Securities and Exchange Board of India vs Vedanta Limited & Ors.

17.09 Crore equity shares at a maximum price of Rs. 335/per share – Respondent no.1 approached the appellant-SEBI seeking extension of the buyback period on the ground that it was falling short of achieving the targeted buyback, it had been able to buy back only 3.6 Crore shares – SEBI rejected the request for extension of the buyback period – Respondent no.1 then made an application to the appellant u/Regn 15B(8) of the Buyback Regulations, to release the Cash Escrow, containing 2.5% of the buyback size amounting to Rs.143.125 Crore – Investigation was conducted – Committee holding that escrow amount is exempted from forfeiture u/Regn 15B(8)(a) of the Buyback Regulations, released the escrow amount in favour of the respondents, however, the investigation into a possible violation of PFUTP Regulations was undertaken separately – Investigation concluded – Appellant issued a Show Cause Notice to the respondents – Adjudicating Officer-AO passed an Order holding that the respondent did not place enough buy orders towards completion of the buyback and had acted fraudulently, making misleading announcement of the buyback of shares without any intent to fulfil it and imposed penalties upon the respondents for alleged violation of Regns 3(a), (b), (c), (d), 4(1), 4(2)(k), (r) of the PFUTP Regulations and Regn 19(1)(a) of the Buyback Regulations – Respondents filed appeal – Securities Appellate Tribunal-SAT set aside the order passed by the AO holding that violations of the PFUTP Regulations and Buyback Regulations were not proved against the respondents– Correctness: Held: Mere release of the escrow does not create an automatic statutory bar to proceedings under the PFUTP Regulations because the release of the escrow is not necessarily equivalent to absence of fraud – It cannot be said that the satisfaction of the conditions contemplated u/Regn 15B(8) necessarily negatives allegations of fraud under the PFUTP Regulations – Scope of the enquiry contemplated by Regn 15B(8) of Buyback Regulation is confined to determining whether the escrow is liable to be forfeited in the circumstances contemplated by the provision – Fact that the conditions governing the forfeiture or release of an escrow have been satisfied, by itself, cannot be treated as a finding on whether the PFUTP Regulations have been violated or not – Where any of the circumstances contemplated under clauses (a), (b) or (c) of Regn 15B(8) are found to exist, the consequence is simply that the escrow cannot be forfeited – But it does not, by itself, answer whether the conduct of the respondents involved any fraudulent or manipulative conduct within the meaning of the PFUTP Regulation – As regards, finding on fraud, it is not sufficient to merely identify the existence of a trading pattern which might give rise to a suspicion of fraud under the PFUTP Regulations – Trading data to be considered alongside any contemporaneous instructions, communications, internal records, or other conduct attributable to the company or persons in control which may corroborate the inference sought to be drawn from the pattern of trades – Furthermore, this Court, exercising jurisdiction u/s.15Z of the SEBI Act, is not the appropriate forum for such resolution – Scrutiny of such conflicting trading data, and the determination of which of the two versions is to be accepted, or whether the discrepancy admits of some explanation not presently apparent, is an exercise that properly belongs to SAT – 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 AO’s order, one which SAT itself never examined or adjudicated upon, in view thereof, matter remanded to SAT for fresh adjudication on the question of fraud alone. [Paras 57-59]