Vedanta shares fall 3% on SEBI order to pay ₹77.6 cr to Cairn UK; board barred from market

Shares of Vedanta fell over 3% in opening trade on Wednesday, extending losses for the third straight session, after the capital market regulator SEBI asked the company to pay ₹77.62 crore plus a simple interest of 18% per annum to Cairn UK Holdings Limited (CUHL), which is now known as Capricorn UK Holdings. The Securities and Exchange Board of India (SEBI) has also restrained Anil Agarwal-led Vedanta’s entire board, including his brother Navin and daughter Priya, from accessing the capital market for non-payment of dividend to CUHL by Cairn India (now known as Vedanta). The regulator in its order also said that Vedanta must make the payment within 45 days or face further action.

Meanwhile, Vedanta in an exchange filing said that the SEBI order will not have any “major financial impact” on the company, adding that it is in the process of taking appropriate legal steps.

In 2011, London-listed Vedanta Resources Vedanta had signed a deal to acquire Cairn Energy PLC's majority stake in its Indian arm, Cairn India Ltd (CIL). The CIL was subsequently merged into Vedanta Resources’ Mumbai-based arm, Vedanta Ltd, in 2017.

Reacting to the news, Vedanta shares declined as much as 3.5% to hit a low of ₹260.80 on the BSE, while the market capitalisation dropped to ₹97,966 crore. Early today, the mining heavyweight opened lower at ₹268.35 against the previous closing price of ₹270.30. In the last one year, the stock hit a 52-week high of ₹301 on May 29, 2023, and a 52-week low of ₹207.85 on September 28, 2023.

As per the notification issued on March 12, the SEBI has barred Vedanta’s chairman and managing director (CMD) Navin Agarwal, whole-time director Tarun Jain, whole-time director and chief executive officer (CEO) Thomas Albanese and whole-time director and chief financial officer (CFO) GR Arun Kumar from accessing the securities market for two months. Adding to it, the non-executive director Priya Agarwal and independent directors K Venkataramanan, Lalita D Gupte, Aman Mehta, Ravi Kant, and Edward T Story have been barred from accessing the market for one month.

The board members have been “restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner”, from the date of coming into force of this order, the SEBI said in a 76-page order issued on March 12.

On April 13, 2017, the SEBI received a complaint dated from CUHL, alleging non-payment of a dividend of ₹340.65 crore by CIL, which was merged with Vedanta on April 11, 2017. CUHL owned 184,125,764 equity shares of CIL.

However, CIL in its report said that all outstanding unpaid dividends of ₹666.53 crore to the account of CUHL had been paid to the Income Tax Department (ITD) against recovery notice from Deputy Commissioner of IT, International Taxation, New Delhi, on June 19, 2017 and June 20, 2017. With the matter before the IT department, SEBI closed the complaint of CUHL.

CUHL then moved to the Securities Appellate Tribunal (SAT) against the SEBI order, which then asked the capital market regulator to reconsider the complaint. The tribunal in its observation said, “if the company, namely, Cairn India had violated the provisions of the Companies Act in not releasing the dividend when there was no embargo upon it, it is SEBI's duty to inquire into the alleged violation and if it exists take action against the said company and, if necessary, under Section 124 of the Companies Act. This aspect has not been considered by SEBI.”

Following the SAT directions, SEBI re-examined the CUHL complaint and informed that allegations of violation of Section 127 of the Companies Act, 2013 and Regulation 4(2)(c) of the SEBI by CIL are not established in an order dated December 26, 2019.

CUHL again filed a petition before the SAT against the SEBI order where the tribunal directed the regulator to initiate an enquiry under Section 11(4)(A) of the SEBI Act and hold an enquiry in the prescribed manner, investigate the violations of the Companies Act, LODR Regulations, etc., and take it to its logical conclusion within six months.

Following this, the SEBI appealed before the Supreme Court of India against the SAT order, seeking extended time for completing the enquiry.

In compliance with directions of the SAT and the Supreme Court, the SEBI investigated to ascertain whether CIL had violated the norms by withholding the dividends payable to CUHL during the period January 22, 2014 to June 20, 2017. 

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