Two top government officials told Reuters on Friday that the ministry of corporate affairs has begun a preliminary review of Adani Group's financial statements and other regulatory submissions made over the years.
Adani Group denies that it has no basis and is due to ignorance of Indian law, and has denied all allegations by US-based short-seller Hindenburg Research of improper use of offshore tax havens and stock manipulation. The Indian conglomerate has always made necessary disclosures, according to the Indian conglomerate.
Adani Group is dealing with a stock market rout triggered by the Hindenburg report on January 24 and scrapped a $2.5 billion share sale this week.
The ministry's reviews mark the latest scrutiny of the Adani GroupAdani Group, but it is a first by the Central Governmentmen.
The Indian markets regulators are already investigating the matter, including the crash in the company's shares, any irregularities in the now-shelved share sale and any possible price manipulation, according to a report from this week.
One government source said that the ministry's inspection process was initiated on Thursday and was under Section 206 of India's Companies Act, under which the government reviews financial documents submitted over the years, such as balance sheets, books of accounts or ledgers.
An inquiry was initiated by the Director General of Corporate Affairs. The ministry is closely monitoring the situation and will take appropriate measures in time, according to a senior government official who has direct knowledge of the proceedings, said he was told by the ministry.
A spokesman for Adani Group didn't respond immediately to a request for comment. The ministry of corporate affairs, as well as the Director General's office, did not respond to requests for comment from Reuters.
A second government source confirmed that the process had been initiated and will include looking into corporate governance practices of the company, but declined to elaborate.
The process is confidential and officials of the government don't want to be named.
The Section 206 legal provision under the Companies law empowers India's federal government to seek more documents from a company if it deems this necessary, such as minutes of meetings or board resolutions, two other sources familiar with the process said.
Both houses of India's parliament were adjourned on Friday amid chaotic scenes as lawmakers demanded an inquiry following the meltdown of shares in Adani Group companies, which some fear could spark more financial turmoil.