Adani Group Stocks Rally Up to 13% After US Court Accepts Dismissal Plea in SEC Fraud Case

Court Accepts the Plea

The US District Court for the Eastern District of New York accepted the request on Wednesday, directing both parties to schedule a pre-motion conference through the court's deputy clerk. The Adani legal team has stated its intention to formally file for dismissal of the SEC complaint by April 30.

It is important to note that this is a procedural development, not a ruling. The court has not dismissed the case. However, the acceptance signals that the grounds for dismissal raised by the defence are substantive enough to warrant a formal hearing .

The Grounds for Dismissal

In making the legal arguments, the Adani counsels base themselves largely on questions of jurisdiction. According to the defense's argument, the action is one that pertains to defendants from India, the issuer of the securities in question is from India, the bonds are neither registered with the SEC nor traded in the United States, and all activities took place in India. This, in their opinion, means that the defendants cannot be subject to personal jurisdiction because of the provisions of Rule 12(b)(2).

The key issue in the action centres around a $750 million bond issuance by Adani Green Energy made in September 2021 through SEC Rules 144A and Regulation S – regulations that allow private placement of the bonds among institutional buyers without registering them fully. According to the defense, Adani Green Energy issued its bonds to foreign underwriters, who then sold the bonds to institutional buyers. Even though some of those bonds might later have been sold to US residents, Adani Green Energy was not part of the transaction.

The lawyers also stated that Gautam Adani did not personally authorise the bond issuance or direct its sale in the United States. Sagar Adani, who serves as executive director on the board of Adani Green Energy and attended management committee meetings, is similarly argued to have had no direct involvement in selling the bonds to US investors.

The defence further noted that the SEC had not claimed the underwriters who purchased the bonds were US-based institutions, nor that the subscription agreement governing the transaction was subject to US law.

Gautam Adani is represented by Sullivan & Cromwell LLP. Sagar Adani's legal counsel consists of Nixon Peabody LLP and Hecker Fink LLP.

Background: What the SEC Case Alleges

The SEC filed its complaint in late 2024, alleging that Gautam Adani, Sagar Adani, and several other executives paid approximately $250 million in bribes to unnamed Indian government officials to secure favourable power-supply contracts for Adani Green Energy. It was expected to yield more than $2 billion worth of profits during a period of 20 years.

Moreover, according to the regulator, as the company sought to raise capital in the U.S., it claimed that its internal control systems were solid when it came to preventing corruption and bribery. It meant that, in essence, it conducted securities fraud. The Adani Group denies any wrongdoing and is prepared to defend itself legally.

What It Means Going Forward

The upcoming pre-motion conference and the April 30 dismissal filing will be closely watched. If the court ultimately rules in favour of the Adani defence on jurisdictional grounds, it could materially weaken both the SEC civil case and potentially the DOJ's criminal proceedings.

Wednesday's double-digit gains across the group are a clear indicator of how much legal risk had been factored into Adani stock valuations. A single procedural update was enough to move prices sharply, which means any further developments, in either direction, are likely to have an outsized impact on the group's market performance in the weeks ahead.

References:

https://www.livemint.com/market/stock-market-news/adani-group-stocks-surge-up-to-12-after-this-us-court-order-in-bribery-case-against-gautam-adani-nephew-11775628454114.html

https://www.freepressjournal.in/business/adani-group-stocks-surge-past-10-after-us-court-relief-in-sec-case

https://www.cbsnews.com/news/gautam-adani-indian-billionaire-indicted-265-million-dollar-bribery-scheme/