SC refuses to interfere in Linde India’s related-party transactions case | Mint

The Supreme Court on Monday refused to interfere with the Securities and Exchange Board of India’s (Sebi) direction of a valuation exercise in Linde India’s related-party transactions case.

Linde India had approached the top court challenging a recent Securities Appellate Tribunal’s order that also rejected the company’s appeal against the Sebi-directed valuation exercise on Friday.

Chief Justice of India D.Y. Chandrachud said: “If the order has been dismissed in SAT, at this stage, we cannot interfere in the matter.”

Abhishek Manu Singhvi, senior counsel appearing for Linde India, informed the top court that the main matter is scheduled for 15 October before SAT. Therefore, in the meantime, if a valuation exercise is carried out, it would make the main matter infructuous.

Singhvi argued that “if the valuation is done and published … and if the main matter is deeming the valuation wrong … and if that is published on the stock exchanges, it would create a huge scare in the market since Linde is a publicly listed company. None of the shareholders are affected. When the allegations were made, the share price was ₹600 per share, and today it has risen to ₹9,900 per share”.

On 29 April, Sebi, in its interim order, said Linde India was carrying out material related-party transactions—which on the surface seem significant—without first obtaining shareholder permission. The company did not make any valuation available to its board when the decision to award future businesses to related parties was made.

The matter is in regard to various transactions and agreements that Linde India entered into with Praxair India and Linde South Asia Services, both of which are related parties of the company.

Sebi had asked the National Stock Exchange (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 (JV) and shareholders agreement (SHA) between Linde India and Praxair India that led to the formation of Linde South Asia Services.

On Friday, a bench led by Justice P.S. Dinesh Kumar and Dheeraj Bhatnagar held that “we direct the Sebi to issue necessary order/clarification that NSE and the valuer appointed by NSE shall be bound by the unpublished price-sensitive information (UPSI) confidentiality norms.”

While the tribunal also clarified that information to be divulged for valuation exercise shall be kept confidential by Sebi, and the UPSI will be given due protection in accordance with Sebi rules.

Before SAT, Linde India argued that there was no urgency warranting immediate valuation exercise. “The NSE-appointed valuer has sought details from 2016 and such old details are not readily available. Dhond added that hearing of the main appeal before this tribunal is scheduled on 15 October, and if the company’s appeal is allowed, the entire exercise of valuation would be futile.”

Further pointing out that there could be potential risk of leakage of the UPSI related to the company. The senior counsel mentioned that the company has been called upon to furnish the same to the valuer who is a ‘third party’ and such the UPSI may have serious consequences in the securities market and may potentially impact investors’ confidence.

Refuting the concerns of the company regarding the directions for statedly premature valuation, pending the outcome of the appeal and its impact on the market, Khambata submitted that the valuation report is a part of Sebi’s investigation and a fact-finding exercise to decide as to whether shareholders’ approval was needed or not for ‘related-party transactions’ involving business allocation amongst the appellant group entities and therefore, stay on valuation exercise will impede Sebi’s investigative process.