Vedanta’s Cairn India secures a major victory as the Securities Appellate Tribunal (SAT) overturns Sebi’s ₹5 crore fine in a significant buyback case, highlighting the company’s successful defense against alleged misleading announcements.
The Securities Appellate Tribunal (SAT) has overturned a Securities and Exchange Board of India (Sebi) order from May 2021, which had imposed a ₹5 crore fine on Cairn India, a subsidiary of Vedanta Ltd. under the leadership of Anil Agarwal. The fine was imposed on Cairn India for allegedly making’misleading’ announcements regarding its buyback offer. The bench, led by Justice Tarun Agarwala, has ruled in favor of Cairn India, stating, “The appeal is allowed, and the order of Sebi’s adjudicating officer is set aside.”
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Sebi had penalized Cairn India for purportedly violating the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations. Additionally, the company was fined an additional ₹25 lakh for breaching Sebi’s buyback rules. Dissatisfied with the decision, Cairn India decided to appeal the verdict in the SAT.
Sebi’s primary accusation against Cairn India revolved around the company’s alleged lack of intention to carry out the buyback due to its inability to purchase the minimum number of shares as mandated. Sebi contended that the buyback announcement was merely a tactic to entice investors into trading the company’s shares.
In January 2014, Cairn India announced its intention to purchase 17 crore shares from the open market at ₹335 each, with a maximum expenditure of ₹5,725 crore. However, the company was only able to acquire 3.6 crore shares, which fell significantly short of the buyback size stipulated by Sebi’s regulations.
When the stock price reached a level that discouraged investors from selling their shares to the company, Cairn India requested an extension from Sebi, affirming its commitment to the buyback. Nevertheless, Sebi declined the company’s request.
In its official order, Sebi contended that a comprehensive examination of sell orders placed at the National Stock Exchange (NSE) and BSE during the buyback period revealed that Cairn India did not place any buy orders when the market conditions were favorable for the buyback. Instead, the company initiated buy orders only on days when the conditions were not conducive.
Consequently, Sebi concluded that Cairn India failed to meet even the minimum buyback requirement, as it was unable to repurchase even half of the number of shares it had initially announced. This occurred despite the availability of sufficient sell orders on NSE when the market price was below the maximum buyback price, as stated in Sebi’s order.
Furthermore, Sebi imposed fines of ₹15 lakh each on P Elango, who served as the CEO and director of Cairn India, as well as Aman Mehta and Neerja Sharma, who were directors of the company at the time of the alleged violation.
the Securities Appellate Tribunal’s decision to overturn Sebi’s fine on Cairn India marks a significant development in this case. Cairn India successfully argued its case, leading to the annulment of the fine imposed by Sebi in connection with the alleged misleading buyback announcements.
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