SAT upholds SEBI’s directions on Linde India’s related-party deals; dismisses firm's appeal

SAT affirmed that the company must aggregate all transactions with its related parties, particularly Praxair India Pvt. Ltd. (PIPL) for materiality assessment under the listing regulations

The Securities Appellate Tribunal (SAT) has dismissed Linde India Ltd.’s appeal challenging a SEBI order on compliance with related-party transaction (RPT) norms, affirming that the company must aggregate all transactions with its related parties, particularly Praxair India Pvt. Ltd. (PIPL) for materiality assessment under the listing regulations.

In its December 5, 2025 ruling, SAT upheld SEBI’s July 24, 2024 order, concluding that Linde India’s interpretation of testing materiality on a contract-by-contract basis was contrary to the SEBIs framework. Tribunal held that the regulation clearly requires aggregation of “transactions with a related party” in a financial year. If yearly transactions cross Rs 1,000 crore or 10 percent of annual turnover, shareholders’ approval becomes mandatory.

SAT noted in its order, “we find merit in the reasoning given by the respondent that for the purpose of testing the materiality of a transaction with ‘a related party’ during a financial year, under Regulation 23(1), All transactions with the said related party are to be considered”. SAT further stated, “There is no provision for excluding transactions of one contract for calculating materiality of other contract”.

Tribunal concurred with SEBI’s Whole-Time Member, holding that Linde India must determine materiality by aggregating the value of all transactions, whether involving transfer of resources, services, or obligations, with a related party during a financial year. If the cumulative value crosses the prescribed threshold, the company is required to obtain shareholders’ approval under Regulation 23 of the LODR Regulations.

SAT also ruled that the business allocation carried out under the Joint Venture Strategic Handling Agreement (JVSHA) of March 2020, where Linde India and PIPL exchanged geographic territories and certain product segments, constituted an RPT involving the transfer of valuable resources. The Tribunal noted that Linde India ceded its south and central operations while receiving the east and north regions, and transferred product lines such as HYCO and CO₂ to PIPL without compensation. Such transfers, it said, required proper valuation of both foregone and acquired business streams.

Tribunal observed that the business allocation agreement resulted in the transfer of entire business undertakings between Linde and Praxair across various geographies and product segments. It concluded that this amounted to a clear transfer of a “profit-making apparatus” by each entity to the other, encompassing all associated assets and liabilities, including intangibles such as goodwill, brand value, existing orders, and future cash flows.

Tribunal dismissed Linde’s claim that future business cannot be valued, noting that valuation is standard practice in transfers, mergers, and restructuring—even between related parties. Methods like DCF routinely estimate future cash flows to determine the present value of a business. In this case, Linde exited several geographies and product lines under the JV&SHA without receiving any compensation, despite transferring valuable future cash flows. The Tribunal held that such transfers required proper independent valuation, which was not undertaken.

Linde India told SAT that SEBI erred in requiring aggregation of all transactions with Praxair under Regulation 23 of listing regulations, arguing that RPT materiality should be tested only at the single-contract level as per Regulation 2(1)(zc). Since each Praxair contract was separate, at arm’s length, and below thresholds, it said no shareholder approval was needed. Linde called SEBI’s aggregation approach impractical and inconsistent with the Companies Act, Rule 15, and ICSI guidance.

On the JV&SHA, it argued the business allocation involved only future opportunities, not a transfer of resources, and therefore could not be treated as an RPT requiring valuation. The JV structure, it said, was a legitimate CCI-driven business decision that did not benefit Praxair unfairly

SEBI said that Regulation 23 of the LODR Regulations clearly requires aggregation of all transactions with a related party in a financial year for determining materiality, leaving no scope for limiting the test to single-contract dealings. The proviso to Regulation 23(1) mandates shareholder approval where the aggregate value of transactions with a related party exceeds 10 percent of annual turnover. SEBI argued, accepting Linde India’s interpretation would enable companies to split dealings across multiple contracts to evade thresholds, defeating the regulation’s purpose of protecting non-interested shareholders.

SAT noted that Linde India itself acknowledged this interpretation in its 85th AGM notice, which stated that “aggregate transactions” with Praxair exceeding the threshold required shareholder approval.

Tribunal said that the inclusive definition cannot override the substantive language of Regulation 23. Reliance on ICSI guidance was also dismissed, as external aids cannot supersede clear statutory text, and industry practice shows aggregation is the norm.

With the appeal dismissed, Linde India must now aggregate all annual RPTs with each related party for materiality testing, secure shareholder approval where thresholds are breached, and appoint an independent valuer to assess the business transfers made under the JVSHA in accordance with SEBI’s framework.