Mumbai : The Securities Appellate Tribunal (SAT) on Thursday quashed the Securities and Exchange Board of India (SEBI) order relating to non-payment of dividend to Cairn UK Holdings Ltd by Cairn India Ltd, a subsidiary of Vedanta Ltd.
A bench headed by Justice Tarun Agrawal said, “The order passed by SEBI cannot be maintained and is set aside. Appeal is allowed. We are of the opinion that there is a prima facie case made by the appellant in his complaint.” Consequent upon this, we direct SEBI to initiate investigation under the SEBI Act and conduct the inquiry in the prescribed manner and to inquire into the violation of the Companies Act.” SAT said the market regulator should come to a logical conclusion in the matter within six months.
The order comes after Cairn UK Holdings appealed against a SEBI order.
In 2017, Cairn UK Holdings had filed a complaint on SEBI’s Scores platform against non-payment of dividend of over Rs 340.64 crore by Cairn India, calling it a violation of Section 127 of the Companies Act. The British company asked SEBI to instruct Cairn India to pay dividend with interest of 18% per annum. Section 127 pertains to companies which are mandatorily required to transfer unclaimed or unpaid dividend for 30 days from the date of declaration to a special bank account maintained by the company.
The Tribunal also held that the appellant (Cairn UK) was empowered to file an appeal under the SEBI Act in case the market regulator rejected the SCORES platform.
The market regulator, while disposing of the complaint, said that the outstanding dividend has been handed over to the Income Tax authorities and thus it would not be appropriate for SEBI to take any action. Cairn UK challenged the rejection of its complaint in SAT, which directed SEBI to re-examine the matter in 2019. After re-examining the matter, SEBI dismissed Cairn UK’s complaint as baseless, in which Cairn India had violated Section 127 of the Companies Act. Act and Regulation 4(2)(c) of the LODR Regulations. SEBI also said that despite the absence of a clear direction from the Income Tax Department to stop dividend payment after the temporary attachment period is over, it was not clear whether the dividend could be released to the appellant.
Consequently, SEBI determined that in view of the mitigating factors, it was unlikely that Cairn India breached any legal obligations by failing to make the dividend payment.