U.S. law firm Wachtell, Lipton, Rosen & Katz's appointment by Gautam Adani is in the wake of short selling and not "necessarily" a precursor to a legal action against short seller Hindenburg Research, a person close to the development told BQ Prime, requesting anonymity.
The Adani Group has tapped senior lawyers at New York-based Wachtell to advise it on how to stem the crisis facing the Indian conglomerate after Hindenburg's fraud and stock-manipulation allegations, the Financial Times had first reported.
BQ Prime awaits response to queries emailed to Wachtell and the Adani Group.
The person cited above also told BQ Prime that market regulator SEBI, if it deems fit, can examine the short selling. The person cited the Supreme Court's 2015 ruling in Pan Asia Advisors Ltd. to say that the regulator will have jurisdiction to examine the short-selling since it had an impact on the Indian equity markets and investors.
In the Pan Asia case, the apex court was asked to rule on SEBI's jurisdiction to investigate the role of foreign lead managers who dealt with the Global Depository Receipts issued by six Indian companies. The regulator had alleged that the lead managers were involved in fraudulent transactions and manipulation in issuance of GDRs, which adversely impacted Indian investors.
The Supreme Court applied the principle of “effects doctrine” to say the regulator's duty to protect investor interests would automatically come into play as per provisions of the SEBI Act, 1992.
On Friday, the apex court while hearing two public interest litigation petitions on the Adani-Hindenburg fracas also expressed concerns around the loss suffered by the investors. The bench observed that there might be a need to set up a committee to look into the matter, and whether sufficient regulatory framework exists to protect Indian investors.
The Supreme Court, however, hasn't given any direction yet, and will continue hearing the matter on Feb. 13.
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.
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