Linde India Limited vs Sebi

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 2

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. 3

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 4

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, 5

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 6

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; 7

 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 8

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 9

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 10

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. 11

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;

12 v) 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'