SAT Upholds SEBI’s Related-Party Transaction Rules in Linde India Case
Tribunal Confirms Aggregation of Deals for Materiality Test Under LODR Regulations
Linde India’s Appeal Dismissed, Strengthening SEBI’s Corporate Governance Framework
By Our Legal Reporter
New Delhi: December 10, 2025:
In a landmark ruling, the Securities Appellate Tribunal (SAT) has upheld the Securities and Exchange Board of India (SEBI)’s interpretation of related-party transaction (RPT) norms in the case involving Linde India Ltd. and its joint venture with Praxair India Pvt. Ltd. (PIPL). The judgment, delivered on December 5, 2025, dismissed Linde India’s appeal against SEBI’s July 2024 order, reinforcing the regulator’s framework for evaluating materiality in related-party transactions under the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.
Background of the Case
- Linde India Ltd., a multinational industrial gases company, entered multiple contracts with its related party, Praxair India Pvt. Ltd.
- SEBI found that Linde India had tested materiality on a contract-by-contract basis, rather than aggregating all transactions with PIPL.
- SEBI’s order (July 24, 2024) directed Linde India to aggregate all RPTs for materiality assessment and obtain shareholder approval if thresholds were crossed.
- Linde India challenged this interpretation, arguing that SEBI misapplied Regulation 23(1) of the LODR and overlooked the phrasing “in a contract” under Regulation 2(1) (zc).
SAT rejected these arguments, stating that a careful reading of the regulation leaves little scope for alternative interpretation.
Tribunal’s Observations
The SAT bench made several important points:
- Aggregation Principle: Companies must aggregate all transactions with a related party to determine materiality, not assess each contract separately.
- Shareholder Protection: The purpose of Regulation 23 is to ensure transparency and shareholder approval for significant related-party dealings.
- Literal vs. Purposeful Reading: SAT emphasized that SEBI’s interpretation aligns with the spirit of corporate governance, preventing companies from splitting contracts to avoid disclosure.
- Dismissal of Appeal: Linde India’s appeal was dismissed, confirming SEBI’s directions.
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Legal Significance
This ruling has wide implications for corporate governance in India:
- Strengthens SEBI’s Oversight: SAT’s affirmation validates SEBI’s proactive stance in monitoring related-party transactions.
- Prevents Regulatory Arbitrage: Companies can no longer bypass materiality thresholds by splitting contracts.
- Sets Precedent: The judgment will guide future disputes on RPT norms, ensuring consistency in interpretation.
- Investor Confidence: Minority shareholders gain stronger protection against opaque related-party dealings.
Broader Context: Related-Party Transactions in India
Related-party transactions are often scrutinized because they can be used to transfer benefits to controlling shareholders at the expense of minority investors. SEBI’s LODR Regulations require:
- Disclosure of RPTs in financial statements.
- Shareholder approval for material RPTs (crossing 10% of consolidated turnover).
- Audit committee oversight of all RPTs.
The Linde India case highlights how companies may attempt to interpret rules narrowly, but regulators and tribunals insist on substance over form.
Industry Reactions
Corporate governance experts have welcomed the ruling:
- Transparency Boost: Analysts note that aggregation ensures a true picture of related-party exposure.
- Compliance Reminder: Listed companies must revisit their RPT policies to align with SEBI’s interpretation.
- Global Standards: The ruling brings India closer to international best practices, where aggregation is standard.
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Impact on Linde India
- Linde India must now comply with SEBI’s directions and seek shareholder approval for aggregated RPTs with PIPL.
- The ruling may affect its joint venture operations and future contracts.
- The company’s CFO resignation shortly after the ruling has raised questions about internal governance.
Conclusion
The SAT’s ruling in the Linde India case is a milestone in corporate governance enforcement. By upholding SEBI’s interpretation of RPT norms, the Tribunal has ensured that companies cannot evade disclosure requirements by fragmenting contracts.
This decision strengthens shareholder rights, transparency, and accountability, setting a precedent for future disputes. For India’s capital markets, it signals a firm commitment to clean governance and investor protection.
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