Offshore Funds Forced to Amend Appeal as SEBI Challenges Scope of Challenge in Adani-linked SAT Dispute

Offshore Funds Forced to Amend Appeal as SEBI Challenges Scope of Challenge in Adani-linked SAT Dispute​

The Securities Appellate Tribunal (SAT) has ordered the offshore funds involved in a high-stakes regulatory dispute to amend their appeals. This directive follows a procedural objection raised by the market regulator, the Securities and Exchange Board of India (SEBI), regarding the scope of the challenge being mounted by the appellants.

The hearing was adjourned until August 3rd. The offshore entities, which include LTS Investment Fund Ltd, Cresta Fund Ltd, Asia Investment Corporation Mauritius Ltd, APMS Investment Fund Ltd, and Albula Investment Fund Ltd, must now address the substantive nature of the opinion furnished by SEBI.

Dispute Shifts to Adequacy of SEBI's Opinion​

The core issue before SAT has undergone a significant shift. Initially, the appeal focused on whether SEBI had provided its Rule 4(3) opinion in a timely manner. However, after the appeals were filed, SEBI supplied a paraphrased extract of this critical opinion.

This change fundamentally altered the legal grievance. The dispute is no longer about disclosure; rather, it now centers on whether the provided opinion satisfies the detailed standards set out under the SEBI Adjudication Rules.

Regulatory Objections Over Appeal Scope​

SEBI argued at the hearing that the original appeal was strictly limited to seeking disclosure of the Rule 4(3) opinion. Since this opinion has subsequently been furnished, the regulators contended that the initial prayer contained in the appeals no longer holds water.

To challenge the adequacy and quality of the delivered opinion, SEBI stated, the appellants are required to amend their pleadings. This submission highlights the procedural rigor maintained by the market regulator throughout the ongoing proceedings.

Appellants Contend Opinion Lacks Independent Application​

The offshore funds have vigorously argued that the document provided by SEBI amounts merely to a reproduction of the original show-cause notice. They maintain that this documentation fails to demonstrate independent application of mind, which is a statutory requirement under the adjudication rules.

These funds contended that the adjudicating officer did not meaningfully consider their substantive response before deciding to proceed with an inquiry. The appellants are thus challenging the quality and depth of the opinion furnished by SEBI.

SAT Bench Observes Change in Nature of Grievance​

The bench at SAT acknowledged that the nature of the dispute had distinctly changed once SEBI provided the promised opinion. While the initial grievance related purely to the non-disclosure of the opinion, the present challenge is fundamentally tied to its merit and statutory compliance.

The Tribunal indicated that given this shift, the pleadings submitted by the funds must be amended to reflect the new focus of the dispute. The appeals are now being examined on a different plane than they were initially drafted upon.

Way Forward: Amending Pleadings Before Substance Review​

The offshore appellants have agreed to file an amendment application with the tribunal. Simultaneously, SEBI has signaled its intention to oppose the suggested amendments on legal grounds.

The matter is scheduled for further hearing on August 3rd. At that time, SAT is expected to first evaluate the maintainability and scope of the amended appeals before diving into the substantive challenge against SEBI's Rule 4(3) opinion.