Cairn gave up right to claim interest: Vedanta to appeal against Sebi order

Billionaire Anil Agarwal's Vedanta Ltd on Wednesday said it will appeal against Sebi levying Rs 77.6 crore penalty for delay in paying dividends to its erstwhile shareholder, Cairn Energy, saying the UK firm had given up its right to claim interest when it settled a retrospective tax demand with the government.

Sebi had on Tuesday ordered Vedanta to pay Rs 77.62 crore to Scottish explorer Cairn and also barred the firm's entire board, including his brother Navin and daughter Priya, from accessing the capital market for the same.

"Vedanta Ltd will appeal the Sebi order before the appropriate forum," the firm said in a statement.

Vedanta had in 2011 bought Cairn Energy's majority stake in its Indian arm, Cairn India Ltd. Cairn continued to hold a minority stake in Cairn India, which was subsequently merged into its parent and Mumbai-listed Vedanta Ltd.

In 2014, the Income Tax department gave it powers to levy taxes retrospectively, to seek Rs 10,247 crore in capital gains tax from the Scottish explorer over a 2006 reorganisation and listing of Cairn India.

The tax department attached Cairn Energy's residual holding while Vedanta stopped paying dividend, citing the dispute.

The UK firm approached Sebi over stopping the dividend payment even as it contested the tax demand.

Sebi in its order said Vedanta violated the law by withholding dividends that should have been paid to the UK firm between January 2014 and June 2017.

The tax department's attachment expired in March 2016. Cairn Energy in its 2017 complaint to Sebi said despite reminders and release of the attachment, the dividends were not paid until 2017 and the company was liable to pay interest on delayed dividends.

"The dividend payment by Vedanta Ltd to Cairn UK Holdings Ltd (parent firm of Cairn Energy) was under a tax dispute between Cairn UK and the Government of India.

"The said dividend amount was deposited in an 'unpaid dividend account' as per law and was to be released by Vedanta Ltd as per the orders of the Income Tax Department and which was subsequently released post orders of the department and no benefit, whatsoever was derived by Vedanta Ltd," the firm said in the statement.

It went to state that when Cairn UK reached a settlement with the government in its tax dispute, "all dues were cleared, including the said dividend amount".

"Also, as per the settlement with the Government of India on the tax dispute, Cairn UK undertook to surrender its rights to claim interest on such tax refund (arising on account of this dividend)," it said.

Vedanta said there was "absolutely no intent" on its part to withhold the dividend payment from CUHL.

"Vedanta Ltd has an exemplary record in payment of dividends. Vedanta Ltd has paid out dividends of over Rs 84,000 crore to shareholders in the last 10 years. It has never delayed, or been penalised for, any dividend payment," it said.

"The amount of Rs 667 crore (on which the interest of Rs 77.62 crore has been levied) is a very small amount in the context of the amount of dividend Vedanta Ltd pays. It defies logic and the company's exemplary record to withhold payment to any shareholder."

It described as purely the unique circumstances that Cairn UK found itself in with the Income Tax department of the Government of India in 2016-17 that led to the delay.

The regulator in its Tuesday order barred Navin Agarwal, who was chairman of Cairn India (now Vedanta Ltd), as well as three other top executives from accessing the securities market for two months. Those barred included Anil Agarwal's close confidant Tarun Jain and then CEO Thomas Albanese.

They were "prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two months, from the date of coming into force of this order," Sebi had said.

It also barred six others, most of them were directors of the company board, for one month from accessing the securities market.

This list included Anil Agarwal's daughter Priya, who was a director on the board of Cairn India.

Others barred included K Venkataramanan, Lalita D Gupte, Aman Mehta, Ravi Kant, and Edward T Story "from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of one month, from the date of coming into force of this order", it had added.

Story passed away in early December last year.

The tax department had sold Cairn's residual shares in the Indian unit, withheld tax refunds and confiscated dividends due to it to settle part of the tax demand. This totalled Rs 7,900 crore.

Facing global criticism for levying the tax using a retrospective tax legislation, the government withdrew the tax demand and repaid Rs 7,900 crore to Cairn Energy.