the subscription agreement governing the deal was based on US law.

Gautam Adani is represented by Sullivan & Cromwell LLP, while Sagar Adani's counsel is Nixon Peabody LLP and Hecker Fink LLP.

The defence further said that the case should be dismissed because the US SEC has not shown a valid legal claim. They say the defendants are not based in the US and do not carry out business there in a way that would give US courts authority over them. They also argue that the alleged actions involve non-US entities and fall outside the scope of US law.

On jurisdiction, the lawyers have said the Court lacks personal authority over the defendants and that the case should be dismissed under Rule 12(b)(2). They emphasise that the matter “involves Indian Defendants, an Indian issuer, securities not registered with the SEC and not traded on U.S. exchanges, and underlying conduct alleged to have occurred exclusively in India.”

The counsels also pointed out that the SEC has not claimed that the underwriters who bought the bonds were US institutions, nor that the subscription agreement governing the deal was based on US law.

Gautam Adani is represented by Sullivan & Cromwell LLP, while Sagar Adani's counsel is Nixon Peabody LLP and Hecker Fink LLP.

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What is the SEC case against Adani and nephew?

The SEC had alleged that billionaire Gautam Adani and nephew, Sagar, among others, paid $250 million in bribes to unnamed government officials in India to secure favourable power-supply contracts for Adani Green Energy.

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.

(With inputs from ANI)