 Hello and welcome to NewsClick. Today we have with us Paranjay Guhat Haagutta and we are going to discuss whether the Adhani's reports what they are supposed to make to Sebi had proper disclosures or not regarding what would be called related party transactions. Paranjay the argument that related parties should disclose their dealings is true for the company which is publicly listed which is actually Adhani's various companies. Seven of them, at least seven of them. And therefore any transaction with a related party as defined by Sebi then should be publicly disclosed. So in the particular case that we are talking about which has hit the newspapers recently was there proper disclosure between what is called CAM and the fact that one of the partners in the firm was Adhani's daughter-in-law. So this particular set of advices which they would have given to Adhani's companies and the fact that there is a relationship there between a daughter-in-law and the owners of the company or being related by marriage to the company that should or should not have been disclosed. This is the key issue. Thank you Prabir for having me once again on Newsclick. To take a few steps back this has suddenly become newsworthy why because on the 19th of June Andy Mukhaji earlier known as Anindo Mukhaji but he is a columnist he writes for Bloomberg Opinion he wrote an article with the title why doesn't Adhani disclose potential conflicts. Now it's interesting in my opinion what Andy has done Andy Mukhaji is not just an opinion piece he's actually investigated a lot. What is he said? I mean he starts by saying you know Indian firms that start as family-run businesses they don't want to give up control. Even when their shares are widely held by members of the public and we know what had happened to the case of the Adhani group it shares after the Hindenburg research report came out on the 24th of January by this short-selling firm based in New York. Now what is interesting is that the involvement of Paridhi Adhani she is married to Karan Adhani who is the older son of Gautam Adhani who happens to be the chairman of the Adhani group of companies. Now Paridhi Adhani heads the Ahmedabad office of C.A.M. Cyril Amarchand Mangal Das one of India's leading law firms who specialize in corporate law and she also happens to be an important functionary a partner in that company. Now one of the things is she and her husband are designated partners in a company called Adhani Infracon LLP that's a limited liability limited liability partnership in response to Mr Mukhaji's Andy Mukhaji's question they said that this is a small company and it's doesn't have any significant interest in the Adhani group's businesses it's just a personal entity holding art objects. Yet Paridhi Adhani on her own website has advised several several several cases where the Adhani group is involved. It has advised it in in the acquisition of the 75% state stake in the Krishna Patnam Ports company and two transactions involving Adhani Green Energy and the French company Total. The question that would naturally arise that she has herself on her own website advertised that she's involved in mergers and acquisitions including these relating to the Adhani group. Now let's take one more step back. It is known and the Hindenburg research has highlighted that the seven major listed companies that are in the Adhani group they have collectively 578 subsidiaries that's how complex the corporate structure is and and I don't know how many thousand associate companies and about more than 6000 transactions in one financial year the year that ended on the 31st of March 2022 could could be potential could have potential related party transactions then comes the issue of a what who or what is a related party and here again as we have discussed in the past before if you recall the Supreme Court appointed committee which looked at the securities and exchange board of India SEBI and whether there was regulatory failure talked about how this definitions have itself changed over the years at the same time the question that is now very very important if Paridhi Adhani is involved in several transaction including and this is not just these the two involving Adhani Green and Total as well as Krishna Patnam also the very very important acquisition of the Swiss company called Holsem cement cement businesses ACC earlier associated cement companies that part of the Tata group that the Ambuja cements part of the Ambuja group and it enable the Adhani group to become India's second biggest cement producer virtually overnight now she advised them so the question is whether this should have been disclosed by the Adhani group companies now as Andy Mukherjee himself points out opinion is divided one section of experts and lawyers and accounting professional they believe it should have been disclosed another view is that you don't become a related party until you have what is called significant control now you can say that Paridhi Adhani does not have significant control over Cyril Amma Chan mangadas and therefore you are not a related party now here this is what the Adhani group responded to Andy Mukherjee and I read out in the interest of fairness it said we firmly assert that the stated findings and conclusions are misleading and do not display accurate understanding of the Indian regulatory framework and its disclosure requirements it is important to note that Ms Paridhi Adhani partner at Cyril Amma Chan mangadas does not qualify as a related party under all prevailing prevalent laws and regulations CEM and all its partners offer professional services to the Adhani group in adherence to regulatory requirements and we have made all necessary disclosures in this regard to meet our business requirements the Adhani portfolio of companies engages and maintains professional relationship with several Indian and international and Indian law firms and your insinuations means Andy Mukherjee insinuations and aspersions concerning potential conflicts of interest with CEM or any other law firm or its partners are unfounded all right then Andy Mukherjee elaborates you see he points out that he is not alone in various financial statements including the one by Adhani Green Energy on the first it said it has obtained opinions from independent law firms in respect of evaluating relationships with parties having transactions the question is CEM independent second question in the notes to Adhani Total Gas they say that they are you know all the applicable rules they are adhering to it then Andy Mukherjee asked the Adhani group which is this law firm for which you've taken advice because there are other law firms also and therefore they in this case the auditors don't say anything Shah Dhandaria and the Adhani group which had earlier said that you know it is not mandatory to disclose the details of the lawyer's report now do not respond so they neither confirm nor deny that the so-called independent law firm is Siril Amachan Mangaldas or not in which Mr. Gautam Adhani's own daughter-in-law is an important functionary now this is important why because it's not just this company Deloitte Haskins and Cells has raised several concerns about the results financial results of Adhani Ports and the auditors have said that they cannot confirm whether three entities with this company Adhani Ports had transactions were indeed unrelated or not as claimed by the company and therefore it provided what is called a qualified opinion other auditors have done more or less the same so once again probish as we had discussed earlier the letter of the law and the spirit of the law and where you should look at the fine print of the law and simple common sense and this is what I think Andy Mukherjee has said should India incorporate it including the Adhani group disclose much more than it does so far so the question is what is the same we going to do about it and is it in the fairness to those who buy shares in the market because these shares are widely traded what is the disclosure then say we should really insist that companies make one as you said rightly what is the letter of law and we can go on discussing that till kingdom come it can go to courts it can take years other is if the stock exchange has to keep its reputation that it is a fair place for both those who buy shares and those who sell shares then what is the disclosure it should insist to be fair to those who are in the share market not those companies not the companies whose shares are traded because Sebi is a platform for trading shares and therefore Sebi as the regulator of the capital markets has to ensure what is called fair price discovery that the market forces one which is the same logic used why all publicly listed companies have to have a minimum 25% shareholding among public interest the real issue is that it is to be fair to those who come into the share market and buy shares and therefore they need to be protected not those who are listed companies who control the finances of these companies and who therefore have an ability to really make the picture rosier than it should be and therefore the protection that Sebi has to exercise is for those who are not owners of company but who are in the stock market for either their savings or those companies which are investing on behalf of such people so therefore the protection is really not for those who are 75% below the controllers the promoters whatever you want to call it but it's really for the rest 25% and above that they are the shareholders who need to be protected and that's a purpose of the regulator absolutely correct and now we have to just wait and watch because the Supreme Court has given time to Sebi the securities and exchange born of India till the 14th of August to submit its report Sebi wanted more time remember that and so we have to wait I'm saying that the issue is one of Adani is only one issue but it's really for the fairness of the stock market in general and protecting the investors who are not the promoters or the controllers of the companies and that is Sebi's task so if the laws or the rules and the regulations are ambiguous it is for Sebi to see not only okay we can argue we cannot rectify the past but at least going forward what are the requirements that Sebi should impose on those who control these companies thank you very much thank you very much Praveer for being with us and taking us through a rather shall we say difficult exercise understanding what the regulatory requirements are for the stock market. Thank you Praveer. This is all the time we have today for our discussions with Paranjai we'll come back to you with more such issues and more such discussions particularly with Paranjai who has been discussing a number of these issues for a long time with us.