Sebi fined the company for supposed violations of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations. Additionally, it fined the company another ₹25 lakh for violating its buyback rules. Aggrieved by the order, the company appealed it in the SAT.

Sebi’s main allegation against Cairn was that it had no intention to conduct a buyback because it could not buy the minimum number of shares stipulated. It said the buyback was merely designed to induce investors to trade the company’s shares.

In January 2014 Cairn announced it would buy 17 crore shares from the open market at ₹335 each, up to a maximum of ₹5,725 crore. Cairn, however, was only able to buy 3.6 crore shares, less than half the buyback size prescribed under the Sebi’s rules.

When the stock price moved in such a manner that it became unattractive for investors to sell their shares to the company, Cairn sought an extension from Sebi, saying that it had no intention of backing out. Sebi, however, turned down the company’s request.

In its order, Sebi said a detailed analysis of sell orders placed at the National Stock Exchange (NSE) and BSE during the buyback period revealed that the company did not place any buy orders when the price was favourable for a buyback and only did so on those days when it was not.

“Thus, Cairn had failed to achieve even the minimum buyback size as it could not buy back even half the number of shares announced by it, despite availability of sufficient sell orders on NSE, when the market price was lesser than the maximum buyback price,” the Sebi order read.

In the same order the regulator also imposed a fine of ₹15 lakh each on P Elango, who was the CEO and director of Cairn India, and Aman Mehta and Neerja Sharma, who were directors of the company at the time of the alleged violation.

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Updated: 05 Oct 2023, 07:34 PM IST