SAT sets aside Sebi penalty on Cairn India in share buyback case

The Securities Appellate Tribunal (SAT) has set aside capital markets regulator Sebi's order that imposed a penalty of Rs 5.25 crore on Cairn India for making a misleading announcement regarding buyback of shares in 2014.

Cairn India, which was merged with Vedanta Ltd in 2017, was accused of making a misleading public announcement designed to influence investors' decisions.

"We hold that the violations of provisions of... the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations and... the Buyback Regulations are not proved against the company (Vedanta)," a bench consisting of Justice Tarun Agarwala and presiding officer Meera Swarup said.

The bench noted that the company utilised Rs 1,225.45 crore in the buyback process, "which is not a paltry sum to invest on a non-serious effort to buy back the shares".

"It cannot be conclusively proved that the company showed no intent to successfully complete the buyback and thereby acted fraudulently," the bench said in the order.

In May 2021, the Securities and Exchange Board of India (Sebi) imposed a penalty of Rs 5.25 crore on Cairn India for making a misleading announcement regarding the buyback of shares in 2014.

Further, the regulator imposed a fine of Rs 15 lakh each on P Elango, who was the CEO and director of Cairn India, along with Aman Mehta and Neerja Sharma, who were directors of the company at the time of the violation.

According to the Sebi order, the buyback announcement made by the appellants in January 2014 was misleading without any intent to fulfil it and was designed to influence the decision of investors and induce them to trade in the shares of the company.

Cairn India and others have been negligent and should have monitored the trading made by its broker, the order stated.

Cairn India had made a public announcement on January 14, 2014, for the buyback of 17,08,95,522 equity shares of Rs 10 each at a maximum price of Rs 335 apiece amounting to Rs 5,725 crore from the open market.

The buyback offer was scheduled to open on January 23, 2014 and close on July 22, 2014.