Cairn UK dividend case: SC grants SEBI six more months to conduct enquiry

The Supreme Court order was passed in an application filed by SEBI seeking an extension of time to complete the enquiry

The Supreme Court on July 7 granted Securities Exchange Board of India (SEBI) an additional six months to conduct enquiry in a matter related to the non-payment of dividends by Cairn India Ltd to Cairn UK Holdings Ltd.

Cairn India merged with Vedanta in 2017.

The order was passed in an application filed by SEBI, seeking an extension of time to complete the enquiry.

In October 2022, the apex court granted six months' time to SEBI to complete the enquiry into the issue and ordered that the observations by the Securities Appellate Tribunal (SAT) in the case, will not influence the enquiry. SC further directed SEBI take its own independent decision uninfluenced by any of the observations in SAT's order.

In July 2022, SAT set aside a Sebi order in a matter related to the non-payment of dividends by Cairn India Ltd to Cairn UK Holdings Ltd and directed the regulator to hold an enquiry and find a "logical conclusion" in the case within six months. The appellate tribunal's order, came in an appeal was filed by Cairn UK Holdings Ltd against the Sebi order. "The impugned order passed by Sebi cannot be sustained and is quashed. The appeal is allowed.

Background:

In April 2017, the UK-based firm approached the regulator over the non-payment of dividends amounting to over Rs 340 crore by Cairn India. It had appealed to Sebi to direct Cairn India to pay the dividend along with an interest of 18 percent per annum.

Cairn UK Holdings had demanded initiating proceedings under the Companies Act against every director of Cairn India who was knowingly a party to the non-payment of the dividend. However, Sebi disposed of the complaint on the ground that the unpaid dividend was handed over by the company to the income tax authorities and, therefore, it would not be appropriate for the regulator to take any further action.

Cairn UK Holdings had challenged Sebi's rejection of the complaint before the SAT, which then asked the regulator to re-examine the matter in 2019. Rejecting the complaint again, Sebi  held that Cairn India did not violate the Companies Act and LODR (Listing Obligations and Disclosure Requirements) Regulations.

Cairn UK challenged this order at the SAT for the second time.

In its order on July 5 2022, the SAT aside SEBI's order and asked it to conduct a second round of enquiry and pass an order. SEBI challenged this at the Supreme Court.