Vedanta Ltd announced on Wednesday its decision to appeal against the Securities and Exchange Board of India (Sebi) order, which directed the company to pay a penalty of ₹77.6 crore to Cairn UK Holdings Ltd. The penalty was imposed due to a delay in paying dividends to Cairn, a Scottish explorer.
Vedanta stated that Cairn UK had waived its right to claim interest on dividends when it settled a previous tax demand with the Indian government. The mining conglomerate intends to contest Sebi’s ruling through the appropriate channels.
Sebi’s order also barred Vedanta’s entire board, including Anil Agarwal’s brother Navin and daughter Priya, from accessing the capital market. This action was taken as Sebi found Vedanta guilty of withholding dividends that were supposed to be paid to Cairn between January 2014 and June 2017.
Vedanta defended itself by stating that there was no deliberate attempt to withhold dividend payments from Cairn UK. The company highlighted its strong track record of dividend payments, totaling over ₹84,000 crore in the last decade without any delays or penalties.
The dispute arose from a tax disagreement between Cairn UK and the Indian government, resulting in the withholding of dividends by Vedanta. However, when Cairn UK settled its tax dispute with the Indian government, all dues, including the dividend amount, were cleared.
Vedanta emphasized that Cairn UK had agreed to forgo its right to claim interest on the tax refund, including the dividend amount. The mining conglomerate’s acquisition of Cairn Energy’s majority stake in Cairn India Ltd in 2011 further complicated the situation.
In 2014, the Income Tax department sought ₹10,247 crore in capital gains tax from Cairn Energy over a 2006 reorganization and listing of Cairn India. Vedanta stopped paying dividends amid the tax dispute, which prompted Cairn Energy to approach Sebi.
Despite reminders and the release of the tax department’s attachment, dividends were not paid until 2017. Cairn Energy argued that Vedanta was liable to pay interest on delayed dividends, leading to Sebi’s intervention.
It’s important to note that the tax department’s attachment expired in March 2016, but the issue regarding dividend payments persisted until 2017.
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