Withholding of dividends: SAT asks SEBI to probe market norms violation by Vedanta-owned Cairn India

New Delhi: The Securities Appellate Tribunal (SAT) has directed markets regulator SEBI to look into the alleged violation of market norms by Cairn India, a subsidiary of Vedanta, with regard to withholding of dividends payable to Cairn UK Holdings.

The order came after Cairn UK Holdings Ltd filed an appeal with the tribunal against an order passed by Securities and Exchange Board of India (SEBI).

In 2017, the UK based firm had approached the regulator over non-payment of dividend amounting to over Rs 340 crore by Cairn India and had appealed to SEBI to direct Vedanta's subsidiary to pay the dividend along with an interest of 18 percent per annum.

Representational image. Reuters

In the appeal, Cairn UK Holdings had asked to "initiate proceedings under ... Companies Act against every director of the Cairn India who was knowingly a party to the non-payment of the said dividend."

However, the markets watchdog disposed of the complaint on the ground that the unpaid dividend of over Rs 660.63 crore 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.

The tribunal in its order dated 19 July held that while SEBI was justified in holding that question of paying the dividend does not arise since the amount had been transferred to the income tax, it is the regulator's duty to inquire into the alleged violation of Companies Act by Cairn India.

Thereby the order said, "in our opinion, it is open to the appellant to pursue his remedies for return of the dividend amount from the income tax authorities."

Further, the order said, "We accordingly, allow the appeal in part and dispose of the appeal directing SEBI to reconsider the complaint of the appellant dated ... in relation to violation of the provisions of the Companies Act and LODR Regulations and pass appropriate orders."