The Securities Appellate Tribunal (SAT) has quashed a SEBI order on Cairn UK Holdings’ complaint over non-payment of dividend by Cairn India which was merged with billionaire Anil Agarwal-led Vedanta in 2017.

The Tribunal directed SEBI to hold an enquiry on Cairn UK’s complaint and find a “logical conclusion” within six months.

In December 2019, SEBI had rejected a complaint filed by Cairn UK Holdings on the Complaints Redressal System over non-payment of ₹341-crore dividend by Cairn India.

SEBI, by an impugned order, disposed of the Cairn UK complaint on the ground that the unpaid dividend was handed over by the company to the income-tax authorities and, therefore, it would not be appropriate for it to take any further action and, accordingly, closed the complaint. Cairn UK then moved SAT against SEBI order.

SAT direction to SEBI in 2019

In July 2019, SAT directed SEBI to reconsider the complaint for violation of the provisions of the Companies Act and LODR (Listing Obligations and Disclosure Requirement) Regulations and pass appropriate orders.

Disposing the case again, SEBI claimed that there was no violation by Vedanta and the dividend was held back since there was no clear direction from the Income-Tax department to release the dividend.

SAT, in its recent order, said dividend was declared by Vedanta in FY14, FY15 and FY16. The provisional attachment order of Income-Tax on Cairn India expired on March 31, 2016.

After a series of communication, Vedanta informed I-T that it would release the outstanding dividend to Cairn UK in March 2017, but deposited in a separate bank account only after a recovery notice was issued by I-T in June 2017.

What the law says

Under the Companies Act, the company was required to deposit the declared dividend in a separate account in a scheduled bank if the dividend was not paid within 30 days. The Act also provides for punishment upon the directors and the company in case the dividend is not paid within the stipulated period. In the instant case, admittedly, the dividend was not paid to Cairn UK within the stipulated period, it said.

However, SAT said the observations made in its order was only a prima-facie view and the authority will not be influenced by any observation while making the investigation and passing orders.