Cairn Uk Holdings Ltd. vs Sebi

Date of Hearing : 15.07.2019 Date of Decision : 19.07.2019

Appeal No. 319 of 2017 Cairn UK Holdings Ltd. with its registered office at 50 Lothian Road, Edinburgh EH3 9BY. .... Appellant

Versus

1.

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.

2. Vedanta Ltd.

with its office at 1st Floor, Wing C, Unit No. 103, Corporate Avenue, Atul Projects, Chakala, Andheri (East), Mumbai - 400 093. ...Respondents

Mr. Pesi Modi, Senior Advocate with Mr. Neville Lashkari, Mr. Uday Walia, Mr. Shahezad Kazi, Mr. Gibran Naushad, Advocates i/b S & R Associates for the Appellant. Mr. Mustafa Doctor, Senior Advocate with Mr. Vivek Shah, Advocate i/b ELP for the Respondent No. 1. Ms. Fereshte Sethna, Advocate with Mr. Adhiraj Malhotra, Mr. Lokesh Aidasani, Ms. Divya Hirawat, Mr. Sagar Sarin, Mr. Shreyas Taparia, Advocates i/b DMD Advocates for the Respondent No. 2.

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CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1. The appellant held various oil and gas assets / businesses /

production sharing agreements in India, through its foreign

subsidiary companies. The appellant decided to transfer these assets

to an Indian holding company and, therefore, Cairn India Ltd.

(hereinafter referred to as, 'Cairn India') was incorporated after

which the appellant transferred the shares of its foreign subsidiary

companies, to Cairn India in consideration whereof Cairn India

allotted its shares to the appellant. In 2010-11, Cairn India became a

subsidiary of Vedanta Ltd.

2. The appellant filed a complaint with SEBI on April 13, 2017 in

connection with non-payment of dividend which was due to the

appellant by Cairn India amounting to Rs. 340.64 crores. The said

complaint was registered on the SCORES platform of Securities and

Exchange Board of India (hereinafter referred to as, SEBI'). It was

alleged that the dividend was due and payable and was not paid

despite the fact that there was no attachment or order of any court or

authority. It was contended that the non-payment of the dividend

was in clear violation of Section 127 of the Companies Act, 2013 3

(hereinafter referred to as, 'Companies Act') as well as under Section

24 of the Companies Act and therefore, it was within the SEBI's

jurisdiction to take action against the said company as it was also in

violation of the Regulation 4(2)(c) of the Securities and Exchange

Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015 (hereinafter referred to as, 'LODR Regulations').

The appellant, therefore, prayed in its complaint that :-

1. Cairn India be directed to pay the dividend to the appellant

along with interest at the rate of 18% p.a. and,

2. Initiate proceedings under Section 127 of the Companies

Act against every director of the Cairn India who were

knowingly a party to the non-payment of the said dividend.

3. SEBI by the impugned order disposed of the complaint on the

ground that the unpaid dividend of over Rs. 660.63 crores was

handed over by the company to the income tax authorities and,

therefore, it would not be appropriate for SEBI to take any further

action and, accordingly, closed the complaint. The appellant being

aggrieved by the said order has filed the present appeal.

4. We have heard Shri Pesi Modi, the learned senior counsel with

Shri Neville Lashkari, the learned counsel for the appellant and Shri

Mustafa Doctor, the learned senior counsel with Shri Vivek Shah,

the learned counsel for the respondent No. 1 and Ms. Fereshte 4

Sethna, the learned counsel with Shri Adhiraj Malhotra, the learned

counsel for the respondent No. 2.

5. Having heard the learned counsel for the parties, we are of the

opinion that the complaint of the appellant has not been considered

by the respondent in the right perspective. Only a part of the

complaint has been considered by SEBI in so far as the prayer of the

appellant directing Cairn India to pay the dividend alongwith

interest. We are of the opinion that SEBI was justified in holding

that since an amount has been transferred to the income tax

authorities pursuant to some orders issued by them, the question of

paying the dividend by the appellant alongwith interest does not

arise. In our opinion, it is open to the appellant to pursue his

remedies for return of the dividend amount from the income tax

authorities.

6. However, if the company, namely, Cairn India had violated the

provisions of the Companies Act in not releasing the dividend when

there was no embargo upon it, it is SEBI's duty to inquire into the

alleged violation and if it exists take action against the said company

and, if necessary, under Section 124 of the Companies Act. This

aspect has not been considered by SEBI.

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7. We accordingly, allow the appeal in part and dispose of the

appeal directing SEBI to reconsider the complaint of the appellant

dated April 13, 2017 in relation to violation of the provisions of the

Companies Act and LODR Regulations and pass appropriate orders.

8. In this regard, it was urged that an opportunity of hearing may

be given by SEBI while disposing of the appellant's complaint. We

are of the opinion that it is not necessary for SEBI to give an

opportunity of hearing for the purpose of deciding the complaint.

SEBI will consider the complaint and dispose of the complaint in the

light of the directions given by us expeditiously.

9. In the circumstances of the case, there shall be no order as to

costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 19.07.2019 Prepared & Compared by PTM