The market regulator has asked Vedanta India, earlier known as Cairn India Ltd, to pay Cairn UK Holdings Limited (CUHL) Rs 77.62 crore plus a simple interest of 18 percent per annum, for delayed payment of dividend.
The Securities and Exchange Board of India (Sebi) has also asked the company's chairman and managing director (CMD) Navin Agarwal, whole-time director Tarun Jain, whole-time director and chief executive officer (CEO) Thomas Albanese and whole-time director and chief financial officer (CFO) GR Arun Kumar to restrain from accessing the securities market for two months and non-executive director Priya Agarwal and independent directors K Venkataramanan, Lalita D Gupte, Aman Mehta, Ravi Kant and Edward T Story from accessing the market for one month.
Vedanta, through a filing dated March 12, informed the exchanges that the regulator has issued this order. The filing added that the company is "in the process of taking appropriate legal steps in respect of the same".
The company's filing stated that there is "no major financial impact" from the order.
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In April 2017, CUHL had raised a complaint with Sebi alleging nonpayment of dividend of Rs.340.64 crore by Cairn India Limited (merged with
Vedanta on April 11, 2017) in respect of 184,125,764 equity shares of CIL owned by CUHL.
CIL had submitted that all all outstanding unpaid dividends of Rs.666.53 crore to the account of CUHL had been paid to the Income Tax Department (“ITD”) against recovery notice from Deputy Commissioner of IT, International Taxation, New Delhi, issued under Section 226(3) of the Income Tax Act, 1961, on June 19, 2017 and June 20, 2017. With the matter before the IT department, SEBI closed the complaint of CUHL.
CUHL approached SAT who then asked Sebi to reconsider the complaint. The tribunal agreed in part with Sebi's ruling and said that CUHL should approach the income-tax authorities for return of the dividend amount. But the tribunal added that if Cairn India (now Vedanta India) had not released the dividends when there was no embargo on it, then Sebi should inquire into this and take action if there has been a violation.
The IT Department's order that acted as restraint on payment of dividend had expired on March 31, 2016. CIL had contended that the IT Department letters that CUHL submitted as proof of lifting of this restraint were only internal departmental communications, and therefore could not be acted upon. The Sebi order stated that the regulator does not find any merit in such a contention.
CIL had also said that since it has not "enriched itself from unpaid dividend", having transferred the total dividend amount into an account, it should not be penalised with levy of interest.
To this, the Sebi order stated that "the purpose of award of interest is to compensate for the time value of money that the person was unlawfully deprived of".
It added, "Such interest should account for likely use to which the party would have put the relevant amount but for the unlawful withholding of payment of dividend. The purpose of award of interest is not merely to eliminate enrichment of the wrong doer. Its purpose is to reflect loss caused to the claimant or person who has been wrongfully deprived of his entitlement. "
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