The Securities Appellate Tribunal (SAT) has ruled in favor of Cairn India, a subsidiary of Vedanta Ltd. owned by Anil Agarwal, by overturning a ₹5 crore fine imposed by the Securities and Exchange Board of India (SEBI) in May 2021. SEBI had fined Cairn India for allegedly making ‘misleading’ announcements related to its buyback offer. The decision to set aside SEBI’s order was made by a bench led by Justice Tarun Agarwala.
SEBI’s penalties against Cairn India included a ₹5 crore fine for purported violations of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations. In addition, the company was fined an additional ₹25 lakh for allegedly violating SEBI’s buyback rules. Cairn India challenged these penalties by appealing to SAT.
SEBI’s primary allegation against Cairn India was that the company had no intention of conducting a genuine buyback because it could not acquire the minimum number of shares as required by regulations. SEBI contended that the buyback announcement was made to induce investors to trade the company’s shares.
Cairn India’s buyback announcement in January 2014 stated its intention to purchase 17 crore shares from the open market at ₹335 each, with a maximum expenditure of ₹5,725 crore. However, the company was only able to acquire 3.6 crore shares, less than half of the buyback size mandated by SEBI’s rules.
As the stock price movement made it unattractive for investors to sell their shares to the company, Cairn India sought an extension from SEBI, asserting that it had no intention of reneging on the buyback. However, SEBI declined the company’s request.
In its original order, SEBI contended that an analysis of sell orders placed at the National Stock Exchange (NSE) and BSE during the buyback period revealed that Cairn India did not place buy orders when the price was favorable for a buyback. Instead, the company only initiated buy orders on days when it was less favorable to do so.
SEBI’s order stated, “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 the availability of sufficient sell orders on NSE when the market price was lesser than the maximum buyback price.”
Additionally, SEBI imposed fines of ₹15 lakh each on P Elango, who served as the CEO and director of Cairn India, and Aman Mehta and Neerja Sharma, who were directors of the company at the time of the alleged violation.
The SAT’s decision to set aside SEBI’s fine marks a significant development in this case, providing Cairn India with relief from the penalties imposed by the regulatory authority.