SEBI directs Vedanta to pay Rs.77.6 crore plus 18% interest to Cairn UK Holdings Limited (now Capricorn UK Holdings Limited) for delayed dividend payments spanning from January 22, 2014, to June 20, 2017.
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On Tuesday(12th March), The Securities and Exchange Board of India (SEBI) has mandated Vedanta Limited to disburse a substantial sum of Rs. 77.6 crore to Cairn UK Holdings Limited (CUHL), now known as Capricorn UK Holdings Limited. This includes an additional 18 percent interest, addressing the prolonged delay in dividend payments spanning from January 22, 2014, to June 20, 2017. The directive came from K Saravanan, the Chief General Manager of SEBI, underscoring the regulatory body’s commitment to enforcing corporate governance and financial fairness.
The backdrop of this enforcement reveals a tangled web of legal and financial disputes. Initially, the contention arose from a complaint lodged by Cairn UK on April 13, 2017, alleging that Cairn India, prior to its merger with Vedanta on April 11, 2017, failed to remit dividends amounting to Rs.340.64 crore. This failure pertained to the equity shares CUHL held in Cairn India, leading to a protracted legal and regulatory examination.
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SEBI’s scrutiny into this matter was not straightforward. Initially, the complaint was closed after Vedanta contended that an attachment of assets by the Income Tax department in January 2014 hindered the dividend payments. However, the narrative took a turn when the Securities Appellate Tribunal (SAT) directed a re-examination, leading to a complex series of legal challenges, including a directive from the Supreme Court in 2022 to SEBI, urging a conclusive inquiry within a specified timeframe.
The crux of SEBI’s recent order lies in the rejection of Vedanta’s defense, primarily hinged on the 2014 income tax attachment order.
SEBI clarified:
“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.”
This statement underscores the regulatory body’s stance that Vedanta, post-March 2016, had no legal encumbrances preventing it from fulfilling its dividend obligations to CUHL.
Moreover, the SEBI’s findings illuminated a disparity in treatment between CUHL and other shareholders, noting that Cairn India/Vedanta did proceed with dividend payments to other shareholders post-March 2016. This led to the conclusion that Vedanta’s actions were not only a breach of the Companies Act but also violated SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations, specifically sections 4(1)(g) and 4(2)(c).
The legal representation in this case was notable, with Senior Advocate Shyam Mehta and Advocates Amit Agrawal and Sumit Agrawal of Regstreet Law Advisors representing Vedanta Limited and some of its directors. Conversely, CUHL’s legal team included Senior Advocate Pesi Modi and Advocates Neville Phiroze Lashkari, Shahezad Abdulkarim Kazi, and Abhishek Tewari.
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In addition to the financial restitution, SEBI’s order has significant implications for Vedanta’s corporate governance. The temporary ban imposed on Vedanta’s Vice-Chairman, Navin Agarwal, and other executive directors from accessing the securities market underscores the regulatory body’s stringent stance on compliance and ethical corporate behavior.
