Securities Appellate Tribunal
Linde India Limited vs Sebi on 22 May, 2024
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 17.05.2024
Date of Decision : 22.05.2024
Misc. Application No. 631 of 2024
And
Misc. Application No. 638 of 2024
And
Appeal No. 329 of 2024
Linde India Limited
Oxygen House,
P-43 Taratala Road,
Kolkata,
West Bengal - 700 088, India. ..... Appellant
Versus
Securities and Exchange Board of India
SEB Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ...Respondent
Mr. Venkatesh Dhond, Senior Advocate with Mr. Prasad
Shenoy, Mr. Sandeep Parekh, Mr. Anil Choudhary,
Mr. Parker Karia and Ms. Navneeta Shankar, Advocates i/b
Finsec Law Advisors for the Appellant.
Mr. Chetan Kapadia, Senior Advocate with Mr. Mihir Mody,
Mr. Harshvardhan Melanta, Ms. Vidisha Rohira and Mr.
Yash Sutaria, Advocates i/b. K Ashar & Co. for the
Respondent.
Mr. Akshay Petkar, Advocate with Mr. Harsh Kesharia,
Mr. Aniket Malu, Mr. Pranav Shah and Mr. Aditya Nair,
Advocates i/b Harsh Kesharia for Intervener.
CORAM : Justice P.S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member
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Per : Justice P.S. Dinesh Kumar, Presiding Officer
This appeal is directed against order dated April 29,
2024 passed by the SEBI issuing following interim
directions:-
a) LIL shall test the materiality of future RPTs as per
the threshold provided under Regulation 23(1) of the
LODR Regulations on the basis of the aggregate
value of the transactions entered into with any related
party in a financial year, irrespective of the number
of transactions or contracts involved.
b) In the event the aggregate value of the related party
transactions, calculated as provided in clause (a),
exceeds the materiality threshold provided under
Regulation 23(1). LlL shall obtain approvals as
mandated under Regulation 23(4) of the LODR.
c) NSE shall appoint a registered valuer to carry out a
valuation of the business foregone and received,
including by way of geographic allocation, in terms
of Annexure IV of the JV&SHA.
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2. We have heard Shri Venkatesh Dhond, Senior Advocate
with Shri Prasad Shenoy, Shri Sandeep Parekh, Shri Anil
Choudhary, Shri Parker Karia and Ms. Navneeta Shankar,
learned Advocates for the Appellant, Shri Chetan Kapadia,
Senior Advocate with Shri Mihir Mody, Mr. Harshvardhan
Melanta, Ms. Vidisha Rohira and Shri Yash Sutaria, learned
Advocates for the Respondent and Shri Akshay Petkar,
learned Advocate with Shri Harsh Kesharia, Shri Aniket
Malu, Shri Pranav Shah and Shri Aditya Nair, Advocates for
the Interveners.
3. The principal contentions urged by Shri Venkatesh
Dhond, leaned Senior Advocate for the appellant are
summarized as follows:
Appellant has understood the Regulations in consonance
with the legal opinions obtained by the appellant;
that the SEBI has passed the impugned interim
directions on the premise that appellant has executed
Related Party Transactions without obtaining prior
approval from the shareholders in terms of Regulation
23(4) of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements)
Regulations, 2015;that the business allocation between
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the Appellant and its related party is vitiated since a
valuation exercise was not carried out before the grant
of sanction for such allocation; that the business
allocation between the Appellant and its related party is
a transfer of assets;
that there is no imminent threat to securities market
warranting issue of such directions against the appellant
and the same is in violation of the principles of natural
justice, without providing an opportunity of hearing
prior to issuance of directions; and that the directions
are in the nature of a final order, and caused severe
prejudice to the appellant.
that the onus of justifying such orders on grounds of
urgency and necessity to take immediate action, without
providing the aggrieved parties an opportunity to be
heard, lies on the SEBI and SEBI has not discharged the
same.
4. In substance, appellant's case is that since the SEBI sent
its first communication on August 28, 2020, conveying
receipt of representations from investors of the Appellant
regarding their 'outstanding commitment' in terms of the
Appellant's disclosure dated March 04, 2019, there have been
series of correspondence between the appellant and the SEBI,
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the impugned order interim ex-parte order has been passed
without any tenable reasons.
5. Opposing the appeal, Shri. Kapadia, learned Senior
Advocate for the SEBI, submitted that SEBI has examined
appellant's case in accordance with law. Appellant has been
fragrantly violating the statutory Regulations; SEBI has all
the power to pass the interim order in appropriate cases; and
this is a case of clear violation of Regulations. Hence the
impugned order has been passed to protect the interest of
public share-holders as continuance of RPTs without
shareholders' approval, will negatively impact them. The
directions issued by Respondent are not punitive directions
but only remedial directions and not prejudicial inasmuch as
they do not require alteration of status quo ante but are (a)
confined to future transactions and (b) in operation only till
full-fledged hearing takes place upon Appellant filing Reply
within 21 days as per the Impugned Order.
6. Learned Advocate for the intervening applicant also
argued on similar lines as SEBI stating that in securities
regulation, investor protection and market integrity take
precedence over the timing of regulatory actions, with SEBI's
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interim orders focusing on preventing harm and ensuring
fairness despite procedural delays.
7. Though listed for admission, having heard the learned
advocates fully, we have taken up the matter for final
disposal. In the light of the pleadings on record and the
submissions of the learned Advocates, the point that arises for
our consideration is whether the impugned order calls for
any interference?
8. In their pleadings, appellant has averred thus:-
That the Appellant, Linde India Limited (formerly BOC
India Ltd), is a public limited company listed on the
Bombay Stock Exchange Limited ("BSE") since
January 23, 1992, and the NSE since June 16, 1999;
That the appellant was a subsidiary of BOC Group Ltd.,
an unlisted UK-based company. In 2006, 100%
shareholding of the BOC Group was acquired by Linde
U.K. Holdings Limited and its group entities. Further,
100% shareholding of Linde U.K Holdings Limited is
directly or indirectly held by Linde AG, a company
registered in Germany;
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That in June 2017, Linde AG entered into a merger with
Praxair Inc., an American industrial gases company. In
terms thereof, an entity called Linde Plc was
incorporated, and Linde AG and Praxair Inc. became
subsidiaries of Linde Plc. and the same was notified to
the Competition Commission of India on January
01,2018;
That pursuant to the merger, Linde Plc had two
subsidiaries operating in India, Linde India Limited, i.e.,
the Appellant, a listed company and Praxair India
Private Limited ("Praxair"), an unlisted company
operating and carrying out business in India. Linde AG,
through Linde U.K Holdings Limited and the BOC
Group, holds 75% shareholding of the Appellant.
Praxair Inc. owns 100% of the shares of Praxair India
Private Limited ("Praxair"), a private company
incorporated on April 11, 1996 in India. The merger was
completed on October 31, 2018. As a result of the
merger between Linde AG and Praxair Inc., Praxair is a
related party of the Appellant;
That on August 28, 2020, the SEBI sent an email to the
Appellant, inter alia, stating that it was in receipt of
representations from investors of the Appellant
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regarding their 'outstanding commitment' in terms of the
Appellant's disclosure dated March 04, 2019;
That on January 06, 2022, pursuant to the receipt of
certain complaints against the Appellant, NSE
forwarded certain extracts of the said complaints to the
Appellant and called upon the appellant to respond and
the appellant has responded;
That the complaints alleged that instead of merging
Linde India and Praxair, the two entities set up a joint
venture structure in India. Pursuant to such integration,
the Appellant had sought shareholder approval for the
related party transactions to be entered with Praxair
which was rejected by the shareholders by
approximately 93.94% of the votes cast by the eligible
shareholders being against the same. The complaints
alleged that despite the rejection of the resolution, the
Appellant had executed the Related Party Transactions
with Praxair in violation of the LODR Regulation.
9. Pleadings contain exchange of several correspondence.
It appears that there was a crucial development on April 13,
2023, when the SEBI sought some urgent clarifications and
information pertaining to the allocation of business between
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the Appellant and Praxair. Subsequently, on October 19,
2023, the Investigating Authority ("IA") appointed by the
SEBI issued summons to Appellant's Company Secretary and
Managing Director to appear before SEBI on November 02,
2023. Some exchange of correspondence ensued between the
appellant and the SEBI. On January 03, 2024, fresh summons
were issued to the Appellant seeking additional documents
and information pertaining to related party transactions
executed with Praxair.
10. It appears that appellant again sought time and fresh
summons were issued. Appellant and its independent
directors challenged the same in WP(L) 2521 of 2024 and
WP(L) 2501 of 2024, respectively before the Hon'ble
Bombay High Court.
11. Thus, the pleadings indicate that the appellant and SEBI
have engaged in series of correspondences since 2020.
12. By the impugned interim ex-parte order, SEBI has
issued three directions extracted above. It was submitted by
the appellant that, as called upon by the SEBI, in paragraph
No. 58 of the impugned order, appellant shall submit their
reply and seek an opportunity of personal hearing. Learned
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Senior Advocate argued that appellant has been fully
cooperating with the SEBI and in view of continuous
exchange of correspondence, pending consideration of
appellant's reply, there was no imminent hurry in passing the
impugned order.
13. Shri Kapadia, Senior Advocate for the respondent
submitted that if the reply is filed, SEBI shall consider the
same and pass appropriate order within 30 days on conclusion
of hearing.
14. In the light of the facts recorded hereinabove, we are of
the opinion that prima facie, is indubitable that appellant and
SEBI were in exchange of correspondence since 2020,
although it was vehemently contended by Shri. Kapadia that
the relevant date to be reckoned is September 2023. In any
event, it cannot be gainsaid that appellants have been called
upon to file their reply within 21 days from the date of the
impugned order. As recorded hereinabove, Shri Kapadia has
submitted that SEBI shall pass orders within 30 days from the
date of conclusion of hearing. The Learned Senior Advocate
for the appellant is also in agreement with the proposed
course of action.
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15. In that view of the matter, in our considered opinion, it
would not be just and appropriate to continue the impugned
interim ex-parte order any further keeping in view that:
the appellant 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.
16. In view of above discussions, we answer the point for
consideration in the affirmative and pass the following:
ORDER
i) appeal is allowed;
ii) order dated April 29, 2024 is set aside;
iii) without notice, appellant shall appear before the SEBI on May 27, 2024 for inspection of documents, if any, required and file its reply within one week from the date inspection/supply of documents;
iv) SEBI is directed to grant inspection and supply documents immediately;
12v) No costs.
vi) All pending miscellaneous applications stand disposed of.
Justice P.S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member 22.05.2024 MADHUKAR Digitally signed by MADHUKAR SHAMRAO SHAMRAO msb BHALBAR BHALBAR Date: 2024.05.22 16:28:12 +05'30'