Securities Appellate Tribunal
Cairn Uk Holdings Limited vs Sebi on 5 July, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 28.06.2022
Date of Decision : 05.07.2022
Appeal No. 2 of 2021
Cairn UK Holdings Limited
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, Ms. Niti Dixit, Mr. Uday Walia, Mr. Shahezad Kazi, Ms. Aishwarya Singh, Advocates i/b S&R Associates for the Appellant. Mr. Mustafa Doctor, Senior Advocate with Mr. Abhiraj Arora, Mr. Shourya Tanay, Advocates i/b ELP for the Respondent Nos. 1 (SEBI).
2Ms. Fereshte Sethna, Advocate with Mr. Abhishek Tilak, Advocate i/b DMD for the Respondent Nos. 2 (Vedanta Ltd.). CORAM : Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer
1. The present appeal has been filed against the rejection of the appellant's complaint on the Securities and Exchange Board of India Complaints Redressal System (hereinafter referred to as 'SCORES') platform by an order of December 26, 2019.
2. The facts leading to the filing of the appeal is, that the appellant filed a complaint with Securities and Exchange Board of India (hereinafter referred to as 'SEBI') on April 13, 2017 in connection with non-payment of dividend which was due to the appellant by Cairn India Ltd. since merged with respondent nos. 2 (hereinafter referred to as 'Cairn India') amounting to Rs. 340.64 crores. The said complaint was registered on the SCORES platform of 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, 3 2013 (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 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.
4. The appellant being aggrieved by the disposal of the complaint filed appeal no. 319 of 2017. This Tribunal by an order dated July 19, 2019 allowed the appeal in part and disposed of the 4 appeal directing SEBI to reconsider the complaint of the appellant dated April 13, 2017 in relation to the violation of the provisions of the Companies Act and LODR Regulations and pass appropriate orders. This Tribunal held as under :-
"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."
5. Based on the directions of this Tribunal, SEBI reconsidered the matter and by the impugned order held that the violation of Section 127 of the Companies Act and Regulation 4(2)(c) of the LODR Regulations by Vedanta Ltd. is not established and accordingly rejected the complaint. SEBI while disposing of the 5 complaint held that even though there was no categorical direction from the income tax department to withhold the payment of dividend after expiry of the provisional attachment, it was not clear as to whether the dividend could be released to the appellant or not and, therefore, held that under the mitigating circumstances, it was difficult to assume that Cairn India respondent nos. 2 committed any default upon failure to pay the dividend.
6. We have heard Mr. Pesi Modi, the learned senior counsel with Mr. Neville Lashkari, Ms. Niti Dixit, Mr. Uday Walia, Mr. Shahezad Kazi, Ms. Aishwarya Singh, the learned counsel for the appellant and Mr. Mustafa Doctor, the learned senior counsel with Mr. Abhiraj Arora, Mr. Shourya Tanay, the learned counsel for the respondent nos. 1 SEBI. Even though respondent nos. 2 Cairn India has not filed any reply, we have heard Ms. Fereshte Sethna, the learned counsel with Mr. Abhishek Tilak, the learned counsel.
7. At the outset a preliminary objection was raised by the respondent that the present appeal is not maintainable as the appellant is not an aggrieved person as provided under Section 15-T of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') . In support of his submission, the learned senior counsel relied upon the decision in Bharatbhai Baldevbhai 6 Shah & Ors. vs. SEBI in Appeal no. 142 of 2008 decided on October 6, 2009 and IGL Finance Ltd. vs. SEBI in Appeal no. 256 of 2018 decided on August 5, 2021 and H. B. Stockholding Ltd. vs. SEBI in Appeal no. 86 of 2011 decided on April 25, 2012.
8. Section 15-T(1) provides as under :-
"15-T. Appeal to the Securities Appellate Tribunal.--
(1) Save as provided in sub-section (2), any person aggrieved,--
(a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder, or
(b) by an order made by an adjudicating officer [under this Act, or]
(c) by an order of the Insurance Regulatory and Development Authority or the Pension Fund Regulatory and Development Authority,] may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter."
9. A perusal of the aforesaid provision indicates that any person aggrieved may prefer an appeal to the Securities Appellate Tribunal. In the instant case, we find that the appellant had filed a complaint with SEBI on the SCORES platform with regard to the non-payment of dividend and, consequently, contended that such non-payment was a violation of Section 127 of the Companies Act and LODR 7 Regulations. The appellant was to receive Rs. 340.64 crores as dividend from Cairn India, respondent nos. 2. In our view, the appellant as an aggrieved person and had a right to file a complaint. The appellant had a right to file an appeal under Section 15-T upon the rejection of his complaint. In our view, the appellant is an aggrieved person.
10. In this regard, we find that time and again, the respondent are in a habit of raising this plea regarding maintainability of the appeal in the matters arising from a complaint made on the SCORES platform. In this regard, we have held in several matters that a complainant has a right to file an appeal under Section 15-T of the SEBI Act upon rejection of his complaint on the SCORES platform. In Ashok Dayabhai Shah & Ors. vs. SEBI & Ors. Appeal no. 428 of 2019 decided on November 14, 2019, we held that the complainant had a right to file an appeal under Section 15-T of the SEBI Act. This matter was carried out by SEBI before the Hon'ble Supreme Court in Civil Appeal no. 363 of 2020 which was dismissed by an order dated January 27, 2020.
11. The decisions cited by the respondent are not all applicable in the instance case and are clearly distinguishable. In Bharatbhai Baldevbhai Shah (supra), the question was whether the appellant 8 being a shareholder had any locus-standi to file an appeal. Similar was the case in IGL Finance Ltd. (supra). This Tribunal held that the appellants had no locus-standi to file an appeal and consequently dismissed the appeal. In H. B. Stockholding (supra), it was held that the appellant being a shareholder had no right to file an appeal. Thus, the decisions cited by the respondent are not applicable in the instant appeal. The preliminary objection raised by the respondent is thus, rejected.
12. Having heard the learned senior counsel for the parties, we find that dividend had been declared by the board of directors of respondent nos. 2 during the financial years ended March 31, 2014, March 31, 2015 and March 31, 2016. But such dividend was not paid to the appellant. It transpires that the income tax department initiated assessment proceedings for the financial year 2006-07 and on January 22, 2014 passed a provisional attachment order under Section 281B of the Income Tax Act, 1961 (hereinafter referred to as 'Income Tax Act'). The provisional attachment order was extended from time to time and expired on March 31, 2016. As a result of the attachment order, the dividend could not be released by respondent nos. 2 to the appellant but after the expiry of the attachment order on 9 March 31, 2016, there was no embargo upon respondent nos. 2 from not releasing the dividend in favour of the appellant.
13. In this regard, we find that certain correspondence has taken place between respondent nos. 2 with the income tax authorities with regard to release of the dividend and with regard to the effect of the attachment order. Respondent nos. 2 by a letter dated April 20, 2016 informed the Dy. Commissioner of Income Tax that the total dividend of Rs. 285.39 crores was due and payable to the appellant but had not been paid. By another letter dated September 22, 2016, respondent nos. 2 informed the Dy. Commissioner of Income Tax that the said respondent had no impediment in remitting the dividend to the appellant as there was no statutory restraint in relation to the payment of dividend by respondent nos. 2 in favour of the appellant.
14. The Assistant Commissioner of Income Tax by letter dated December 30, 2016 informed the Commissioner of Income Tax that the provisional attachment order under Section 281B of the Income Tax Act has expired on March 31, 2016 and consequently, there was no attachment in force and further informed that the decision to release the dividend by respondent nos. 2 to the appellant was an internal matter between the two companies and the same may be dealt accordingly. This letter of December 30, 2016 was known to 10 the respondent nos. 2 as is clear from the letter dated January 31, 2017 written by respondent nos. 2 to the Commissioner of Income Tax wherein respondent nos. 2 again sought clarification as to whether there was any impediment upon the respondent nos. 2 in remitting the dividend to the appellant. By another letter of the assistant Commissioner of Income Tax dated March 1, 2017, it was again intimated that the attachment order has expired and, therefore, the payment of dividend to the appellant was an internal matter of the respondent nos. 2. Considering this letter of March 1, 2017, respondent nos. 2 by letter dated March 27, 2017 informed the Commissioner of Income Tax that respondent nos. 2 would be paying the outstanding dividend payment to the appellant without further delay.
15. In spite of the aforesaid, no dividend was paid. Under Section 123(4) of the Companies Act, the company is required to deposit the declared dividend in a scheduled bank in a separate account if the dividend is not paid within 30 days from the date of declaration which they did. Section 127 of the Companies Act provides for punishment upon the directors and the company in the event the dividend is not paid within the stipulated period. We however find that pursuant to a recovery notice dated June 16, 2017, issued by the 11 Dy. Commissioner of Income tax (Internal Taxation) New Delhi, respondent nos. 2 deposited the outstanding dividend in an unpaid Dividend Account.
16. In the instant case, admittedly, the dividend was not paid to the appellant within the stipulated period. Thus, a prima-facie, case is made out for violation of Section 127 read with Section 124 of the Companies Act. The finding that the documents available on record was not sufficient to establish mens rea for an offence to be established under Section 127 of the Companies Act is patently erroneous as we find that relevant documents has not been considered by SEBI. Further, nothing has come on record to indicate as to what was the mitigating circumstances which led respondent nos. 2 in not releasing the dividend after the expiry of the attachment on March 31, 2016 and issuance of recovery notice dated June 16, 2017.
17. In view of the aforesaid, the impugned order passed by SEBI cannot be sustained and is quashed. The appeal is allowed. We are of the opinion that a prima-facie, case is made out by the appellant in its complaint. We consequently direct SEBI to initiate an enquiry under Section 11(4)(A) of the SEBI Act and hold an enquiry in the prescribed manner, investigate the violations of the Companies Act, 12 LODR Regulations, etc. and take it to its logical conclusion within six months from today. We further note that any observations made by us in this order is only a prima-facie view and the authority will not be influenced by any observation made by us while making the enquiry / investigation and / or passing any order pursuant to the enquiry / investigation report. In the circumstance of the case, the appeal is allowed with no order as to costs.
18. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Judicial Member Ms. Meera Swarup Technical Member RAJALA Digitally signed 05.07.2022 by RAJALAKSHMI KSHMI HDate:
NAIR 2022.07.06 PTM H NAIR 15:08:23 +05'30'