SC refuses to intervene in Linde India related-party transaction case

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

Linde India has moved the Supreme Court challenging a recent Securities Appellate Tribunal order that also dismissed the company’s appeal against the Sebi-guided valuation exercise on Friday.

Chief Justice of India DY Chandrachud said: “If the SAT dismisses the order, we cannot interfere in the matter at this stage.”

Abhishek Manu Singhvi, senior counsel appearing for Linde India, informed the Supreme Court that the main case is scheduled to be heard before SAT on October 15. Therefore, if valuation is done at the same time, it renders the main matter meaningless.

Singhvi believes that “if the valuation is done and published…if the main issue is the perception that the valuation is wrong…if it is published on the stock exchange, it will create a huge panic in the market because Linde is a public company. There are no shareholders affected. At the time of the accusations, the share price was $600 per share, it rose to 600 today $9,900” per share.

On April 29, Sebi, in its interim order, said Linde India was conducting material related party transactions (which prima facie were material) without obtaining prior permission from shareholders. The company did not provide any valuation to the board when deciding to award future business to related parties.

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

Sebi has asked the National Stock Exchange (NSE) to appoint a registered valuer for valuation of the business relinquished and received, including by way of geographical allotment, as per the joint venture (JV) and shareholders agreement (SHA) between the parties Make an assessment. Linde India and Praxair India facilitated the establishment of Linde Services South Asia.

A bench headed by Justices PS Dinesh Kumar and Dheeraj Bhatnagar on Friday held, “We direct Sebi to issue necessary orders/clarifications that the NSE and the valuers appointed by the NSE shall be bound by confidentiality norms for Unpublished Price Sensitive Information (UPSI)” .

At the same time, the tribunal also clarified that Sebi should keep the information disclosed during the evaluation process confidential and give UPSI due protection in accordance with Sebi rules.

Before the SAT, Linde India argued that there was no urgency for immediate valuation. “The NSE-appointed valuer has sought details for 2016 but such old details are not easily available. The main appeal hearing before the tribunal is scheduled for October 15, if the company’s If the appeal is granted, the entire valuation exercise will be in vain.”

It was further pointed out that the company’s relevant UPSI may be at risk of leakage. The senior lawyer mentioned that the company has been asked to provide the same information to a “third-party” valuer and that such a UPSI could have serious consequences on the securities market and could affect investor confidence.

Khambata refuted the company’s concerns over the apparent premature valuation report, which is part of Sebi’s investigation and fact-finding to decide whether business between entities of the appellate group is involved, ahead of the outcome of the appeal and its impact on the market. Whether the allotted “related party transactions” require shareholder approval, therefore, halting the valuation exercise will hamper Sebi’s investigation process.