You are here: Home » Companies » News
Business Standard

FinMin official advised subsidiary to not pay dividends, accuses Cairn

Company has sought explanation from tax authorities on freezing of payments

Press Trust of India  |  New Delhi 

Cairn Energy

British firm plc has accused a senior ministry official of "privately" advising billionaire Anil Agarwal-led Vedanta Group to withhold its dividend for a potential squaring off of a retrospective liability. Cairn Energy, which is the only company whose assets have been frozen for a retrospective demand, has in a written application to an international arbitration tribunal stated that its dividend from its erstwhile subsidiary (now a Vedanta Group firm) has not been paid for last three financial year. This, it alleged, was done at the behest of an "advise" a senior ministry official gave to Vedanta in "private meetings", multiple sources in the department and industry said. It has also written to on the issue. The department had in January 2014 draft assessment estimated Rs 10,247 crore due on for capital gains it allegedly made on a 2006 transfer of assets to a newly created subsidiary and then listing it on stock exchanges. sold a majority stake in to Vedanta Group in 2011 but retained 9.8 per cent stake which the department had barred it from selling. After sending draft assessment order, the department had in April 2014 also raised a similar demand on for not withholding in 2006. Both and have initiated separate international arbitrations contesting the demands. Though dividend can be frozen only after a formal demand is raised, which happened only on March 31 2017 after a full assessment was completed and June 15 2017 was given as the due date for payment, Cairn has not received Rs 670 crore of dividend for three fiscals. When contacted for comments, the Ministry said it does not comment on individual cases.

Sources, however, said the department will reply to the arbitration panel saying it does not interfere in matters between two spokesperson said: "The dividends due to Plc for the last three years are lying in an unpaid dividend account as they were subject to an attachment order under section 281B (of Act). "We would like to reiterate that these dividends are not available for use by Cairn (now Vedanta)." He further said: "Plc has also been in touch with us and we have been responding to their mails/letters sharing our predicament in view of the notice now issued to them post the order of the Tribunal for payment of liability by June 15, 2017." When contacted, plc spokesperson confirmed the company also writing to "and in relation to the payment of dividends." "Both and have confirmed receipt of the letter," the spokesperson said. Originally, approached the arbitration panel in February saying is stopping from paying dividend. The tribunal asked the department if it had stopped from paying dividend. The department in its reply stated that the matter was between the two and it had no role to play, sources said. When replying to that notice, the department had internally observed that there can be no attachment of the dividend unless formal demand is raised and is not paid. Sources said based on department statement, the Tribunal gave its verdict that it will not intervene. This led to on March 8 stating in a press statement said the department has agreed to lift the freeze it being paid dividend by Cairn India, but it will continue to be restrained from selling the residual stake pending a dispute. But the dividends never flowed to the company, prompting it to approach replied to that letter saying it had deposited the dividend amount in a scheduled bank within five days of declaring the dividend. However, it is awaiting the advice of the revenue authorities whether dividend can be paid. Sources said also wrote to the authorities on why it was not clearly stating its position on the freezing of dividend payments. Now, has written to arbitrators saying a senior ministry official in "private meetings" with Vedanta has advised it against payment of dividend.

First Published: Mon, May 01 2017. 16:47 IST