Adani Cleared: What the SEBI Orders Tell Us About Related-Party Transactions

The Adani–Hindenburg story has been hanging over India’s markets for more than a year. It began with sensational headlines about stock manipulation, shell companies, and billions wiped out in market value. It ends, at least for now, with SEBI — India’s market regulator — saying that Gautam Adani and his group did nothing illegal.

So how did we get from “biggest corporate fraud in history” to “clean chit”? The answer lies in one technical detail: related-party transactions. These three words might not set your pulse racing, but they’re the reason why Adani has walked free of the allegations and why Hindenburg’s explosive report collapsed in the eyes of Indian regulators.

Here’s where it gets interesting. SEBI isn’t denying that money moved between Adani companies and certain little-known entities. What it’s saying is that, by the law at the time, those entities didn’t qualify as “related parties.” In other words, you can’t apply today’s rules to yesterday’s deals. That legal fine print was enough to tilt the case in Adani’s favor.

But does this mean the allegations were baseless, or does it expose how wide the loopholes in India’s corporate rulebook used to be? And what does this mean for investors who watched Adani’s stock values swing wildly with every headline? Over the next few minutes, let’s break this down — what SEBI really said, what “related-party transactions” mean in plain language, and how this ruling could shape the way corporate India is policed in the future.

The Adani–Hindenburg Saga in 5 Minutes

Cast your mind back to January 2023. Out of nowhere, a little-known U.S. short-seller called Hindenburg Research dropped a bombshell report accusing the Adani Group of “the biggest corporate con in history.” The allegations were heavy: stock manipulation, use of shell companies to hide related-party transactions, and a corporate empire built on questionable foundations.

The market reaction was instant and brutal. Within days, Adani’s listed firms saw their value crash by more than $100 billion. Ordinary investors panicked. Opposition parties in India turned it into a political football. And regulators like SEBI had no choice but to step in.

Hindenburg’s core claim revolved around the idea that Adani was moving money around through obscure firms that looked independent on paper but were, in reality, closely tied to the group. These were flagged as related-party transactions, or RPTs. For a layperson, think of it like a family-run shop giving huge loans to “a friendly neighbor” who is actually your cousin in disguise. It may not look connected on the surface, but the benefit still flows back into the family.

For more than 15 months, SEBI investigated these claims. It reviewed fund flows, examined corporate structures, and questioned whether Adani had sidestepped disclosure rules. During this period, the case became a global talking point. Western media compared it to Enron, while in India, Adani’s meteoric rise suddenly looked fragile.

Now, fast-forward to September 2025. SEBI has released its final orders — and they don’t read like a crime thriller. Instead, the regulator says: yes, the money moved, yes, three companies were involved, but no, this was not illegal at the time. And that single clarification has flipped the narrative from scandal to “clean chit.”

Related-Party Transactions Explained — Like You’re 12

Alright, let’s cut through the jargon. A related-party transaction, or RPT, is simply a deal between a company and someone it already has close ties with. Think of it as doing business with your own family.

Here’s a fun example: imagine you own a lemonade stand. You need sugar. Instead of buying it from the supermarket, you buy it from your brother’s shop. Now, that’s not necessarily wrong — but if your brother sells you the sugar at triple the market price, and you quietly pass on the extra cost to your customers, things start to look shady. Investors who put money into your lemonade business deserve to know these details because it affects profits.

This is exactly why SEBI — like regulators around the world — has rules for companies about RPTs. Transparency is the keyword. The idea is simple: if a company is cutting deals with its relatives, shareholders should know so they can judge whether the deal is fair or fishy.

But here’s where the Adani case gets interesting. Back when the transactions in question happened, the definition of an RPT was narrower. The rules only covered direct, visible relationships — the equivalent of you buying sugar directly from your brother’s shop. If you bought it from a “friend’s shop” who later passed the money to your brother, that wasn’t caught by the old definition. And this is exactly the loophole SEBI pointed out.

By April 2023, the law changed. Regulators widened the net, saying even indirect transactions that ultimately benefit a related party should be disclosed. In our lemonade example, this means if your sugar supplier’s cousin’s uncle was secretly your brother, you’d still have to tell your investors.

So, when SEBI examined Adani’s deals, it admitted money was routed through companies like Adicorp, Milestone, and Rehvar. But legally, at that time, these weren’t “related parties.” Which means — no violation.

What SEBI Actually Said in Its Orders

When SEBI finally put out its orders on September 18, 2025, the mood was less courtroom drama and more legal technicality. Instead of fiery language or dramatic accusations, the regulator’s tone was almost calm — like a teacher reminding you that the rulebook has changed since last semester.

Here’s the heart of it: SEBI admitted that yes, Adani companies did route funds through three firms — Adicorp Enterprises, Milestone Tradelinks, and Rehvar Infrastructure. But here’s the catch — under the rules back then, these firms weren’t “related parties.” Which means the deals, however roundabout, were not illegal.

To put it simply, SEBI said: “You can’t judge yesterday’s cricket match by today’s rules.” If the no-ball rule was tightened this year, you can’t go back and penalize bowlers from three years ago.

SEBI even acknowledged that after 2021, the rules were rewritten precisely because companies had been using clever structures to stay outside the definition of RPTs. The watchdog admitted there was a “regulatory gap.” But the law only kicked in from April 2022, with full compliance expected by April 2023. So, the past deals — even if they looked like structural workarounds — were not in violation.

The regulator also pointed out a few more things that worked in Adani’s favor:

• All loans in question were repaid before the investigation even began.

• The intermediary firms had also lent money to non-Adani companies, so they weren’t just shells working for Adani.

• There was no evidence of money being diverted away for personal benefit.

And then came the clincher: since the transactions weren’t “related-party” under the law back then, the bigger charges — like fraud and unfair trade practices — simply collapsed. SEBI wrote it plainly: “The allegations are not established.”

For Gautam Adani, this was vindication. For SEBI, it was about following the letter of the law. And for investors, it raised a deeper question: is this a win for compliance, or a reminder that rules often evolve only after someone figures out how to dodge them?

Why Timing Mattered — The Loophole Factor

If there’s one thing this case teaches us, it’s that timing is everything — not just in the stock market, but in corporate law. SEBI’s orders didn’t just clear Adani because the transactions were innocent. They cleared him because the rules at the time didn’t consider them illegal.

Here’s the story in plain English. Before 2021, SEBI’s rules on related-party transactions were narrow. They only captured direct dealings between a company and its “related party.” Indirect arrangements — say, funneling money through another company that’s not formally related — were in a grey area. That’s exactly what happened in the Adani case: money moved through companies like Adicorp, Milestone, and Rehvar, which looked independent on paper but ultimately benefited the Adani Group.

But here’s the kicker: in November 2021, SEBI amended the rules. The new definition explicitly said that even indirect transactions benefiting a related party must be disclosed. The law had a “look-forward” effect: it applied only to transactions happening after April 2022, giving companies until April 2023 to comply. Retroactively punishing past transactions? Legally impermissible.

So, the timing wasn’t just a technicality — it was the reason the Hindenburg report, which made headlines worldwide, didn’t stick in court. SEBI’s orders effectively said: what looks questionable today may not have been illegal yesterday. And that gap is exactly why the case dragged on for over 15 months before finally closing.

This also highlights a broader point about corporate India: clever structures can exploit regulatory gaps. SEBI tightened the rules to prevent this going forward, but for Adani, the timing of these transactions turned what could have been a massive penalty into a clean chit.

What This Means for Investors

For anyone who had their money in Adani shares during the Hindenburg storm, SEBI’s clean chit comes as a sigh of relief — finally, some clarity after months of uncertainty. But it’s not just about a stock price bounce; it’s about understanding why investor trust is fragile and how corporate governance matters.

First off, the market reaction was predictable. Adani’s listed companies saw a sharp rebound in stock prices after the SEBI order. Investors who held through the turbulence are smiling now, while those who sold in panic probably kicked themselves. It’s a reminder that market sentiment can swing wildly based on reports, even before regulators weigh in.

But there’s a bigger lesson here. The case exposed how loopholes in corporate rules can affect shareholders. Even though SEBI ruled the transactions were legal at the time, ordinary investors had little way of knowing the full picture. The takeaway? Transparency isn’t optional — it’s essential. Companies that hide complexity in shell entities or indirect structures risk eroding investor confidence, regardless of legal compliance.

And while the SEBI order protects Adani retrospectively, it also signals that if similar transactions occurred today, they would likely be treated as related-party transactions and require full disclosure. For investors, this is both comforting and cautionary: the rules are tighter now, but market moves can still be influenced by perception as much as legality.

In short, SEBI’s order restores some confidence, but it also reinforces the need for vigilance. Knowing where the money flows, who benefits, and how companies structure their transactions is no longer optional for serious investors — it’s essential.

Legal and Market Reactions

The moment SEBI cleared Adani, the chatter went wild — and not just in trading rooms. Investors, market watchers, and journalists all had one question: What does this really mean?

Gautam Adani didn’t hold back. On X (formerly Twitter), he hit back at the Hindenburg report, saying SEBI had reaffirmed the truth and that the allegations were baseless. He went further, pointing out the pain caused to investors and even hinting that those who spread “false narratives” owed the country an apology. It wasn’t just about clearing his name — it was about reclaiming control over a narrative that had rattled markets and shaken confidence.

Legal experts, on the other hand, focused on the bigger picture. Nirali Mehta from Mindspright Legal noted that the ruling wasn’t just a vindication for Adani; it highlighted a gap in the law before April 2023. Essentially, the rules at that time didn’t consider indirect transactions as related-party deals, so SEBI couldn’t penalize the group for what, by today’s standards, might look questionable.

Market analysts chimed in too. Stocks of Adani companies bounced sharply after the order, giving some relief to investors who had weathered months of volatility. But many emphasized that the episode wasn’t just about legal compliance. It was a wake-up call that transparency and corporate governance are now under as much scrutiny as financial performance.

The consensus? Adani is legally in the clear, but the story underscores how quickly corporate reputations can swing and why investors — and companies — need to be aware of the fine print. The regulator may have closed this chapter, but the lessons about loopholes and market perception are here to stay.

FAQs About the SEBI Adani Ruling

1. What exactly is SEBI’s role in this case? SEBI, or the Securities and Exchange Board of India, is basically India’s market watchdog. Their job is to make sure companies play fair and investors don’t get cheated. In this case, SEBI investigated whether Adani’s transactions violated rules around related-party dealings — and after a detailed probe, they concluded there was no violation at the time the transactions happened.

2. Why did SEBI dismiss Hindenburg’s charges? The short answer: timing. The rules Hindenburg cited weren’t in effect when Adani’s transactions occurred. SEBI found that the companies involved weren’t legally “related parties” back then. So, technically, Adani didn’t break the law. It wasn’t about intent or morality — it was about the letter of the law.

3. What are these “conduit companies” everyone talks about? Think of them like middlemen. Hindenburg claimed companies like Adicorp, Milestone, and Rehvar acted as conduits to move money back to Adani. SEBI looked at them and said, yes, funds went through these companies, but they weren’t exclusively linked to Adani, and the deals were repaid in full. That’s why it didn’t qualify as illegal.

4. Did SEBI find any fraud? No. SEBI didn’t find any evidence of fund diversion, misrepresentation, or unfair trade practices. The transactions were considered commercial dealings in the ordinary course of business.

5. Are related-party rules stricter now? Absolutely. The rules were updated in 2021 and became fully enforceable in 2022–2023. Now, even indirect transactions benefiting a related party must be disclosed. The loophole that existed in Adani’s case has been effectively closed.

6. Can investors still take legal action? Legally, it’s tricky. Courts usually recognize someone as “aggrieved” if they suffered direct, substantial harm. Ordinary investors who weren’t parties in SEBI’s investigation may struggle to challenge the ruling.

7. What does this mean for corporate governance in India? The takeaway is clear: transparency isn’t optional anymore. Companies must disclose even indirect dealings with related parties. Investors now have more clarity, and future loopholes are likely to be caught early.

Our Directors’ Institute - World Council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out efficiently, helping you make a significant contribution to the board and raise corporate governance standards within the organization.