The Supreme Court on Wednesday remanded to the Securities Appellate Tribunal (SAT) a case involving ₹A fine of Rs 5.25 crore was imposed by the Securities and Exchange Board of India (Sebi) on Cairn India, now part of Vedanta Ltd, for a share buyback in 2014.
A bench headed by Justice JB Pardiwala decided to remand the case to the SAT for fresh consideration of certain factual aspects.
The detailed decision was not available at the time of publication, and the specific reasons for the Supreme Court’s decision were not immediately clear.
In January 2014, Cairn India announced a plan to buy back up to 17.08 crore shares at a maximum price ₹335 per piece including total up to ₹5725 crores. The buyback was planned to take place from January 23 to July 22, 2014.
However, the company ended up buying back only 3.67 crore shares, spending ₹1,225.45 crore – about 28.59% of the announced buyback amount. According to the applicable buyback rules, at least 50% of the allocated amount was required to be used.
Sebi subsequently investigated Cairn’s trading activities during the buyback period. The regulator said the company made a misleading public statement without a genuine intention to complete the buyback, thereby violating the Prohibition of Fraud and Unfair Trade Practices Regulations (PFUTP) and the buyback rules. Sebi also said that purchase orders for Cairn were inadequate despite favorable liquidity in the market.
In May 2021, Sebi introduced ₹5.25 crore fine on Cairn India – ₹5 crores for alleged PFUTP violations and ₹25 lakhs for violating buyback rules. He also imposed ₹15 lakh each to three former Cairn officials: P. Elango, Aman Mehta and Neerja Sharma, who signed the ransom notice. By then in 2017, Cairn India merged with Vedanta.
Cairn challenged the regulator’s order before the SAT. The company argued that it could not have anticipated the sharp rise in its share price when the buyback was announced. According to his case, the shares were trading above the maximum redemption price ₹335 for a significant portion of the buyback period, making purchases at the advertised price unattractive or impossible.
The SAT accepted the gist of Cairn’s arguments and quashed Sebi’s order in October 2023 and ₹5.25 crore fine. He also canceled ₹A fine of Rs 15 lakh was imposed on the three former officials. The Tribunal found that the evidence before it did not establish conclusively that Cairn did not intend to successfully complete the buyback. It also noted that the company could not have predicted the bull market trend or known when it announced the buyback that the shares would trade higher ₹335 for a large number of trading days.
Sebi then challenged the SAT order in the Supreme Court. In November 2024, the apex court refused to stay the SAT order and issued a notice of appeal to Sebi, allowing it to proceed to the final adjudication.