SAT dismisses Linde India plea challenging Sebi valuation in related party deals

The Securities Appellate Tribunal (SAT) on Friday dismissed an appeal by Linde India, challenging the valuation exercise conducted by a valuer appointed by the National Stock Exchange (NSE) in connection with 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Exchange Board of India (Sebi) to issue an order clarifying that both the NSE and its appointed valuer are bound by the Unpublished Price-Sensitive Information (UPSI) confidentiality rules. 

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The tribunal emphasized that Sebi must ensure the information disclosed for the valuation remains confidential and is safeguarded under Sebi rules.

Shareholder complaints and regulatory action

Sebi, in its 29 April interim order, found that Linde India had engaged in material related party transactions without obtaining prior shareholder approval. Notably, the company had not provided any valuation to its board when it decided to allocate future business to related parties. Sebi's order followed multiple complaints from shareholders, which prompted an investigation into the transactions.

The matter pertains 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.

Market regulator Sebi had asked 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.

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

Dhond further said that with the main appeal scheduled for hearing on 15 October, the valuation exercise would be futile if Linde’s appeal were to succeed. He also raised concerns about potential UPSI leaks, as the company had been asked to share sensitive information with the valuer, a third party, which could negatively affect investor confidence and the securities market.

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

He argued that halting the valuation would hinder Sebi’s fact-finding process and emphasized that the exercise would not prejudice the company.

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The SAT bench found no illegality in NSE's decision to appoint a valuer in line with Sebi’s directions and declined to stay the valuation.

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

Linde had initially approached the SAT seeking interim relief from Sebi’s order, which the tribunal temporarily granted. However, the matter is yet to be decided on merits.

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SAT has now scheduled a final hearing for 15 October, and Sebi has been asked to submit its reply in the interim.