Probe Cairn India for withholding dividend to Cairn UK, SAT tells SEBI

Our Bureau Mumbai | Updated on July 23, 2019 Published on July 23, 2019

The UK company had been allowed to claim dividends in the course of an international arbitration under the UK-India bilateral treaty

Did Cairn India and Vedanta, controlled by Anil Agarwal, violate market norms with regard to payment of dividend worth around ₹440 crore? The Securities and Appellate Tribunal (SAT) has asked SEBI to probe.

I-T Department’s move

In 2017, Cairn Holdings UK had complained to SEBI against Cairn India for withholding dividend payments to it. The UK company had been allowed to claim dividends in the course of an international arbitration under the UK-India bilateral treaty.

Vedanta had declared ₹21.2 a share dividend for shareholders and a 7.5 per cent payment on preference shares. For Cairn, the total receivable came to about ₹440 crore. But Vedanta transferred that money to a separate account, which was later taken over by the income tax department. Cairn India was in 2011 acquired by Vedanta but the British firm continued to hold 9.8 per cent stake in the company. Cairn India was merged into Vedanta in 2017. On merger, Cairn Energy’s holding in Vedanta came to 4.95 per cent.

SEBI did not take any action on a complaint by UK’s Cairn Holdings and closed the matter against Cairn India on the alibi that the dividend amount had been deposited with the income tax department. India’s tax department has a dispute with UK’s Cairn Holdings worth thousands of crores in a matter involving retrospective tax effect.

Fixing responsibility

Cairn Holdings moved SAT against SEBI. Withholding dividend without any reason is a violation of SEBI norms. SAT’s decision asking SEBI to probe the matter is actually also holding the regulator responsible for its job instead of just passing the buck, a legal expert said.

“If Cairn India had violated the provisions of the Companies Act in not releasing the dividend when there was no embargo upon it, it is SEBI’s duty to inquire into the alleged violation, and if it exists, take action against the said company,” said SAT in its order.

“We accordingly, allow the appeal in part and dispose of the appeal directing SEBI to reconsider the complaint of the appellant (Cairn UK) dated April 13, 2017, in relation to violation of provisions of Companies Act and LODR (Listing Obligation and Disclosure Requirements) Regulations and pass appropriate orders,” SAT said.

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Published on July 23, 2019
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