Securities Appellate Tribunal relief for Vedanta in Cairn buyback case

In a relief to Vedanta, the Securities Appellate Tribunal (SAT) quashed an order passed by the market regulator on erstwhile Cairn India and set aside the penalty of Rs 5.25 crore.

The Securities and Exchange Board of India (Sebi) had issued the order in May 2021 for allegedly flouting buyback regulations.

Cairn India’s board had approved a buyback of Rs 5,725 crore from the open market route, scheduled to be done between January 2014 and July 2014. However, the company failed to utilise the minimum 50 per cent of the earmarked amount as mandated under Sebi regulations.

The company managed to utilise Rs 1,225 crore, or 28.6 per cent, of the maximum buyback size, against the required utilisation of Rs 2,862 crore.

 

Sebi, in its order, had observed that no buyback orders were placed on NSE on 24 days, and buy orders for fewer than 5,000 shares were placed on 15 days out of a total of 54 days on which the price was favourable. Based on these findings, Sebi imposed the penalty alleging fraudulent practices.

“The company utilised Rs 1,225 crore in the buyback process and in our view, this is not a paltry sum to invest for a non-serious effort to buyback the shares. The above indicates that it cannot be conclusively proved that the company showed no intent to successfully complete the buyback and thereby acted fraudulently,” highlighted Justice Tarun Agarwala.

The court observed that the company placed buy orders on 82 days on NSE and on all 123 days on BSE, adding that the then regulations did not define any method or procedure for conducting the buyback.

Regarding allegations of buy trades placed only on favourable days, SAT further noted that the company couldn't have predicted the bullish trend in the stock markets at the time when the decision for a buyback was made nor could it be aware that the scrip would be above the maximum buyback price on 68 days out of 123 trading days.

Cairn India was merged with Vedanta in 2017.