SAT dismisses Linde India’s suit challenging Sebi’s valuation in related party deals

The Securities Appellate Tribunal (SAT) on Friday dismissed an appeal by Linde India, which challenged the valuation exercise conducted by a valuer appointed by the National Stock Exchange (NSE) in relation to the company’s related party transactions.

A bench comprising Justices PS Dinesh Kumar and Dheeraj Bhatnagar directed the Securities and Exchange Board of India (Sebi) to issue an order clarifying that both the NSE and its appointed valuer are bound by the confidentiality norms of Unpublished Price Sensitive Information (UPSI).

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He court He stressed that Sebi should ensure that the information disclosed for valuation remains confidential and is protected under Sebi rules.

Shareholder complaints and regulatory measures

Sebi, in its interim order dated April 29, found that Linde India had engaged in significant related-party transactions without obtaining prior approval from shareholders. Notably, the company had not provided any valuation to its board when it decided to allocate future business to related parties. The Sebi order came following multiple complaints from shareholders, which led to a probe into the transactions.

The matter relates to various transactions and arrangements that Linde India entered into with Praxair India and Linde South Asia Services, both related parties of the company.

Market regulator Sebi had asked NSE appoint a registered valuer to carry out a valuation of the business lost and received, including by way of geographical allocation, in terms of the joint venture (JV) and shareholders’ agreement (SHA) between Linde India and Praxair India leading to the formation of Linde South Asia Services.

Venkatesh Dhond, senior counsel for Linde India, argued that there was no urgency for the valuation and that the valuer had requested data dating back to 2016, which was not easily accessible.

Dhond added that since the main appeal is scheduled for October 15, the valuation exercise would be futile if Linde’s appeal was successful. He also expressed concern over possible leaks from UPSI as the company had been asked to share sensitive information with the valuer, a third party, which could adversely affect investor confidence and the stock market.

Countering these arguments, senior advocate Darius Khambata, representing Sebi, argued that valuation is an integral part of the regulator’s investigation into whether shareholder approval was required for related party transactions.

He argued that stopping the valuation would hamper Sebi’s fact-finding process and stressed that the exercise would not hurt the company.

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The SAT tribunal found no illegality in NSE’s decision to appoint a valuer as per Sebi’s directions and refused to stay the valuation.

Sebi had ordered that the valuation report be shared with the regulator, the company, its board and audit committee. Linde was also required to submit the report to the stock exchanges, along with management comments.

Linde had initially requested a temporary injunction from the SAT against the Sebi order, which the court granted. However, the matter has not yet been decided on the merits.

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The SAT has scheduled a final hearing for October 15 and Sebi has been asked to file its response in the meantime.