The recent Securities Appellate Tribunal (SAT) ruling in the Linde India-Praxair case marks a defining moment for India’s corporate governance framework. It endorses SEBI’s interpretation of Related Party Transaction (RPT) norms while exposing the monitoring gaps that allow significant value transfers to remain undetected for years.

In an economy dominated by conglomerates with multi-layered subsidiaries, the risk of promoter influence is high. The RPT rules exist to prevent diversion of value from listed companies to group entities. The SAT’s December 5 judgement reinforces this objective and shows that regulatory systems still depend excessively on disclosures and shareholder complaints rather than real-time oversight.

In 2020, Linde India shifted its South and Central region businesses, including hydrogen and carbon dioxide product lines, to Praxair India, another subsidiary of the same global parent. This transfer effectively moved established customers, market access, and future earning potential to an unlisted group entity without valuation or shareholder approval. Although framed as internal business restructuring, it was a material transfer of commercial value.

The SAT rejected Linde’s argument that each contract should be assessed separately. It upheld SEBI’s view that all RPTs must be aggregated annually, so companies cannot fragment transactions to avoid scrutiny. It also dismissed the claim that potential future business cannot be valued. Courts and regulators routinely value projected cash flows in mergers, slump sales, and transfer-pricing matters. In this case, some profitable segments........

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