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TMI Blog2023 (10) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... me was observed on the basis of any of the corporate announcement made by Cairn during the investigation period . The Company could not have foreseen or predicted that the stock markets would witness this bullish trend at the time when the decision for going for a buyback was taken nor could the Company be aware at the time of making the public announcement that the traded price of the scrip would be above the maximum buyback price on 68 days out of 123 trading days. Thus, allegation that the Company had made misleading public announcement on January 14, 2014 designed to influence the decision of investors and to induce sale or purchase of its securities is not proved. Company failed to show intent towards completing the buyback by not putting enough buy orders at appropriate time and therefore acted fraudulently - As we find that out of 123 trading days available to the Company to conclude the buyback, on 55 days at BSE and 54 days at NSE, the closing price of the scrip was lesser or equal to maximum buyback price of Rs. 335/-. Closing price was more than maximum buyback price of Rs. 335/- per share from April 2, 2014 to April 23, 2020 and from May 12, 2014 to July 22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Act, 1992, in the matter of Cairn India Limited (now merged with Vedanta Limited). Appeal No. 420 of 2021 has been filed by Vedanta Limited ( the Company for short), Appellant no. 1, Mr. P. Elango, Appellant no. 2 and Mr. Aman Mehta, Appellant no. 3. Appeal No. 486 of 2021 has been filed by Ms. Neerja Sharma. As the impugned order is common to all the appellants, both the appeals are being taken up together. By the impugned order, penalties have been imposed for violation of Regulation 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ( PFUTP Regulations for short) and Regulation 19(1)(a) of SEBI (Buyback of Securities) Regulations, 1998 ( Buyback Regulations for short). 2. The brief facts of the case are as follows. The Board of Directors of Cairn India Ltd. (the Company) approved on December 26, 2013 a proposal to buyback 17,08,95,522 equity shares at a maximum price of Rs. 335/- per share (with a face value of Rs. 10/- each) for a maximum amount of Rs. 5725 crores from the open market route in accordance with Buyback Regulations. The shareholders of the Company approved the proposal through postal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed by the Company on 82 days on NSE and on all 123 days on BSE. No buy orders were placed on NSE on 24 days and buy orders for less than 5000 shares were placed on 15 days out of a total of 54 days on which the price was favourable. Accordingly, SEBI concluded that by making the announcement of buyback without any intent to fulfill it, the Company and Mr. P. Elango (CEO and Director of the Company, Appellant no. 2), Mr. Aman Mehta (Director on the Board of the Company, Appellant no. 3) and Ms. Neerja Sharma, Director (Risk Assurance) and Company Secretary, Appellant in Appeal no. 486 of 2021 who all signed the public advertisement dated January 14, 2014 acted fraudulently and violated Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(K) and (r) of the PFUTP Regulations and Regulations 19(1)(a) of the Buyback Regulations. A penalty of Rs. 5.25 crores was levied on the Company and that of Rs. 15 lakh each on the Appellant nos. 2 and 3 and Appellant in Appeal no. 486 of 2021 under Section 15HA and 15HB of the SEBI Act, 1992. 7. A common Show Cause Notice (SCN) dated July 13, 2017 was issued to all 4 Noticees. As Cairn India Ltd. had merged with Vedanta Ltd. on April 11, 2017, Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled. (iv) Data for 2012 and 2013 indicated that most of the shares of the scrip were traded on NSE. However, out of 123 trading days, the Company placed orders on only 82 days on NSE with no orders being placed on 41 days. On BSE, the Company placed orders on all 123 days. (v) The Company had not placed enough buy orders between the period January 23, 2014 to March 1, 2014 when the price of scrip was below the maximum buyback price. The closing price was favourable on 54 days on NSE and 55 days on BSE out of 123 days. The Company did not place any orders on 24 days out of 24 favourable days on NSE and placed orders for more than 1,00,000 shares on only 13 days. 10. The appellants have pleaded that there is nothing on record to conclude that the announcement of buyback was made without the intention to fulfill it. This is borne by the following:- (i) The Company had deposited Rs. 143.125 crores in Escow Account for processing the buyback. After investigation the Respondent did not forfeit the amount on February 12, 2016 under Section 15B (8) of Buyback Regulations and released it as the Respondent found that the VWAMP during the buyback period was higher than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the buyback period was Rs. 348.48 per share on BSE and Rs. 342.83 per share on NSE. Thus, the VWAMP for the scrip on both the Exchange was higher than the buyback price of Rs. 335 per share. 12. Having heard the learned counsel for the parties, we note that the allegations against the Company are that firstly, it had made misleading announcement on January 14, 2014 regarding buyback of shares designed to influence the decision of the investors and to induce sale or purchase of securities. Secondly, the Company failed to put in enough buy orders at appropriate time towards the aim of completing the buyback and hence failed to show intent and acted fraudulently. The allegations against Appellant nos. 2 and 3 and the Appellant in Appeal no. 486 of 2021 are that they facilitated the Company in making the said misleading announcement by signing the public announcement. 13. With regard to allegation regarding the Company making a misleading public announcement designed to influence the decisions of investors, we find that the Board of Directors approved the proposal for buyback of shares along with the maximum price of the equity shares at Rs. 335/- on November 26, 2013. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be faulted for adopting a prudent and cautious approach by placing few buy orders at the initial stage of the buyback period. Placement of large buy orders at the initial stage could have affected the price of the scrip and possibility of the price going above the maximum price even earlier could not be ruled out. The Company could not have perceived that in last 2-3 months of the buyback period the price would not be favourable. We note that the Company bought back Rs. 3.34 crores of shares during the period April 25, 2014 to May 9, 2014 when the price fell down below the maximum price. There is nothing on record to indicate that the Company instructed the intermediaries to prefer one Stock Exchange over another. The Company utilized Rs. 1225.45 crores in the buyback process and in our view this is not a paltry sum to invest for a non-serious effort to buyback the shares. The above indicates that it cannot be conclusively proved that the Company showed no intent to successfully complete the buyback and there by acted fraudulently. 16. Thus, we hold that the violations of provisions of Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(K) and (r) of the PFUTP Regulations and Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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