SEBI’s ongoing investigation into allegations against the Adani Group “hit a dead end”


Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

I have come across reports ( to the effect that SEBI’s ongoing investigation into the past allegations against the Adani Group in 2014 seems to have “hit a dead end” in 2017. If those reports are correct, it raises serious concerns about the manner in which the Ministry of Finance and the Ministry of Corporate Affairs, as well as SEBI itself, have allowed legislative infirmities/ gaps to exist, that helped domestic companies operate their overseas shell companies not only to evade taxes but also manipulate the Indian stock market at the cost of thousands of small investors.

In this connection, I request you to refer to my earlier letters on the subject, accessible at &

The following points emerging from the above-cited correspondence call for an independent investigation:

1) The May 6, 2023, report of the Expert Committee appointed by the Hon’ble Supreme Court vide their Order on March 2, 2023, in the Adani matter, raised the following issue.

SEBI regulations 2014 mandated the requirement to disclose the ultimate beneficial ownership of a natural person above the FPI. This was part of a provision that dealt with “opaque structure” in the ownership of an FPI. In any case the declaration of the ultimate beneficial owner under the SEBI Regulation was required to conform to the disclosure of the beneficial owner under the Prevention Money Laundering Act and thereby under Rule 9 of the Prevention of Money Laundering (Maintenance of Records) Rules of 2004. ………….In 2018, the very requirement to disclose the last natural person above every person owning any economic interest in the FPI was done away with

At a time when SEBI had already received complaints from no other than some Central investigating agencies on a possible infringement of the SEBI regulations by the Adani Group, possibly with reference to operations through overseas entities and when SEBI faced difficulties in determining the ultimate beneficial ownership of such entities, why did SEBI rush into diluting the already existing 2014 regulations to introduce more opacity in relation to beneficial ownership of the overseas entities?

2)Would SEBI be presenting a correct picture of the ongoing investigations into the 2014 complaint, by saying that the investigation met with a dead end in 2017, when the Minister of State in your Ministry, in response to a question in the Lok Sabha (Question number 72 answered on 19-7-2021), confirmed that, while SEBI and DRI had undertaken investigations against a few such FPIs, no investigation had yet been undertaken by the Enforcement Directorate? There seems to be some inconsistency in the stand apparently taken by SEBI vis-a-vis the statement made by your Ministry before the Parliament.

3)Answering a Rajya Sabha Question on shell companies on 6-2-2018, the Corporate Affairs Minister stated “The Companies Act, 2013 does not define the term Shell Company. However, the Organization for Economic Cooperation and Development (OECD) defines a Shell Company as a company which is formally registered or otherwise legally organized in an economy but which does not conduct any operation in that economy other than in a pass-through capacity” 

Apparently, the Corporate Affairs Ministry had constituted an expert group to recommend suitable amendments to the Companies Act and other related legislations for defining overseas shell companies. Five years have elap[sed since then but no further action has been taken yet, which in turn has allowed the existing legal loophole to continue to benefit those companies taking undue advantage of the legislative gap to evade taxes and manipulate the domestic stock market. Has the failure on the part of the government to act decisively on this been deliberate, aimed at granting undue benefits to errant domestic companies?

4)This refers to my letter of February 9, 2023 ( The Dept of Economic Affairs (DEA) in your Ministry issued a relaxation in overseas investment rules in August 2022 [GSR 646(E) dated 22-8-2022], which implies that overseas investment in a foreign entity by a resident in India would be permissible, even if the foreign entity in question invests into India, either directly or indirectly, either through another subsidiary registered in the main overseas location or in a third country, irrespective of whether the investment implies tax avoidance or outright tax evasion. Does this not constitute yet another set of rules that indirectly benefit errant domestic companies round-tripping funds via overseas shell companies, which seem to be a part of a concerted attempt on the part of different wings of the government to extend undue benefits to errant domestic companies engaged in creating a shadow economy to the detriment of the public interest?

The above-mentioned developments cannot be treated merely as isolated ones not forming part of an overall scheme aimed at extending an undue advantage to domestic companies seeking to evade taxes, round-trip funds and manipulate the domestic stock market.

May I call for an independent investigation commissioned urgently to examine these developments together and take appropriate action against all those involved in granting undue benefits to errant companies and providing a misleading picture to evade public accountability?


Yours sincerely,

E A S Sarma

Former Secretary to the Government of India



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