In a significant respite to Vedanta Limited (“Vedanta”), the Securities Appellate Tribunal has allowed the Appeal filed by Vedanta against the order passed by the Securities and Exchange Board of India (“SEBI”) and has set aside the penalty of Rs 5.25 crores imposed upon Vedanta and Rs 15 lakhs on three officers of the Company.

SEBI had alleged that the public announcement by Cairn India Limited (“Cairn”) (now merged with Vedanta) for buying back its shares was a misleading announcement designed to influence the decision of the investors and induce them to trade in the shares of Cairn which was reflected in the increased trading volume after the buyback announcement. On that basis, SEBI alleged that Cairn by making the public announcement of buyback without any intent to fulfil it, had acted fraudulently and violated the provisions of the SEBI (PFUTP) Regulations and the SEBI Buyback Regulations.

Cairn had made the Public announcement on January 14, 2014 for buyback of its 17,08,95,522 equity shares of ₹10/- each at a maximum price of ₹335/- per share for a maximum amount of ₹5,725 crores in accordance with SEBI Buyback Regulations. The buyback offer was scheduled to open on January 23, 2014 and close on July 22, 2014.

Cairn was able to buy back 3.67 crores shares, after spending a sum of Rs 1,225 crores, which represented 21.48% of the total shares earmarked for the buyback as against the requirement of buying back a minimum of 50% of the shares earmarked for the buyback.

Vedanta argued that Cairn made all attempts to complete the buyback and had placed purchase orders on the stock exchanges almost on the daily basis but the same could not be completed as market price of the shares remained higher than maximum buyback price during the majority of the 6 months buy back period, which was beyond control of Cairn.

Vedanta relied on SEBI’s own investigation report wherein SEBI had come to the conclusion that no major impact on price and volume was observed on the basis of the corporate announcement made by Cairn and argued that thus allegation of fraud could not have been made against Cairn.

Mr. Somasekhar Sundaresan, Advocate instructed by DMD Advocates, led by Mr. Pawan Sharma, Advocate and Mr. Rishabh Sharma, Advocate appeared for Vedanta Limited.

Mr. Shiraz R, Senior Advocate instructed by a team led by Mr. Manish Chhangani, Advocate appeared for Securities and Exchange Board of India.

The matter has also been reported by:

TaxGuru – https://taxguru.in/sebi/breather-vedantas-cairn-alleged-buyback-fraud-sat-reverses-sebis-order.html