Cairn India gets SAT relief in case vs Sebi
Mumbai, Oct 5, 2023
In a major relief to Cairn India, a part of Anil Agarwal-led Vedanta Ltd, the Securities Appellate Tribunal on Thursday set aside Sebi’s May 2021 order that imposed a penalty on the company for allegedly making the misleading announcement of its buyback offer.
A bench led by Justice Tarun Agarwala said, “The appeal is allowed and the order of the Sebi’s adjudicating officer is set aside."
In May 2021, the Securities and Exchange Board of India (Sebi) had imposed ₹5 crore penalty for allegedly making misleading public announcements on the buy-back offer.
The fine was levied for supposed violation of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.
It also levied ₹25 lakh more for violating Sebi’s buy-back regulations. Aggrieved by the order the company appealed before SAT.
Sebi’s main allegation against Cairn was that it had ‘no intention’ to conduct a buy-back transaction because it could not buy the minimum stipulated number of shares. Adding, that the buy-back was designed to influence the decision of the investors and induce them to trade in the shares of the company.
In January 2014, Cairn announced that it would buy 17 crore shares at ₹335 for a maximum amount of ₹5,725 crore from the open market. Cairn, however, was only able to buy 3.6 crore shares. This was not even 50% of the buyback size as prescribed under Sebi’s Buyback Regulations.
When market price became unattractive for investors to sell the shares to the company, Cairn sought an extension from Sebi stating that it had no intention of backing out. Sebi, however, turned down the company’s request.
According to the order, a Sebi analysis of sell orders placed on National Stock Exchange (NSE) and BSE revealed the company did not place any buy orders when the price was favourable but only on those days when it was not.
“Thus, Cairn had failed to achieve even the minimum buyback size as it could not buy-back even half the number of shares announced by it, despite available of sufficient sell orders on NSE, when the market price was lesser than the maximum buyback price," the Sebi order said.
In the same order, the regulator had also imposed a fine of ₹15 lakh each on P Elango, who was the CEO and director of Cairn India, along with Aman Mehta and Neerja Sharma, who were directors of the company at the time of violation.
[Mint]
