New Delhi, Sep 9 (PTI) The Supreme Court on Wednesday remanded back to Securities Appellate Tribunal (SAT) a matter in which market regulator SEBI had imposed a penalty of Rs 5.25 crore on Cairn India, a part of Vedanta Limited, for making a misleading announcement regarding the buyback of shares in 2014.

A bench of Justices J B Pardiwala and K V Viswanathan said the scrutiny of conflicting trading data, and the determination of which of the two versions is to be accepted is an exercise that properly belongs to SAT.

A buyback of shares is a corporate action where a company repurchases its own shares from existing shareholders.

"Having perused the impugned order, we find that SAT does not appear to have engaged with the discrepancy between the investigation report and the NSE’s letter at all.

"Since this is a material infirmity going to the evidentiary root of the Adjudicating Officer's order, one which SAT itself never examined or adjudicated upon, we are of the view that the matter ought to be remanded to SAT so as to enable it to render a considered finding on this specific aspect, upon a proper examination of the record," the bench said.

The top court directed SAT to first determine, upon a proper scrutiny of the trading data placed before it by both parties including the data furnished by the NSE, as to which version of the historical trading data is free from discrepancy and accurately reflects the true position.

"Upon doing so, SAT shall record specific findings on each of the instances of discrepancy noted hereinabove, as also any other such discrepancy that may be brought to its notice," the bench said.

"In exercise of its powers under Section 15U(2) of the SEBI Act, SAT may summon and examine on oath the officers of the respondent company, the merchant bankers engaged by it and/or any other person acquainted with the facts of the matter...," it added.

The Securities and Exchange Board of India (SEBI) had imposed a penalty of Rs 5.25 crore on Cairn India for making a misleading announcement regarding the buyback of shares in 2014.

In addition, the regulator levied a fine of Rs 15 lakh each on P Elango, who was the CEO and director of Cairn, Aman Mehta, who was the director on the company's board, and Neerja Sharma, who was director (risk assurance) and company secretary, SEBI had said.

These three officials had signed the public advertisement regarding the buyback in January 2014 and facilitated the company in making the misleading announcement. After a detailed investigation, SEBI found that Cairn did not place adequate buy orders despite the availability of adequate sell orders at NSE.

It had further noted that Cairn was not able to fulfil at least 50 per cent of the buyback issue, despite the conditions were favourable to the company.

"...Cairn by not placing adequate buy orders despite the availability of adequate sell orders at NSE had perpetrated a fraud by making a misleading announcement regarding buyback of shares designed to influence the decision of investors and to induce sale or purchase of securities," SEBI had said in its 41-page order.

By making the public announcement of a buyback without any intent to fulfil it, the entities have acted fraudulently and violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms as well as buyback norms, it added.

Cairn had made a public announcement on January 14, 2014, for buyback of 17,08,95,522 equity shares of Rs 10 each at a maximum price of Rs 335 apiece for Rs 5,725 crore from the open market.

The buyback offer was scheduled to open on January 23, 2014, and close on July 22, 2014. Cairn informed that till June 27, 2014, it was able to buy back a total of 3,67,03,839 shares, which represented 21.48 per cent of the maximum buyback shares utilising a total of Rs 1,225.45 crore or 28.59 per cent of the maximum buyback size.

It was noted that Cairn was not able to utilise the minimum amount of 50 per cent of the buyback size as required under the SEBI Buyback Regulations.

Therefore, it had sought an extension of the buyback period, which was not acceded by the market regulator. Subsequently, in July 2014, Cairn had submitted that it could not achieve the minimum amount of 50 per cent of buyback size as required under the rules.

Further, the company had made an application to SEBI to release the cash escrow (Rs 143.125 crore), containing 2.5 per cent of the buyback size. Pursuant to this, the regulator had conducted an investigation into the matter.

Cairn India merged with Vedanta Ltd in 2018. PTI PKS PKS KVK KVK