India’s securities regulator has rejected settlement applications from at least three Mauritius-based offshore funds holding investments in Adani Group companies, according to people familiar with the matter.

The applications were related to regulatory cases involving alleged failures to disclose shareholder information and certain investment details required under Indian securities rules.

The decision could push the cases further through the enforcement process instead of allowing the funds to resolve the proceedings through settlements.

SEBI Investigation Follows 2023 Hindenburg Allegations

The cases are part of a wider investigation involving offshore investors connected to Adani Group companies.

India’s Securities and Exchange Board of India (SEBI) began examining 13 offshore funds after Hindenburg Research published allegations in 2023 concerning the use of offshore entities and possible breaches of public-shareholding rules.

Adani Group has repeatedly denied wrongdoing. Shares of several companies within the conglomerate have also recovered from the sharp decline that followed the 2023 allegations.

Disclosure Rules at the Centre of the Cases

Indian regulations require listed companies to maintain at least 25% public shareholding.

Regulatory scrutiny increased after allegations that some offshore funds holding Adani shares could have had links to the conglomerate. Investigators examined whether such relationships affected compliance with India's public-shareholding requirements.

SEBI had previously determined that two of the 13 offshore funds violated disclosure rules by failing to report acquisitions of certain Adani securities after their holdings crossed the required threshold.

The regulator also alleged that the funds had not fully cooperated with its investigation.

Disagreement Over Settlement Terms

Sources said the latest settlement applications were rejected after disagreements over the financial penalties sought by SEBI.

The regulator also requested information about the shareholders behind the offshore funds as part of the proposed settlement. At least some of the investors opposed providing those details, according to one person familiar with the discussions.

Names of the funds whose applications were rejected were not immediately available.

SEBI had not immediately responded to requests for comment.

Read more: Adani Power Evaluates Nuclear Technologies, Awaits Government Policy for Private Sector Entry

Cases Could Move Into Enforcement Proceedings

A settlement would have allowed the funds to close the regulatory proceedings without formally admitting or denying the allegations.

With the applications rejected, the cases could instead continue through SEBI's enforcement process.

Possible consequences could include publication of regulatory findings, monetary penalties and restrictions or suspension of permissions to operate in India's securities market, depending on the outcome of individual proceedings.

Wider Significance for Adani Investors

The developments add another layer to the long-running regulatory scrutiny surrounding Adani Group's offshore investors.

The dispute also highlights the importance of disclosure requirements for foreign funds investing in Indian listed companies. Regulators rely on information about ownership structures and significant shareholdings to determine whether investors are complying with market rules.

For the offshore funds involved, failure to reach a settlement could mean a longer regulatory process and potentially greater public scrutiny of their investments and ownership structures.