Advertisement
Securities and Exchange Board of India Vs Vedanta Limited & Ors. (Supreme Court)
Escrow Released Does Not Mean Fraud Erased: Failed Buyback May Still Face PFUTP Scrutiny, but Suspicion Alone Cannot Become Proof — Regulations 15B(8), 3 & 4; Escrow Release Does Not Bar PFUTP Scrutiny of Failed Buyback; Suspicious Trading Pattern Cannot Substitute Proof of Buyback Fraud; Faulty Trading Data Cannot Sustain PFUTP Fraud Finding Against Vedanta; Vedanta Buyback Fraud Allegations Remanded for Fresh Evidentiary Examination: Supreme Court
Facts of the caseVedanta Limited, formerly Cairn India Limited, passed a special resolution on 26.11.2013 to buy back 17.09 crore equity shares at a maximum price of ₹335 per share, involving a maximum outlay of ₹5,725 crore.The public announcement was made on 14.01.2014. The buyback remained open from 23.01.2014 to 22.07.2014. Vedanta deposited ₹143.12 crore, representing 2.5% of the maximum buyback size, in an escrow account as required by the SEBI Buyback Regulations, 1998.During the six-month period, the company could buy back only 3.67 crore shares for ₹1,225.45 crore—approximately 21.48% of the targeted number. It thus failed to complete the minimum buyback of 50% prescribed by Regulation 14(3).Vedanta sought an extension, explaining that a substantial bullish movement had pushed the market price beyond the ₹335 ceiling. SEBI rejected the request because the Regulations contained no provision permitting extension.Escrow was released—but fraud proceedings followedSEBI’s initial investigation for determining whether the escrow amount should be released concluded that Vedanta satisfied Regulation 15B(8)(a) & (b). Its Legal Affairs Department also opined that forfeiture might not be warranted and that proceedings under the PFUTP Regulations on the same facts would be legally difficult. The escrow amount was consequently released.A subsequent investigation, however, examined whether the buyback announcement was fraudulent. SEBI alleged that Vedanta had not placed sufficient purchase orders even on days when shares were available below ₹335. According to SEBI, the company announced a massive buyback without genuinely intending to complete it, thereby misleading investors and influencing the market.
Paid content
Become a Premium Member, or log in if you are already a Premium member.
