SAT Overturns SEBI's Order Against Linde India In Related Party Transactions Case

The Securities Appellate Tribunal has set aside a Securities and Exchange Board of India order against Linde India in a case of related party transactions. In addition, the appellate tribunal has asked the company to appear before the SEBI on May 27 for inspection of documents, and then file its reply within one week.

In its order on Thursday, SAT said, "It would not be just and appropriate to continue the impugned interim ex-parte order any further keeping in view that the appellant (Linde India) has been directed to file reply within 21 days and SEBI has made a statement before us to pass orders within 30 days from the date of conclusion of hearing and in the event of any adverse order, SEBI is enjoined with all powers to pass appropriate directions, including an order of disgorgement."

The matter is related to various transactions and agreements by Linde India Ltd with its related parties Praxair India Pvt Ltd and Linde South Asia Services Pvt Ltd.

The latest ruling came after the company approached the tribunal against an order passed by SEBI on April 29 that had directed the National Stock Exchange to designate a valuer to conduct the valuation of related party transactions between Linde India and Praxair India, following complaints by shareholders.

The interim order was passed on the premise that the company had executed related party transactions without obtaining prior approval from the shareholders.

SEBI, in its interim order, noted that Linde India was executing related party transactions, which prima facie appear to be material, without taking shareholder approval. Such actions effectively deprive public shareholders of an opportunity to express their views on transactions, which have the potential to disproportionately benefit controlling shareholders at the expense of the broader shareholder base.

The regulator had asked NSE to appoint a registered valuer to carry out a valuation of the business foregone and received, including by way of geographic allocation, in terms of the joint venture and shareholders agreement entered between Linde India and Praxair India that led to the formation of Linde South Asia Services.

SEBI had stated that Linde India must assess the materiality of future related party transactions based on the total value of transactions conducted with any related party in a financial year, regardless of the number of transactions or contracts involved. Additionally, if the total value of RPTs surpasses the materiality threshold, shareholder approvals must be obtained.

While SEBI initiated the investigation, the company moved the Bombay High Court for a stay on the probe, which was not granted by the court.