SEBI orders Vedanta to pay ₹77.6 crore to Cairn UK for delay in dividend payment

The Securities and Exchange Board of India (SEBI) on Tuesday ordered Vedanta Limited to pay ₹77.6 crore to Cairn UK Holdings Limited (CUHL) along with 18 per cent interest for delays in dividend payments due for the period between January 22, 2014 and June 20, 2017..The order was passed by Chief General Manager (CGM) of SEBI, K Saravanan on March 12..Notably, the SEBI has also temporarily banned Vedanta’s Vice-Chairman, Navin Agarwal and other executive directors on the company's board from accessing the securities market for two months.Other directors (independent, non-executive directors) have been prohibited from accessing the securities market or dealing with securities for one month.“I find that Noticee No. 2 to 11 (the above-named directors), being persons in charge of and responsible for the affairs of the Noticee No.1, were party to the decision to withhold dividend payment to CUHL even after cessation of restraint on March 31, 2016. I also find that omission of Noticee No.1 to release dividend to CUHL after March 31,” the SEBI order had concluded..The dispute between Cairn UK (now known as Capricorn UK Holdings Limited) and Vedanta stemmed from an April 13, 2017 complaint filed by Cairn UK with the SEBI.The complaint alleged that Cairn India (which merged with Vedanta on April 11, 2017) had not paid dividends worth ₹340.64 crore to CUHL with respect to equity shares it owned in Cairn India.SEBI initially closed the complaint after Vedanta said that the dividend could not be paid due to an attachment of assets by the Income Tax department in January 2014.It later re-examined the complaint on a direction by the Securities Appellate Tribunal (SAT). In 2019, SEBI concluded that there was no violation of Section 127 of the Companies Act (dealing with dividend payments)..This 2019 finding was challenged by CUHL before the Supreme Court. In 2022, the Supreme Court ordered SEBI to initiate an enquiry and complete the same within a specific time frame (six months), although the time period was later extended on SEBI’s request.Upon conducting this enquiry, SEBI has now rejected an argument by Vedanta (formerly Cairn India) that it could not pay the dividend due to CUHL earlier because of uncertainty created by a tax demand.SEBI pointed out that the 2014 attachment order (of the income tax authorities) relied on by Vedanta to defend its conduct had expired by the end of March 2016. There was no embargo on Vedanta to prevent it from paying CUHL its dividend after March 31, 2016, it found.“ITD letter dated March 31, 2016 did not restrict payment of dividend. In view thereof, I find that, after March 31, 2016 till June 16, 2017, there was no cloud over entitlement of CUHL to receive dividend. Therefore, I reject contention of the Noticee(s) that CIL withheld payment of dividend after March 31, 2016 due to uncertainty regarding entitlement of CUHL to receive dividend,” the SEBI order said..SEBI also noted that after March 31, 2016, Cairn India/Vedanta did make dividend payments to other shareholders.This meant that Cairn India/Vedanta failed to treat CUHL on par with other shareholders when it came to dividend payments, the order said while pointing out that such conduct violated SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations.“Despite cessation of restraint (on March 31, 2016), Noticee No.1 (Vedanta) continued to withhold payment of dividend to CUHL (Cairn UK) during April 01, 2016 to June 15, 2017. In view of the above, I find that Noticee No.1 violated Section 127 of the Companies Act, Regulation 4(1)(g) and 4(2)(c) of LODR Regulations,” it concluded..Senior Advocate Shyam Mehta and Advocates Amit Agrawal and Sumit Agrawal (Regstreet Law Advisors) appeared for Vedanta Limited and some of its directors. Advocate Saachi Purohit appeared for other directors.Senior Advocate Pesi Modi, along with Advocates Neville Phiroze Lashkari, Shahezad Abdulkarim Kazi and Abhishek Tewari, appeared for CUHL..[Read Order]