‘Cairn UK reached settlement with GoI in tax dispute, all dues were cleared’: Vedanta on dividend payment

Vedanta Ltd, controlled by mining moghul Anil Agarwal, on Wednesday said the dividend payment by Vedanta Ltd to Cairn UK Holdings Limited (CUHL) was under a tax dispute between Cairn UK and the Government of India, which was settled and all dues were cleared including the said dividend amount.

On Tuesday, capital market regulator SEBI ordered Vedanta Ltd to pay Rs 77. 62 crore to Scottish explorer Cairn for the delay in payment of dividends, and also barred the firm’s entire board, including his brother Navin and daughter Priya, from accessing the capital market for the non-payment of the amount. 

In a 76-page order, Sebi said Vedanta must make the payment within 45 days or face further action. 

While Navin, who was CIL chairman, has been restrained from accessing the securities market for two months, Priya, who is the non-executive non-independent director on Vedanta’s board, has been restrained for a month.

A day after the order was issued against it, Vedanta said: “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. In fact, Para 111 of the SEBI order explicitly says that Vedanta Ltd. / Cairn India Ltd. deposited unpaid dividend amount in special account called unpaid dividend account and it ‘did not benefit from the unpaid dividend amount during April 01, 2016 to June 15, 2017’.” 

It added: “When Cairn UK reached a settlement with the Government of India in its tax dispute, all dues were cleared including the said dividend amount. Also, as per the settlement with GOI on the tax dispute, Cairn UK undertook to surrender its rights to claim interest on such tax refund (arising on account of this dividend).”

The company said it would challenge the Sebi order before an appropriate forum.

“There was absolutely no intent on the part of Vedanta Ltd 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 crores to shareholders in the last ten years. It has never delayed, or been penalised for, any dividend payment. The amount of Rs. 667 crore 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 was 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”. Vedanta Ltd. will appeal the SEBI order before the appropriate forum,” the company further said.

In 2011, Vedanta bought over Cairn Energy PLC’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 slapped a Rs 10,247 crore taxes demand on 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.

Sebi on Tuesday said, “Vedanta shall pay to Cairn UK Holdings (the parent firm of Cairn Energy) Rs 77,62,55,052 (Rs 77.62 crore) i.e. simple interest at the rate of 18 per cent per annum for delayed payment of dividend, due and payable by (the firm) to CUHL, within 45 days from the date of this order.”