Holding

The corporate status of Technip and Coflexip is governed by French law, but their obligations under Indian law, including the SEBI takeover regulations, are governed by Indian law; Technip did not obtain control of Coflexip (and thus SEAMEC) in April 2000, the effective date of acquisition is July 2001.

Summary

Technip SA and its French subsidiary Coflexip acquired a controlling stake in SEAMEC, an Indian company, prompting SEBI to invoke the Substantial Acquisition of Shares and Takeover Regulations, 1997. SEBI held that French law governed the determination of when control was obtained, concluding that Technip gained control of Coflexip in July 2001 and ordered a public offer and interest payment. The Securities Appellate Tribunal, applying Indian law, found the date of control to be April 2000 and directed Technip to pay the price differential to SEAMEC shareholders. The Supreme Court held that the status of the French companies is determined by French law, but their obligations under Indian law, including the SEBI regulations, are governed exclusively by Indian law, and found no evidence of de facto control in April 2000. Consequently, the Court concluded that control was only acquired in July 2001, set aside the SAT order, and upheld SEBI's order. The appeals of Technip and IFP were allowed, and the bank guarantees securing the disputed amount were discharged.

Issues considered

The appropriate law (French or Indian) to determine the date of control for a foreign‑parent acquiring an Indian subsidiary.
Whether Technip and Coflexip exercised control over SEAMEC in April 2000 under the SEBI Regulations.
The meaning of ‘acquirer’, ‘acting in concert’ and the ‘chain principle’ under Regulations 2(b), 2(e) and 2(o).
The applicability of the public‑policy exception to the enforcement of foreign law.

Legislation cited

Subjects

takeoversubstantial acquisitionforeign lawprivate international lawcontrolacting in concertSEBI regulationspublic policyFrench lawIndian lawcorporate statuspublic offer

Judgment

TECHNIP SA A
v.
SMS HOLDING (PVT.) LTD. AND ORS.

MAY 11, 2005

[RUMA PAL, ARIJIT PASAYAT AND C.K. THAKKER, JJ.] B

Securities and Exchange Board of India Act, 1992-Securities And
Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations, I 997-Regulations I 0, I I and I 2:
c
Acquisition of Indian Company, subsidiary of French Company by
another French Company-Indian law/French law-Applicability of-Held:
Relationship of two French companies whether one of control or not is really .
a question of their status-The applicable law would, therefore be law of their
dolnicile, namely, French law-However question as to their obligations under D
Indian law would have to be governed exclusively by Indian law.

Date of indirect acquisition-Determination of-S a subsidiary of C, a
French company-T, another French company acquired C~T purchased
29.68% shares of C in April 2000-Shareholding of C in S did not constitute
substantial part of assets of C-No evidence to show that T acquired C in E
April, 2000 to gain control of S-/t was only a strategic alliance-Substantial
acquisition took place in July 2001-Therefore date of acquisition is July
2001.

Words and phrases- 'acquirer' and 'acting in concert '-Meaning of- .
In the context of Regulations 2(b) and 2(e) of Securities And Exchange Board F
of India (Substantial Acquisition of Shares and Takeover)Regulations, 1997.

Private International law:

Foreign law-When not applicable-Held: Inapplicable when it is
contrQly to domestic public policy and morality. ·

Technip and Coflexip are French Companies. Seamec is an Indian
G
Company and subsidiary of Coflexip. Technip acquired the control of
Seamec through Coflexip. IFP and its subsidiary ISIS are also French
Government Co1ttpanies. IFP was shareholder in Technip and Coflexip.
Dispute arose as to the date of acquisition. On complaint of Seamec
223 H
224 SUPREME COURT REPORTS (2005] SUPP. I S.C.R.

- A shareholders before SEBI, it was held that French Law was applicable to
the takeover for determining the date of acquisition. It found that Technip
had Qbtained control of Coflexip in July 2001 without Public offer. SEBI
directed Technip to make public announcement as required under the
Securities And Exchange Board of India (Substantial Acquisition of Shares
and Takeover) Regulations, 1997 within 45 days and pay 15% interest to
B shareholders for delayed announcement. Before Securities Appellate
Tribunal (SAT), the grievance of Seamec shareholders was that date of
control of Coflexip by Technip was April 2000 and not July 2001. Pending
appeal, Technip made public announcement to acquire shares of Seamec
by taking July 2001 as the relevant date. SAT however held that the
C relevant date was April 2000 as the applicable Jaw to the question was
Indian Law and accordingly directed Technip to pay Seamec shareholders
the difference between the price of shares between July 2001 and April
2000 together with 15% interest on such difference. One of the grounds
on which SAT came to this conclusion that was based on the fact that both
the companies had been promoted by IFP and that IFP through ISIS acting
D in concert with Technip had brought about the takeover of Coflexip by
Technip. Hence the present appeal. A separate appeal is filed by IFP
challenging the allegations made against it in SAT's order.

Allowing the appeals, the Court

E HELD: 1.1. Admittedly both Coflexip and Technip were
incorporated according to and under the laws of France. They are
therefore 'domiciled' in France. Normally, any issue relating to their
internal affairs would be resolved by applying the Jaw of their domicile,
in this case French Law. But by that token it is equally true that Seamec
p which was incorporated in India would be governed by Indian law.
(236-E~F]

Hazard Brothers and Co. v. Midland Bank Ltd., (1933) AC 289; Metliss
v. National Bank of Greece and Athens, SA: (1961) AC 255 and Kuwait
Airways Corp. v. Iraqi Airways Co. (2002) UKHL 19, referred to.
G
1.2. Questions as to the status of a corporation are to be decided
according to the laws of its domicile or incorporation subject to certain
exceptions including the exception of domestic public policy. This is
because "a corporation is a purely artificial body created by law. It can
act only in accordance with the law of its creation". Therefore, if it is a
H corporation, it can be so only by virtue of the law by which it was
TECHNIP SA v. SMS HOLDING (PVT.) LTD. 225
incorporated and it is to this law alone that all questions concerning the A
creation and dissolution of the corporate status are referred unless it is
contrary to public policy. (238-A-B]

'
Smt. Surinder Kaur Sandhu v. Harbax Singh Sandhu, AIR (1984) SC
/

1224, relied on
B
In re Langley's Settlement Trusts, (1962) Ch. 541; Russ v. Russ, (19621
3 All E.R.; Oppenheimer v. Cattermole, (1975) 1 All ER 538; In the matter
of American Fibre Chair Seat Corporation. William Daum et al. v. Arthur J
Kinsman, 265 N.Y.416; 193 N.E.253; McDermott Inc. v. Harry Lewis, 531
A.2d 206; Richard Reid Rogers v. Guaranty Trust Company of New York,
288 US 123-1518.C.(U.S.) Carl Zeiss Stiftung v. Rayner and Keller Ltd.,
c
(1966] 2 ALL ER 536; Gaudiya Mission and Ors. v. Brahmachari and Ors.,
(1998) Ch. 341; Kuwait Airways Corp. v. Iraqi Airways Co., (No. 3) (2002)
UKHL 19 and Lazard Brothers and Co. v. Midland Bank Ltd, (1933) AC
289, referred to. Cheshire and North's Private International Law (12th
Edn.) p.174, referred to. D
1.3. The general rule regarding determination of status by the lex
incorporationis will not apply when the issue relates to the discharge of
t
obligations or assertion of rights by a corporation in another country
whether such obligation is imposed by or right arises under statute or
contract which is governed by the law of such other country. The E
/
.. relationship of Technip to Coflexip whether one of control or not is really
' a question of their status. The applicable law would therefore be the law
of their domicile, namely, French law. Having determined their status
according to French Law, the next question as to their obligation under
the Indian Law vis-a-vis Seamec would have to be governed exclusively
F
by Indian law. SAT's error lay in not differentiating between the two
issues of status and the obligation by reason of the status and in seeking
to cover both under a single system of law. (238-E, 239-F-G]

National Bank of Greece and Athens S.A. and Metliss: (1958) 58 A.C.
509 and Adams v. National Bank of Greece S.A. (1961) A.C. 255, 282, G
referred to.

2.1. All statutes enacted by Parliament or the States can be said to
be part of Indian public policy. But to discard a foreign law only because
.it is contrary to an Indian statute would defeat the basis of private
international law to which Indi~ undisputedly subscribes. [241-E-F) H
'*
226 SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A 2.2. The power to disregard a provision in the foreign law must be
exercised exceptionally and with the-greatest circumspection "when to do J

otherwise would affront basic principles of justice and fairness which the
courts seek to apply in the administration of justice in this country."
Domestic public policy which can justify a disregard of the applicable
...
foreign law must relate to basic principles of morality and justice and the
B foreign law amount to a flagrant or gross breach of such principles.
(239-H; 240-A; 240-E]

Renusagar Power Co. Ltd. v. G.eneral Electric Co., [1994) Supp. 1 SCC
644, referred to.
•
c Fannie F. Loucks et al., as Administrators of the Estate of Everett A.
Loucks, De~eased v. Standard Oil Company of New York, 224 N.Y.99,
referred to.
;
2.3. The difference between the French law and their regulations
relates to the prescribed limits of share holding for control by one company J
D over another. This cannot '.:onceivably make the French law violative of
any public policy underlying the Acts and Regulations so as to disregard
the French Law. Thus it is the French law which must be applicable to .
decide whether Technip took over the control of Coflexip in April 2000 'I"
)
or July 2001,. [247-D-·E] .....
E '
3. The aim of French Law like Indian Law is to ensure that all parties ...
to a public tender offer respect the principles of shareholder equality,
market transparency and integrity, fair trading and fair competition.
Under Section 45 of the Evidence Act, 1972, the Court can take the
admitted position into consideration in order to form an opinion as to the
F text of the l'!elevant French law.

De Beeche and Ors. v. The South American Stores (Gath and Chaves
Limited and the Chilian Stores Gath and Chaves Limited), (1935) A.C. 148,
referred to.

4. The Stock Exchange authorities in France are the 'GMF' and the
G 'COB'. They are regulatory bodies with powers of inspection, supervision
and disciplinary action. The supervisory role of CMF is itself subject to
.the French Banking Commissio!l and-the COB; Article 1 and Article 2 of
I

Decree No. 96-869 dated October 3, 1996 also provide for appeals from
the decisions taken by the CMF before the Paris Courts of Appeals. Article
H 33 of Chapter-I Title-II provides that the CMF shall set forth th~ Rules ,.
TECHNIP SA v. SMS HOLDING (PVT.) LTD. 227

governing public offers including the conditions under which a natural A
or legal person, acting alone or in concert within the meaning of Article
356-1-3 of Law 66-37 dated July 24, 1966 and who directly or indirectly
comes to hold a certain percentage of the capital stock or voting rights in
a company whose shares are traded on a regulated market to forthwith
inform the CMF and file a proposed tender offer with a view to acquiring B
a specified quantity of the company's securities. If this filing is not made,
the securities that the person holds in excess of the aforementioned
percentage of the capital stock or voting rights shall be deprived of voting
rights. The provisions in French law relating to takeovers are, therefore,
rigorous. The Indian law is no less rigorous and differs only marginally
with the French law on the subject. [245-E-F; 246-AJ C
5.1. The three relevant Regulations which were alleged to have been
violated by Technip are Regulations 10,11 and 12. Regulations 10,11 and
12 are contained in Chapter III of the Regulations which deals with
substantial acquisition of shares or voting rights in and acquisition of
control over a listed company. In order to trigger Regulations 10 to 12, it D
would have to be established that the purchase of the 29.68% shares by
Technip in Cotlexip was with the object of taking control of Seamec. The
allegation in the show cause notice was that Technip, the acquirer and ISIS
as a shareholder of Cotlexip acted in concert to acquire control over
l Cotlexip and therefore Seamec, treating Seamec as the target company. E
The emphasis is on the target company whether the case is of direct or
indirect acquisition under the Regulations. [246-B; 248-C-D)

5.2. Regulation 2(b) defines 'acquirer' as meaning any person who,
directly or indirectly, acquires or agrees to acquire shares or voting rights
in the target company or who acquires or agrees to acquire control over F
the target company either by himself or with any person acting in concert
with the acquirer. Regulation 2(e) defines the phrase 'person acting in
concert' and sub section (i) says that it comprises "persons who, for a
common objective or purpose of substantial acquisition of shares or voting
rights or gaining control over the target company, pursuant to an
agreement or understanding (formal or informal), directly or indirectly G
co-operate by acquiring or agreeing to acquire shares or voting rights in
the target company or control ovedhe target company". The word 'target
company' in Regulation 2(o) means a listed company whose shares or
voting rights or control is directly or indirectly acquired or is being
acquired. If the Indian Law were to be invoked in April 2000 it would H
228 SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A have to be shown that Technip acquired or agreed to acquire the right to
control Seamec (in this case the.alleged target company) either by itself
or acting in concert with any other shareholder or Coflexip.
(248-E; 249-A-B)
5.3. According to the Bhagwati Committee Report to be acting in
'
B concert with an acquirer, persons must fulfill certain 'bright line' tests.
They must have commonality of objectives and a community of interest
and their act of acquiring the shares or voting rights in company must
serve this common objective. The commonality of objective which should
be established between the acquirer and a shareholder in order to trigger
C off Regulations 10,11 and 12 with respect to a subsidiary company is
referred to as the "chain principle" in the Report which enunciates that
an offer should be made to the shareholders of such a target company if
(a) the shareholding in the second company constitutes a substantial part
of the assets of the first company; or (b) one of the main purposes of
acquiring control of the first company was to secure control of the second
D company. The "second company" both under the 'chain principle' referred
to in the Bhagwati Committee Report as well as in the City Code on
Takeovers and Mergers is the target company and the !irst company is
the med.ium or vessel or vehicle for attaining control o~ the target
company. In the present case Coflexip would be the 'first company' and
Seamec the actual target and the liability to make an exit offer to the
E shareholders of Seamec would arise only if either one of the two conditions
prescribed is fulfiHed. It would therefore have to be proved by the
shareholders of Seamec that Coflexip was taken over (if at all) in .April
2000 by Technip with the assistance of ISIS so that control of SEAMEC'
could be obtained or that Coflexip's shareholding of SEAMEC constituted
F a substantial part of Coflexip's assets. (249-C-D, E; 250-B-C]
S.4. Th<? standard of proof required"lo establish such concert is one
of probability and may be established "if having regard to their relation
etc., their conduct, and their common interest, that it may be inferred that
they must be acting together: evidence of actual concerted acting is
G normally difficult to obtain, and is not insisted upon." Given the serious
consequences linked to the existence of a concerted action, only serious
presumptions drawn from factual date can lead to a qualification of a
concerted action. The mere observation of similarity of behaviours cannot
constitute such a proof. Even the common position of certain shareholders
is not necessarily indicative of the existence of a concerted action. Such
H shareholders may have adopted legitimately a similar position,
TECHNIP SA v. SMS HOLDING (PVT.) LTD. 229
independently, because of their own strategic interest. (250..:E] A
6.1. IFP had promoted Technip and Coflexip in 1958 and 1971
respectively. In 1975 IFP promoted ISIS as a wholly owned subsidiary to
hold its investments. It is the admitted position that IFP retained majority
control of ISIS until October, 2001. The main shareholders of Technip at
all material times were ISIS, Gaz de France and Sogerap. They held B .
11.8%, 10.9% and 6.4% of the shareholding whereas 65.9% -of the
shareholding was held by the public. In 1994 ISIS, Gaz de -France, Elf and
Technip entered· into an agreement inter alia granting a right of pre-
emption to each other in respect of their respeetive shareholdings.
(251-F; 252-A]- C

6.2. The shareholders of Coflexip till April 2000 were ISIS, Elf and
Stena, apart from American investors who held 50% of the shareholding.
The first three shareholders had entered into a similar shareholders
agreement with a right of pre-emption. Coflexip through a chain of
subsidiaries purchased 49.85% of the shareholding in Seamec on 25th D
October, 1999. (252-B]

6.3. In December, 1999, the Chairman CEO of Coflexip made a
proposal to the Chairman/CEO of Technip to examine the merits of a
merger between CoOexip and Technip. On 31st March, 2000, Stena offered
to sell its shares in Coflexip held by it being 29. 7% of the shareholding o_f E
Coflexip, to Technip. (252-C)

6.4. On 7th April, 2000, the Board of Technip approved the deal with
Stena to purchase its 29.68% shares in Coflexip. ISIS and Elf abstained
from voting as they were shareholders in both Coflexip and Technip. .
(252-EJ F

6.5. On 11th April, 2000, several events took place. ISIS wrote a letter
to Stena renouncing its preemptive rights under the shareholders
agreement in favour of Technip. There is no binding that it would h?ve
been financially possible for ISIS to have exercised its preemptive rights G
given the financial implications particularly the necessity to make a further
public offer to purchase the balance shares of Coflexip as it would have
crossed the threshold as prescribed under French Law. On the same date
Elf also renounced its pre-emptive rights under the shareholders
agreement in favour of Technip. An agreement was then entered into
between Technip and Stena for the acquisition of Stena's 29.68% shares H
j'

230 SUPREME COURT REPORTS (2005] SUPP. I S.C.R.

A in Coflexip at the rate of Euros 119 per share. Statements of intent were
filed by Technip with Stock Exchange Authorities and with Coflexip.
Coflexip in turn wrote a letter to Technip on the same date agreeing not
to acquire eq'uity shares in a competing company without prior written
consent of Technip. [252-F, G-H)

·B 7.1. The declaration required by French law was made to the CMF
by Technip on 28th April, 2000 that Technip a) did not directly or
indirectly hold any other shares in Coflexip; b) it was not acting in concert
with any other and had no plans for any such action; c) it had no intention
to increase its equity stake within 12 months after acquisition; d)
C undertaking not to acquire new equity shares in other companies involved
in Coflexip's scope of activities except with the prior written approval of
Cotlexip; e) agreeing that violation of any of the aforesaid stipulation
would entitle Coflexip to claim damages. [253-A, B-C)

7.2. Clearly a purchase of 29.68% shares in a company would not
D by itself give the purchase de Jure control of the company under French
Law. The acceptance of the statement of intent filed by Technip before
the Stock Exchange Authorities would not however be conclusive of the
matter. The purchase of shares between Stena and Technip was completed
on 19th April, 2000, on which date and Stena's 29.68% shares in Coflexip
E was registered in favour of Technip. According to Technip there was in
fact no change in the daily management of Coflexip. Coflexip's Board of
Directors consisted of eleven Directors, of which Technip's Directors were
only three. [253-E, F)

7.3. On the same date i.e. 11th April 2000 three appointees of Technip
were co-opted on the Board of Coflexip. The i>reside.nt of the Board and
F
the Managing Director continued to be the same. The respondents have
argued that there was in fact an effective change in the management. Of
the 11 Directors of Coflexip, three belonged t~ ISIS. Therefore, ISIS and
Technip together had a total of six out of the eleven Directors on Coflexip's
Board. Additionally, Technip's Directors were appointed to the Strategic
G Committee as well as the Audit Committee of the Board. The respondents
point out that all these appointments were made even before payment of
the purchase price. of the shares by Technip to Stena. The purchase of
sha1·es between Stena and Technip was completed on 19th April, 2000, on
which date and Stena's 29.68% shares in Coflexip was registered in favour
H of Technip. [253-H; 254-A-B)
TECHNII" SA v. SMS HOLDING (PVT.) LTD. 231
7.4. Technip has argued that the effect of fhe purchase of the Stena's A
shares was merely a strategic alliance between Coflexip and Technip and
Technip did not control Coflexip. On the other hand there was evidence
of a possible acquisition of Technip by Coflexip. This position continued
till January, 2001 when IFP agreed to sell its entire interest in ISIS to
Technip. According to Technip and IFP this was the first time, IFP had B
come into the picture. (254-C-D)

7.5. Having regard to the balance of probabilities there was no
evidence that Technip obtained de facto control of Coflexip in April 2000.
The evidence would rather suggest that it was nothing more than a
strategic alliance. The mere factthat in two Annual General Meetings of C
Coflexip Technip was in the majority cannot by itself establish its control
over Coflexip. It may be that in a company with a large·and dispersed
membership, a comparatively small proportion of the total shares, if held
in one hand, may enable actual control to be exercised. But the obtaining
of a majority in a shareholders' meeting may have been the outcome of
absenteeism or some other factor. It is not as if Technip exerted its D
influence over any policy matters of Coflexip. Besides this was not the case
in the Show Cause Notice. The allegation was that ISIS and Technip acted
in concert in the matter of_purchase of Stena's shares in Coflexip by
Technip. That has not been established. [254-H; 255-A-B)

Hindustan Motors Ltd. v. Monopolies and Restrictive Trade Practices E
Commission, AIR (1973) 450, referred to.

8.1. Technip's explanation for ISIS not exercising its pre-emptive
right under the shareholders agreement is plausible. The explanation was
that ISIS was a subsidiary of IFP and it is not the policy of IFP to manage F
companies in which it invests. ISIS therefore was not interested in
acquiring further shares in Coflexip nor did it have the financial means
to do so. ISIS was a Government controlled company and was holding
shares on behalf of IFP, a Government body, and its failure to exercise
its rights of pre-emption could be a Government decision should IFP have
caused ISIS to proceed with such a huge investment, it could have been G
in breach of the relevant EU regulations as intervention of the State in
Private Industry. [255-C-D)

8.2. There is no evidence that Technip acquired Coflexip if it at all
did so in April 2000, so as to gain control of Seamec. SEBI said that on
H
232 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A the material before it, it was difficult to hold that IFP along with ISIS
was acting in concert with Technip for the purpose of acquiring shares/
voting rights/control of Coflexip so as to indirectly acquire control over
Seamec in April 2000. But in view of the admitted takeover of Coflexip
by Technip in July 2001, it directed the publication of an offer to Seamec's
B taking that as the effective date. Thus, the takeover of Seamec was only
an incidental fall out of the control of Coflexip and that Seamec formed a
'small and insignificant portion of the total business of Coflexip'
contributing merely 2% of the total asset base ofCoflexip as on December,
2000. The finding was not reversed by SAT. Thus SEBi's order must
prevail and the order of SAT must be set aside. (255-E-F; 258-E)
c CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9258-9265
of 2003.

From the Judgment and Order dated 27.10.2003 of the Securities
Appellate Tribunal, Bombay in A.Nos. 79, 80, 85, 91, I 04, I 05, 119/2002
D and I of 2003.

Soli J. Sorabjee and A.K. Ganguli, Tasneem Ahmadi, Rajesh Rai, Pritish
Kapur, Gaurav Joshi, Bharat Sangal, Ms. Sangeeta Manda), Ms. Sushmita
Kapur with them for the Appellants.

E Sunil Dogra, Ms. Ritu Bhalla, Zubin Pratap, Joy Basu, Rahul Tyagi,
Madhurendr.a Kr., B.K. Satija, R. Banerjee, Khandwal Securities, (R.4),
Ambhoj Kumar Sinha, Gaurang Kanth, Anand Shekhar, Mrs. Gauri Rasgotra,
Pradip Kumar Khaitan, O.P. Gaggar, Sudhir Kumar Gupta, Bhargava V.
Desai, Sanjeev Kr. Singh, Pradeep Kr. Malik for the Respondents.
F The Judgment of the Court was delivered by

RUMA PAL, J. There are five main protagonists in these appeals, the
appellant, Technip, a company incorporated in France, Coflexip, also
incorporated in France, the Institut Francais du Petrol (referred to as IFP)
G which through its subsidiary ISIS, a company incorporated in France, was a
shareholder in Technip· and Coflexip, South East Asia Marine Engineering
and Construction Ltd. (referred to as SEAMEC), a company incorporated and
registered in India and finally the respondents who are the shareholders of
SEAMEC. SEAMEC is a subsidiary of Coflexip in the sense that Coflexip
through a chain of wholly owned subsidiaries controls the -m.ajority
H
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 233

shareholding in SEAMEC. A
The question which arises for consideration in these appeals is whether
Technip acquired control of SEAMEC through Cotlexip in April, 2000, or in
July, 200 I? There is no dispute that if Technip controls Cotlexip then it also
controls SEAMEC and if there has been a change of control of SEAMEC
then Technip would be bound to offer to purchase the shares of the minority B
shareholders in SEAMEC in accordance with the provisions of the Securities
And Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations, 1997 (hereinafter referred to as the Regulations). The importance
of the date of control/acquisition is because of the price of the shares payable
on such public offer. In this case the price of SEAMEC shares in April 2000 C
was Rs.238 per share which was much higher than the price ofRs.43.I2 per
share in July, 2001. Technip had not made any public announcement at all,
either in April 2000 or in July, 200 I.

On the complaint of ·certain shareholders of SEAMEC before the
Securities and Exchange Board of India (SEBI), proceedings were initiated D
against Technip under the Securities and Exchange Board of India Act, 1992
(referred as 'the Act'). SEBI held that French law applied to the takeover of
Cotlexip and consequently SEAMEC by Technip for the purpose of
determining when such takeover was effected. It found that the Technip had
obtained control of Cotlexip in July 2001 and had violated Regulations 10 E
and 12 of the Regulations thereby acquiring 58.24% of the. shares/voting
rights and control in SEAMEC in July 2001 without making any public offer.
Technip was accordingly directed by SEBI to make a public announcement
as required under the Regulations within 45 days of its order taking 3rd July,
· 200 l as the specified date for calculation of the offered price. Technip was
also directed to pay interest at the rate of 15% per annum to the willing F
minority shareholders of SEAMEC, for the delayed public announcement.

The minority shareholders ofSEAMEC preferred an appeal from SEBI's
order before the Securities Appellate Tribunal (SAT) constituted under the
Act. Their grievance was that the date of control of Cotlexip by Technip was
12.4.2000 ·and not 3rd July, 2001 as held by SEBI. While the appeal was G
pending, pursuant to an interim order passed by the Tribunal, Technip
implemented the order of SEBI by making a public announcement to acquire
the shares ofSEAMEC by taking 3rd July, 2001 as the specified date. Technip
has also made payment of the share consideration together with the interest
thereon to the shareholders of SEAMEC who accepted the public offer. H
234 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A The Tribunal held that the applicable law to the question as to when
control of SEAMEC had been taken over by Technip, was Indian Law. The
Tribunal affirmed SEBI's conclusion that the Regulations had been violated
by Technip by its...failure to make a public announcement but decided that the
relevant date on which the control of SEAMEC was taken over by Technip
B was April, 2000. The Tribunal accordingly directed Technip to treat the
relevant date for calculating the offer price as 12th April, 2000 and to pay
SEAMEC shareholders the difference between the price of the shares between
3.7.2001 and 12th April, 2000 together with the interest on such difference
at the rate of 15%. One of the grounds on which the Tribunal came to the
conclusion thafTechnip had taken over Coflexip in April, 2000 was based on
C the fact that both the companies had been promoted by lFP and that IFP
through ISIS acting in concert with Technip had brought about the takeover
of Coflexip by Technip.

According to Technip, since Technip and Coflexip are both registered
in France and the takeover ofCoflexip by Technip also took place in France,
D the applicable law is French. In terms of French Law, according to Technip,
there was rro control of Coflexip by Technip in April, 2000 and as such there
was no change in control of SEAMEC on that date but in July 2001. It is
further submitted that in _any event Regulation 12 did not apply to the takeover
because SEAMEC was not the target company and that while taking over
E Coflexip, Technip neither had the common objective nor was there any
agreement between Technip and Coflexip with regard to SEAMEC. The rate
of interest has also been challenged. It is said that although there was no
challenge to the rate which was fixed by SEBI, if the Tribunal's order is
upheld, then the impact of interest would be much greater. It is submitted that
in any event, the dividend paid must be adjusted against the interest claimed.
F It is the final submission of Technip that if April 2000 is to be taken as the
date of control, then only those shareholders who were shareholders of
SEAMEC on the specified date and continued as such till the offer was made
are entitled to the benefit of the Tribunal's order.

A separate appeal has been preferred by lFP from the decision of the
G Tribunal being CA No. I 0092/98. The grievance of IFP is that it is a
professional body created by decree of the French Government and has been
set up as a centre for research and industrial development, education,
professional training and information for the oil and gas and automotive
industries in France. IFP does not carry on any industry or commercial
H activities nor does it manage or control any listed company. It promotes
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 235

companies to apply the results of its own research. IFP says that an unnecessary A
stigma has been cast by the Tribunal's decision on a Government organization
even though the show cause notice issued by SEBI did not make any allegation
against IFP.

The respondents have on the other hand argued that the law applicable
to SEAMEC was Indian Law and to determine if there was a change in the B
management and control of SEAMEC the provisions of the Regulations would
apply. In terms of Regulations IO, 11 and 12 read with Regulation 2, any
person, who acquires shares or voting rights in a registered company (described
as a target company under the Regulations) above 15% or acquires control
over the target company is required to make a public announcement offering C
to purchase the shares of the other shareholders in the target company. It is
the submission of the respondents that according to Indian and French Law
de facto control of Coflexip and therefore SEAMEC was taken over by
Technip in April, 2000. The respondents also claim that Technip had in fact
applied to SEBI to exempt them from the operation of the Regulations. The
application bad been rejected. This issue according to the respondent could D
not, therefore be reopened. It is said that SEAMEC was very much in the
contemplation of Technip when it decided to take over Coflexip. It is asserted
that therefore Regulations 10, 11 and 12 applied in full measure. Technip had
not only acted in concert with ISIS, another shareholder of Coflexip, but
even by itself was in a position to exercise and in fact exercised control over E
Coflexip and therefore SEAMEC in April 2000.

The shareholders of SEAMEC may be classified into three groups;

(a) Those, who were shareholders of SEAMEC in April, 2000 and
continued as such;
F
(b) Those, who were not shareholders in April, 2000 but were
shareholders during the public offer having purchased the shares
of SEAMEC before July, 2001.

(c) Those shareholders, who were shareholders on the date of the
public offer holding shares purchased in April 2000 and more G
shares after April, 2000 but before July, 2001.

The respondents who belong to group (b) have said that the public
offer made by Technip after SEBI's order was unconditional. It was made to
·the shareholders who were shareholders as on the date of the public offer. On
the question of interest it is said that it was not open to Technip to. question H
236 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A either its liability to pay interest or the rate of interest and that Technip had
already paid interest to the present shareholders without protest. Finally it is
said that the finding of fact by the Tribunal should not be interfered with
unless this Court came to the conclusion under Section l 5Z of the Act that
it was perverse. ·'

B We will start with this final submission. Section I 5Z of the SEBI Act,
1992 allows any person aggrieved by the decision or the order of the Securities
Appellate Tribunal to file an appeal to the Supreme Court on any question
of law arising out of such order. Now the primary dispute in this appeal is
whether the impugned transaction is to be judged according to French Law
C or Indian Law. That is a ques.tjon of law. Furthermore, the determination as
to what French Law is, is doubtless a question of fact but it is "a question
of fact of a peculiar kind". As has been commented in Cheshire and North's·
Private International Law (12th Edn.)

"To describe it (foreign law) as one of fact is no_ doubt apposite, in
D the sense that the appl!cable law must be ascertained according to the
evidence of witnesses, yet there can be no doubt that what is involved
is at bottom a question of law. This has been recognized by the
courts".

Admittedly both Coflexip and Technip were incorporated according to
E and under the laws of France. They are therefore 'domiciled' in France_.
Normally, we would resolve any issue relating ·to their internal affairs by
applying the law of their domicile, in this case French Law (See: Hazard
Brothers & Co. v; Midland Bank Ltd., (1933) AC 289, 297; Metliss v. National
Bank of Greece & Athens, SA: [1961] AC 255). But by that token it is
F equally true that SEAMEC which was incorporated in India would be governed
by Indian law and that is what SAT held:

"SEBI has viewed (sic) that since Technip and Coflexip are French
companies, matters relating to them should be decided in accordance
with French law. To the said extent SEBI is correct. SEBI has no
G jurisdiction to regulate takeovers and acquisitions taking place outside
India. But certainly SEBI has jurisdiction to regulate substantial
acquisition and takeovers of companies in India".

But then it came to the conclusion that even the question "whether
Technip acquired control over Coflexip on 12.4.2000 and consequently over
H SEAMEC need be tested in the light of 2(c) definition". In other words
/

TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 237

Indian law would apply to determine whether the control of Coflexip was A
taken over by Technip. According to SAT any view to the contrary would
"lead to absurd consequences even defeating the very objective of the Takeover
Regulations".

SA T's conclusion as to the applicable law is questioned by the appellant
and that cannot be considered as a question of fact. As held in Dalmia Dail)' B
Industries Ltd. v. National Bank of Pakistan', the role of the appellate Court
is such cases is:

" .. to examine the evidence of foreign law which was before the justices
and to decide for ourselves whether that evidence justifies the C
conclusion to which they came 2."

The respondent's preliminary objection to the maintainability of the
appeal is accordingly rejected.

The jurisdiction of SEBI or SAT or indeed this Court to apply foreign D
law has not been questioned at any stage. What is referred to as "private
international law" by some authorities 3 is referred to as conflict of laws· by
others 4 • Whatever the nomenclature, it is based on the 'just disposal of
proceedings having a foreign element'. To quote from Kuwait Airways Corp.
v. Iraqi Airways Co., (2002) UKHL 19.
E
'The jurisprudence is founded on the recognition that in proceedings
having connections with more than one country an issue brought
before a court in one country may be more appropriately decided by
reference to the laws of another country even though those laws are
different from the law of the forum court."
F
We have already said and it must be taken to be a generally accepted
rule of private international law, that questions of status of a person's domicile
ought in general to be recognized in other countries unless it is contrary to
public policy. Questions of status of an individual would include matters

'Prakasho v. Singh, (1968) Probate Division LR 250;
G
2
Da/mia Dairy Industries Ltd. v. National Bank of Pakistan, [1978] 2 Lloyd's Rep. 223 at
286; and see Webb (1967) 16 ICLQ 1152, 1155-1156. ·
3
See Cheshire & North' Private International Law.

'Dicey & Morris: The Conflict of Laws H
238 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A such as legal competence, marriage and custody. (See in re Langley's
Settlement Trusts (1962) Ch. 541 ); Russ v. Russ, [1962] 3 All E.R.; Smt.
Surinder Kaur Sandhu v. Harbax Singh Sandhu: AIR (1984) SC 1224;
Oppenheimer v. Cattermole, [1975] 1 All ER 538). Questions as to the status
of a corporation are to be decided according to the laws of its domicil or
incorporation subject to certain exceptions including the exception of domestic
B public policy. This is because "a corporation is a purely artificial body created
by law. It can act only in accordance with the law of its creation". Therefore,
if it is a corporation, it can be so only by virtue of the law by which it was
incorporated and it is to this law alone that all questions concerning the
creation and dissolution of the corporate status are referred unless it is contrary
C to public policy. [See: In the matter ofAmerican Fibre Chair Seat Corporation.
William Daum et al. v. Arthur J Kinsman, 265 N.Y.416; 193 N.E.253;
McDermott Inc. v. Harry Lewis, 531 A.2d 206; Richard Reid Rogers v.
Guaranty Trust Company of New York, (288 US 123-151 (S.C.(U .S.) Carl
Zeiss Stiftung v. Rayner and Keller Ltd, (1966) 2 ALL ER 536; Gaudiya
Mission and Ors. v. Brahmacflari and Ors., 1998 Ch. 341; Kuwait Airways
D Corp. v. Iraqi Airways Co., (No. 3) 2002 UKHL 19; Lazard Brothers and
Co. v. Midland Bank ltd., (1933) AC 289 at 297; Cheshire and North's
Private International Law (12th Edn.) p.174].

This general rule regarding determination of status by the lex
E incorporationis will not apply when the issue relates to the discharge of
obligations or assertion of rights by a corporation in another country whether
such obligation is imposed by or right arises under statute or contract which
is governed by the law of such other country.

The distinction is brought out in the case of National Bank of Greece
F and Athens SA. and Metliss: 58 A.C. 509. A Greek Bank had issued mortgage
bonds to persons in U.K. in pounds sterling. The bonds were guaranteed by
another bank. Both the issuing bank and the guaranteeing bank were
incorporated under Greek Law. The guaranteeing bank was subsequently
amalgamated with a third Greek company and a new company was formed.
A bond holder sued the new company seeking to enforce the guarantee.
G Under the Greek law there was a moratorium imposed on payments by the
new bank. It was held by the House of Lords that the status of the new bank
would be decided according to the law of the domicile of the original guarantor
company and the new company which was Greek law. It was found t.hat
according to Greek law the new company succeeded to the assets and liabilities
H of the guarantor company. The question then was whether the English Courts
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 239

would recognize the moratorium as debarring the bond holder from enforcing A
his rights under the bond. It was not in dispute that the bond was governed
·by English law. It was held that the evidence of the effect of the Greek
moratorium in Greece was therefore irrelevant.

"This was an English debt and the obligation to pay it, its quantum
and the date of payment, are all governed by English law which will B
not give effect to the Greek Moratorium." (pg. 529)

The claim of the bond holder was accordingly allowed.

Consequent upon the decision of the House of Lords a new Greek law
was passed retrospectively modifying the terms of the amalgamation, so that C
the new bank was no longer required to discharge the original guarantor's
dues to the bond holders. The House of Lords in Adams v. National Bank of
Greece SA. 1961 A.C: 255, 282 again rejected the new bank's submission
that it was not liable on the bonds. It was held that what was sought to be
enforced was not "a Greek right, but a right arising under a contract under D
English law". It was held:
. '
"It is well settled that English law cannot give effect to a foreign law
which· discharges an English liability to pay money in England and
the appellants' contracts were English contracts under which they
were to be paid in England". E
Although the law of the Bank's domicile determined its status as a
debtor, it could not determine the liability of the defendant on a contract
subject expressly to English law.

The relationship of Technip to Coflexip whether one of control or not F
is really a question of their status. The applicable law would therefore be the
law of their domicil, namely, French law. Having determined their status
according to French Law, the next question as to their obligation under the
Indian Law vis-a-vis SEAMEC would have to be governed exclusively by
Indian law (in this case the Act and the Regulations). SAT's error lay in not G
differentiating between the two issues of status and the obligation by reason
of the status and in seeking to cover both under a single system of law.

But, contend the respondents, the French law even if applicable, was
contrary to the Act and Regulations and is thereby contrary to the public
policy underlying the Indian enact111ent. In our view, domestic public policy H
240 SUPR_EME COURT REPORTS (2005) SUPP. I S.C.R.

A which can justify a disregard of the applicable foreign law must relate to
basic principles of morality and justice and the foreign law amount to a
flagrant or gross breach of such principles.

As far back as in 1918, Cardozo J, speaking for the Bench in Fannie
F Loucks et al., as Administrators ofthe Estate ofEverett A. Loucks, Deceased,
B Appellants v. Standard Oil Company of New York, Respondent. 224 N.Y.99;
said:

"The courts are not free to refuse to enforce a foreign right at the
pleasure of the judge~, to suit the individual notion of expediency or

c fairness. They do not close their doors unless help would violate
some fandamental principle ofjustice, some prevalent conception of
good morals, some deep-rooted tradition of the common weal".

Similarly the House of Lords inKuwait Airways Corp. v. Iraqi Airways
Co.(No.3): (2002) UKHL 19 said:
D
" ............ Exceptionally and rarely, a provision of foreign law wm
be disregarded when it would lead to a result wholly alien to
fundamental requirements of justice as administered by an English
court".

E In other words the power to disregard a provision in the foreign law
must be exercised exceptionally and with the greatest circumspection "when
to do otherwise would affront basic principles of justice and fairness which
the courts seek to apply in the administration of justice in this country. Gross
infringements of human rights are one instance, and an important instance,
of such provision". (ibid).
F
The issue in the latter case arose out of an Iraqi law which confiscated
Kuwaiti aeroplanes and vested them in the Iraqi Airlines Corporation. The I
~
Court refused to recognize the Iraqi law because: i·

"a legislative. act by a foreign state which is an flagrant breach of
G clearly established rules of international law ought not to be recognized
by the courts of this country as forming part of the lex situs of that
state".

This Court in Renusagar Power Co. Ltd. v. General Electric Co., [1994]
H Supp. 1 SCC 644 while construing Section 7 (1) (b) of the Foreign Awards
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 241

Act which allows Indian Courts the power to refuse to enforce foreign awards A ._
which are contrary to public policy, has held that:-.

. " ... defence of public policy which is permissible under Section
~(l) (b) (ii) should be construed narrowly. It must be held that the
enforcement of a foreign award would be refused on the ground that
it is contrary to public policy if such enforcement wou·ld be contrary B
to (i) fundamental policy of Indian law; or (ii) the interests of India;
or (iii) justice or morality. (pg.682)

In that case it had been argued by the appellant that the expression
"public policy" in Section 7(1) (b) (ii) of the Act has to be construed in a C
liberal sense and not narrowly and it would include within it~ ambit disregard
of the provisions of the Foreign Exchange Regulations Act, 1973. This Court
J accepted the argument on the ground that the provisions contained in FERA
l_
have been enacted to safeguard the economic interests of India and any
violation of the said provisions would be contrary to the public policy of
India as envisaged in Section 7(1)(b)(ii) of the Act. However on the facts it D
- was held that the enforcement of the award would not involve violation of
any of the provisions of FERA and for that reason it not would be contrary
to public policy of India so as to render the· award unenforceable in view of
Section 7(l)(b)(ii) of that Act.

In a sense all statutes enacted by Parliament or the States can be said E
to be part of Indian public policy. But to discard a foreign law only because
it is contrary to an Indian statute wouid defeat the basis of private international
law to which India undisputedly subscribes. (See: Surinder Kaur Sandhu v.
Harba"I: Singh Sandhu (supra)]. To quote again from the Kuwait Airways case
(supra). F
"The laws of the other country may have adopted solutions, or even
basic principles, r7jected by the law of the _forum cou,ntry. These
differences do not in themselves furnish reasons why-the forum court
should decline to apply the foreign law. On the contrary, the existence
of differences is the very reason why it may be appropriate for the G ·
forum court to have recourse to the foreign law. If the laws of all
countries were uniform there would be no 'conflict' of laws".

The Bhagwati Committee Report on Takeovers (1997) which was
prepared after examining the principles and practices and the regulatory
H
242 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A framework governing takeovers in as many as fourteen countries noted that
while the practice and procedures vary from country to country, the principles
and the concerns-cardinal among which are equality of opportunity to all
shareholders, protection of minority interest, transparency and fairness-have
remained more or less common. The aim of French Law like Indian Law is
to ensure that all parties to a public tender offer respect the principles of ~-

B shareholder equality, market transparency and integrity, fair trading and·fair
competition. All this is culled from the opinions of the experts relied upon
by all the parties. Under Section 45 of the Evidence Act, 1972, the Court can
take the admitted position into consideration in order to fonn an opinion as
to the text of the relevant French law. [ See: De Beeche and Ors. v. The
C South American Stores (Gath and Chaves Limited and the Chi/ian Stores
Gath and Chaves Limited) 1934 LR A.C. 148]

Undisputedly, in April 2000, the relevant law in force in France was
/--
Article 355-1 of the French Companies Act 1966 (LOI No.66-537, du 24
Juillet 1966, Sur les Societas Commerciales). It read as follows:-
D
"I. A company shall be regarded as controlling another:
~·
{l) When it directly or indirectly holds a percentage of the capital •
'-
conferring on it the majority of the voting rights in the general I

meetings of this company;
E )
(2) When it alone holds the majority of the voting rights in this
ll
company pursuant to an agreement concluded with other members ~

Qr shareholders and which is not contrary to the interests of the
company;
(3) When it actually makes, due to the voting rights which it holds,
F the decisions in the general meetings of this company.

"II. It shall be presumed to exercise this control when it directly or
indirectly holds a percentage of the voti.ng rights higher than 40%
and when no other member or shareholder directly or indirectly holds
a percentage higher than its own."
·a
Sub-clauses (I) and (2) of Clause (I) of Article 355-1, deal with dejure
acquisition of control by one company of another. The third sub-clause deals
with de facto control. All three sub-sections deal with the position of a
company acting on its own. Clause II of Article 355. l provided for statutory
H presumption of control when the acquiring company directly or indirectly
•
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 243

held more than 40% of the voting rights and was the largest shareholder. A
In May, 2001, Article 355-1 of the 1996 Act was amended to include
the following Sub-section:-

"III. In order to apply the same sections of this chapter, two or more
persons acting in concert shall be regarded as jointly controlling B
another when they actually make, under an agreement to implement
a common policy, the decisions taken in the general meetings of the
latter."

Clause III provides for control being acquired by persons acting in
concert under an agreement to implement a common policy if they actually C
take decisions in .furtherance of such agreement at general meetings of the
"controlled company". The entire Article was incorporated in the French
Commercial Code as Article L 233-3 in 2002.

The second relevant Article is Article 356-l. Roughly translated it D
provided:-

"Any individual or legal entity, acting alone or in concert, that becomes
the owner of a number of shares representing more than one twentieth,
one tenth, one fifth, one third, one half or two thirds of the capital or
the voting rights of a company having its registered office in France E
and whose shares are admitted for trading on a regulated market or
are traded on the over-the- counter market as stated in article 34 of
law no.96-597 dated July 2nd, 1996 relating to the modernization of
financial activities, shall inform such company in a period of 15 days
as of the crossing upwards of the threstio14 of the total number of F
shares that such person holds_.
•,
The owner also informs the Conceil de Marches Financiers (CMF)
within a period of 5 trading days as of the day of crossing upwards
of the threshold when the shares are listed on a regulated market. The
CMF makes public such information. G
The notifications referred to in the two proceeding paragraphs are
also to be provided in the same period when the equity interest falls
below the thresholds provided in the first paragraph.

The owner who is required to disclose the information in accordance H
244 SUPREME COURT REPORTS [2005) SUPP. l S.C.R.

·A with the first paragraph above specifies the number of securities that
it possesses giving access to the capital of the company as well as the
voting rights attached thereto.

The by-laws of the company can provide for additional disclosure
obligations relating to holdings of fractions of the capital or voting
B rights that are less than the one-twentieth mentioned in the preceding
paragraph. The obligation relates to holding each such fraction, which
cannot be less than 0.5% of the capital or voting rights.

In the event of a failure to satisfy the disclosure obligations mentioned
in the preceding paragraph, the by-laws ofthe company may stipulate
c that the provisions of the first two paragraphs of article 356-4 shall
apply only if requested and duly recorded in the minutes of the general
meeting, by one or more shareholders holding a' fraction of the capital
or the voting rights of the issuing company at least equal to the
smallest fraction of the capital held which must be declared. This
D percentage shall nevertheless not be greater than 5%.

The owner wl:).o is required to disclose according to the first paragraph
must declare upon exceeding the thresholds of one tenth or one fifth
of the capital or the voting rights the objectives that he intends to
pursue over the coming twelve months. This declaration shall state
E whether the acquirer is acting alone or in concert, whether he intends
to make further purchases, whether he intends to acquire control of
the company, and whether he intends to seek his appointment or that
of one or more other persons to the board of directors, management
committee or surveillance committee. It is sen! to the company whose
shares have been acquired and to the CMF who publishes it, and to
F the Commission des Operations de Bourse (COB), within fifteen
trading days of surpassing the . threshold. Should those intentions
change, and this is admissible only in the event of substantial changes
in the environment, the financial situation or the shareholder base of
the persons concerned, a new declaration must be made and published
G in the same way.

The last paragraph of Section 356-1 provides that, upon crossing the
thresholds of 10% of share capital or voting rights in the target company, and
again of 20% of share capital or voting rights in the target company, the
purchaser is required to til~ with the Stock Exchange Authorities, with copy
H to the target company, a Statement of Intent, specifying (i) whether the
TECHNIP SA v. SMSHOLDING (PVT.) LTD. [RUMA PAL, J.] 245
purchaser acts alone or in concert with third parties, (ii) whether the purchaser A
intends to continue acquiring shares in the target company, (iii) whether the
purchaser intends to acquire control o( the target company and (iv), whether
the purchaser intends to seek representation on the Board of Directors of the
target.

The Section has been re-enacted as L 233-7 of the 2002, French B
Commercial Code.

Therefore, French Law at the relevant time provided that a company
holds control over another (the Target Company) in the following cases.

(i) the Company holds, directly or indirectly, title to a number of C
shares granting to such holder a majority of voting rights in the
general meetings of shareholders of the Target.
(ii) the Company holds the majority of voting rights in the Target
pursuant to an .agreement with a third party or as a result of
acting in c9ncert
,..;:,.,.
with such third party. D
(iii) the Company in effect determines, through the votes it holds, the
decisions taken in the general meetings of shareholders of the
Target (what is known as 'de fact<?' control).

The Stock Exchange authorities in France are the Conceil des Marches E
Financiers or the French Financial Markets Authority (referred to as the
'CMF') and the Commission des Operations de Bourse viz. the French Stock
Exchange Authority (referred to as the 'COB'). They are regulatory bodies
with powers of inspection, supervision and disciplinary action. The supervisory
role of CMF is itself subject to the Commission Bancaire or the French
Banking Commission and the COB. Article I and Article 2 of Decree No. 96- F
869 dated October 3, 1996 also provide for appeals from the decisions taken
by the CMF before the Paris Courts of Appeals. Article 33 of Chapter-I Title-
11 provides that the CMF shall set forth the Rules governing public offers
including the conditions under which a natural or legal person, acting alone
or in concert within the meaning of Article 356-1-3 of Law 66-37 dated July G
24, 1966 aforesaid and who dfrectly or indirectly comes to hold a certain
-percentage of the capital stock or voting rights in a company whose shares
are. traded on a regulated market to forthwith inform the CMF and file a
proposed tender offer with a view to acquiring a specified quantity of the
co~pany's securities. If this filing is not made, the securities that the person
holds in excess of the aforementioned percentage of the capital stock or H
246 SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A voting rights shall. be deprived of voting rights.
The provisions in French law relating to takeovers as we see them are,
therefore, rigorous. The Indian law is no less rigorous and differs only
marginally with the French law on the subject.

B The three relevant Regulations which were alleged to have been violated
by Technip are Regulations 10,l l and 12. Regulations 10,1 l and 12 are
contained in Chapter JII of the Regulations which deals with substantial
a'cquisition of shares or voting rights in and acquisition of control over a
listed company:-
c "10. No acquirer shall acquire shares or voting rights which (taken
together with shares or voting rights if any, held by him or by persons
acting in concert with him), entitle such acquirer or exercise fifteen
percent or more of the voting right in a company, unless such acquirer
makes a public announcement to acquire shares of such company in
D accordance with the Regulatl6ns.

11(1) No acquirer who, together with persons acting in concert with
him, has acquired, in accordance with the provisions of law, not less
than 15% not more than 75% of the shares or voting rights in a
company, shall acquire either by himself or through or with persons .,
E ading in concert with hiril, additional shares or voting rights entitling
him to exercise more than 2% of the voting rights, in any period of
12' months, unless such acquirer makes a public announcement to
acquire shares in accordance with the Regulations.

(2) No acquirer shall acquire shares or voting rights which (taken
F together with shares or voting rights, if any; held by him or by persons
acting in concert with him), entitle such acquirer to exercise more
than 51 % of the voting :rights in it company, unless such acquirer
makes a public announcement to acquire share of such company in
accordance with the Regulations.
G
Explanation: For the purposes of Regulation 10 and Regulation 11,
acquisition shall mean and include;

(b) direct acquisition in a listed company to which the Regulations
apply;
H
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 247
(c) indirect acquisition by virtue of acquisition of holding companies, A
whether listed or unlisted, whether in India or abroad.

12. Irrespective of whether or not there has been any acquisition of
shares or voting rights in a company, no acquirer shall acquire control
over the target company, unless such person makes a public
announcement to acquire shares and acquires such shares in accordance B
with the Regulations.

Explanation.

Where any person or persons has given joint control, such control
shall not be deemed to be a change in control so long as the control C
~iven is equal as the control given is equal to or less than the control
exercises by person(s) presently having control over the company."

The difference between the French law and their regulations relates to
the prescribed limits of share holding for control by one company over another. D
This cannot conceivably make the French law violative of any public policy
underlying the Acts and Regulations so as to persuade us to disregard the
French Law.

Thus it is the French law which we must apply to decide whether
Technip took over the control of Coflexip in April 2000 or July 2001. E
Incidentally, the opinions of various persons claiming to be experts in French
, Commercial Law have expressed diametrically opposing views as to whether
Technip could be said to have taken control of Coflexip applying the relevant
French law, in April 2000. We do not propose to rely upon either of the
views expressed as none of them was subjected to cross examination.
According to Technip their expert affirmed an affidavit and was offered for F
cross examination by SEBI and that SEBI declined to do so. But the affidavit
unlike the opinion expressed by the same firm earlier to Technip on 15th
November 2001 did not express any opinion as to whether Technip did or did
not acquire control of Coflexip either in April or July 2001 but only gave
evidence of the applicable French law and highlighted the consequences of G
failure to comply with the statement of intent which was required to be filed
with CMF. Therefore, ultimately it is for this Court to resolve the conflict by
looking at the admitted text of the French law and the material on record to
decide the proper application of the provisions. According to the show cause
notice issued by SEBI to Technip,. Technip had acquired control of Coflexip
by acting in concert with ISIS. Technip has said that in April, 2000 there was H
248 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A no concept of acting in concert under French Law since the extended meaning
of 'controlled company' was introduced by amendment to Article 355-1 only
in May, 2001. The submission ignores Article 356-1. The concept of a takeover
by acting in concert was there in 2000. In fact Article 355-1 of the French
Companies Act merely sets out factors determining when a company could
B be said to hold control over another. It does not, as Article 356.1 does, speak
of the method for acquiring such control.

At this stage and before we apply the law to the facts we may note one
aspect that has been lost sight of by SAT and that is that irrespective of the
status of Cotlexip and Technip to each other, in order to trigger Regulations
C 10 to.12,,it would have to be established that the purchase of the 29.68%
shares by_ )'echnip in Cotlexip was with the object of taking control of
SEAMEC. That is what' the relevant Regulations provide and also what is
allegeq in the Show Ca~se Notice issued to Technip by SEBI. The allegation
in the show cause notice was that Technip, the acquirer and ISIS as a
shareholder of Cotlexip acted in concert to acquire control over Coflexip and
D therefore SEAMEC treating SEAMEC as the target company. The emphasis
is on the target company whether the case i_s of direct .or indirect acquisition
under the Regulations. Thus Regulation 2(b) of the Regulations defines
'acquirer' as meaning any person who, directly or indirectly, acquires or
agrees to acquire shares or voting rights in the target company and 'acquirer'
E also means a person who acquire or agrees to acquire control over the target
company either by himself or with any person acting in concert with the
acquirer.

The word 'control' has been defined in Regulation 2(c) in the following
manner:
F
"control" ~hall inclide the right to. appoint majority of the directors
or to control the management or policy decisions exercisable by a
person or persons acting individually or in concert, directly or
indirectly, including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements or in any
G other manner".
. I
The other definition which i~ relevant is Regulation 2(e) defining the
phrase 'person acting in concert'. We· are concerned with sub section (i)
which says that it comprises "persons who, for a common objective or purpose
of substantial· acquisition of shares or voting rights or gaining control over
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 249

the target company, pursuant to an agreement or understanding (formal or A
informal), directly or indirectly co-operate by acquiring or agreeing to acquire
shares or voting rights in the target company or control over the target
company". Finally is the definition of the word 'target company' in Regulation
2(o) as meaning a listed company whose shares or voting rights or control is
directly or indirectly acquired or is being acquired. If the Indian Law were B
to be invoked in April 2000 it would have to be shown that Technip acquired
or agreed to acquire the right to control SEAMEC ( in this case the alleged
target _company) either by itself or acting in concert with any other shareholder
or Coflexip.

According to the Bhagwati Committee Report to be acting in concert C
with an acquirer, persons must fulfill certain 'bright line' tests. They must
have commonality of objectives and a community ofinterest and their act of
acquiring the shares or voting rights in company must serve this common
objective. The commonality of objective which should be established between
the acquirer and a shareholder in order to trigger off Regulations 10, 11 and
12 with respect to a subsidiary company is referred to as the "chain principle" D
in the Report which enunciates that an offer should be made to the shareholders
of such a target company if

(a) the shareholding in the second company constitutes a substantial
part of the assets of the first company; or
E
(b) one of the main purposes of acquiring .control of the first company
was to secure control of the second company.

This is evident also reading the definitions of 'acquirer' 'control' 'acting
in concert' and 'target company' in Regulations 2 (b)(c) (e) and (o) together.
F
A similar position obtains in England where Note 7 to Rule 9.1 of the
City Code on Takeovers and Mergers likewise provides:-

"Occasionally, a person or group of persons requiring statutory control
of a company (which need not be a company to which the Code
applies) will thereby acquire or consolidate control, as defined in the G
Code,. of a second company because the first company itself holds a
controlling block of shares in the second company, or holds shares
which, when aggregated with those already held by the person or
group, secure or consolidate control of the second company. The
Panel will not normally require an offer to be made under this Rule H
in these circumstances unless either:
250 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A (a) the shareholding in the second company constitutes a
substantial part of the assets of the first company; or

(b) one of the· main purposes of acquiring control of the first
company was to secure control of the second company".

B The "second company" both under the 'chain principle' referred to in
the Bhagwati Committee Report as well as in the City Code oil Takeovers
and Mergers is the target company and the first company is the medium or
vessel or vehicle for attaining control on the target company. In the present
case Coflexip would be the 'first company' and SEAMEC the actual target
and the liability to make an exit offer to the shareholders of SEAMEC would
C arise only if either one of the two conditions prescribed is fulfilled. It would
therefore have to be proved by the shareholders of SEAMEC that Coflexip
was taken over Wat all) in April 2000 by Technip with the assistance of ISIS
so that control of SEAMEC could be obtained or that Coflexip's shareholding
of SEAMEC constituted a substantial part of Coflexip's assets.
D
The standard of proof required to establish such concert is one of
probability and may be established "if having regard to their relation etc.,
their conduct, and their common interest, that it niay be inferred that they
must be acting together: evidence of actual concerted acting is normally
difficult to obtain, and is not insisted upon" 5• While deciding whether a
E company was one in which the public were substantially interested within the
meaning of Section 23A of the Income Tax Act, 1922 this Court said:-

"The test is not whether they have actually acted in concert but whether
the circumstances are such that human experience tells us that it can
safely be taken that they must be acting together. It is not necessary
F to state the kind of evidence that will prove such concerted actings.
Each case must necessarily be decided on its own facts" 6 •

In Guinness PLC and Distillers Company PLC the question before the
Takeover Panel was whether Guinness had acted in concert with Pipetec
G when Pipetec purchased shares in Distillers Company PLC. Various factors
were taken into consideration to conclude that Guinness had acted in concert
with Pipetec to get control over Distillers Company. The Panel said :-

1
Commissioner ofIncome. Tax, West Bengal v. East Coast Commercial Co. Ltd., AIR (1967)
SC 768.

H 6
Commissioner of Income Tax v. Jubilee Mills Ltd., (1963) IIL !TR SC 9.
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 251

"The nature of acting in concert requires that the definition be drawn A
in deliberately wide terms. It covers an understanding as well as an
agreement, and an informal as well as a formal arrangement, which
leads fo co-operation to purchase shares to acquire control of a
company. This is necessary, as such arrangements are often informal,
and the understanding may arise from a hint. The understanding may
be tacit, and the definition covers situations where the parties act on B
the basis ofa "nod or a wink" .. Unless persons declare this agreement
or understanding, there is rarely direct evidence of action in concert,
and the Panel must draw on its experience and commonsense to
determine whether those involved in any dealings have some form of
understanding and are acting in co-operation with each other7". C
According to the Dictionaire Permanent du Droit des Affairs French
law does not make proof of the concerted action dependant upon the existence
of a written document. "However, given the serious consequences linked to
the existence of a concerted action, only serious presumptions drawn from
factual date can lead to a qualification of a concerted action. The mere D
observation of similarity of behaviours cannot constitute such a proof. Even
the common position of certain shareholders is not necessarily indicative of
the existence of a concerted action. Such shareholders may have adopted
legitimately a similar position, independently, because of their own strategic
interest". (Extract from the 1989 French Securities and Exchange Commission E
Report).

In this background of the law we may consider briefly the relevant
facts.

IFP had promoted Technip and Coflexip in 1958 and 1971 respectively. p
In 1975 IFP promoted. ISIS as a wholly owned subsidiary to hold its
investments. It is the admitted position that IFP retained majority control of
ISIS until October, 2001.

The main shareholders of Technip at all material times were ISIS, Gaz
de France and Sogerap (which later came to be known as Fina Total Elf and G
is hereafter referred to as 'Elf). They held 11.8%, 10.9% and 6.4% of the
shareholding whereas 65.9% of the shareholding was held by the public. In
1994 ISIS, Gaz deFrance, Elf and Technip entered into an agreement inter

7
Guinncss PLC, The Distill1.:rs Company PLC (Panel hearing on 25th August 1987 and 2nd
September, 1987 at page 10052 ·Reasons for Decisions of the Panel. H
252 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

· A alia granting a right of pre-emption to each other in respect of their respective
shareholdings.

The shareholders of Coflexip till April 2000 were ISIS, Elf and Stena
(incorporated in the Netherlands), apart from American investors who held
50% of the shareholding. The first three shareholders had entered into a
B similar shareholders agreement with a right of pre-emption.

Coflexip through a chain of subsidiaries purchased 49.85% of the
shareholding in SEAMEC on 25th October, 1999.

In December, 1999, the Chairman CEO of Coflexip made a proposal to
C the Chairman/CEO of Technip to examine the merits of a merger between
Coflexip and Technip. In January, 2000 Stena intimated that it would not
support a merger of Coflexip and Technip as it was not part of Stena's
strategy to hold an equity stake in an engineering and construction company.

D On 3 lst March, 2000, Stena offered to sell its shares in Coflexip held
by it and its associates J.P. Morgan, being 29.7% of the shareholding of
Coflexip, to Technip. '

ISIS had three representatives on Coflexip's Board of 11 Directors,
who also had two Directors in Technip.
E
On 7th April, 2000, the Board of Technip approved the deal with Stena
to purchase its 29.68% shares in Coflexip. ISIS and Elf abstained from voting
as they were shareholders in both Coflexip and Technip.

On 11th April, 2000, several events took place. ISIS wrote a letter to
F Stena renouncing its preemptive rights under the shareholders agreement in
favour of Technip. There is no binding that it would have been financially
possible for ISIS to have exercised its pre-emptive rights given the financial
implications particularly the necessity to make a further public offer to purchase
the balance shares of Coflexip as it would have crossed the threshold as
G prescribed under French Law. On the same date Elf also renounced its pre-
-emptive rights under the shareholders agreement in fa,vour of Tt:chnip. An
agreement was then entered into between Technip and Stena for the acquisition
of Stena's 29.68% shares in Coflexip at the rate of Euros 119 per share.
Statements of intent were filed by Tecl:mip with Stock Exchange Authorities
and with Coflexip. Coflexip in tum wrote a letter to Technip on the same
H date agreeing not to acquire equity shares in a compet~ng company without
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 253

. prior written consent of Technip.

The declaration required by French law was made to the CMF by
Technip on 28th April, 2000 that Technip.

(a) did not directly or indirectly hold any other shares in Coflexip;
(b) it was not acting in concert with any other and had no plans for B
any such action;
(c) it had no intention to increase its equity stake within 12 months
after acquisition;

(d) undertaking not to acquire new equity shares in other companies C
·involved in Coflexip's scope of activities except with the prior
written approval of Coflexip;
(e) agreeing that violation of any of the aforesaid stipulation would
entitle Coflexip to claim damages.

This was published by CMF on 4th May, 2000. A similar declaration D
or statement of intent was given to COB. Both the authorities accepted the
declaration an_d there was no protest to the publication by any member of
c Coflexip or anyone else for that matter. There is thus no dispute that Technip
agreed to acquire 29.68% shares in Coflexip on 1.1.4.2000. Nor is it disputed
that it complied with the requirements of Art 356-1. E
Clearly a purchase of 29.68% shares in a company would not by itself
give the purchase de Jure control of the company under French Law. The
acceptance of the statement of intent filed by Technip before the Stock
Exchange Authorities would not however be conclusive of the matter. It may
be that the Market Authorities agree to the publication of a statement or a F
notice or _a financial publication. It may also be that those professional
independent bodies have profes~ionally verified the contents of such
communications and havebeen satisfied with their accuracy. However, there
is no adj11dicatory process and there was no judicial decision of any authority
which we could recognize as a foreign judgment on any principle of judicial G
comity or conflict of laws. To return to the narration of facts:-
-·
On the same date i.e. 11th April 2000 three appointees of Technip were
co-opted on the Board of Coflexip. According to Technip there was in fact
no change in the daily management ofCoflexip. Coflexip's Board of Directors
consisted of eleven Directors, of which Technip' s Directors were only three. H
254 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A The President of the Board and the Managing Director continued to be the
same. The respondents have argued that there was in fact an effective change -
in the management. Of the 11 Directors of Coflexip, three belonged to ISIS.
Therefore, ISIS and Technip together had a total of six' out of the eleven
Directors on Coflexip's Board. Additionally, Technip's Directors were
B appointed to the Strategic Committee as well as the Audit Committee of the
Board. The respondents point out that all these appointments were made even
before payment of the purchase price of the shares by Technip ,to Stena. The
purchase of shares between Stena and Technip was completed on 19th April,
2000, on which date and Stena's 29.68% shares in Coflexip was registered
in favour of Technip.
c Technip has argued that the effect of the purchase;ofthe Stena's shares
was merely a strategic alliance between Cotlexip and Technip and Technip
did not control Coflexip. On the other hand there was evidence of a possible
acquisition of Technip by Coflexip. This position continued till January,
200 I when IFP agreed to sell its entire interest in ISIS to Technip. According
D to Technip and IFP this was the first time IFP had come into the picture.

In February, 2001 the _Chairman of Coflexip expressed his reservation
about the proposed sale of ISIS's shares in Coflexip_ to Technip. Coflexip
continued to act independently of Technip with regard to various policy
E decisions. Technip offered to purchase the balance shares of Coflexip at a
premium of 25% on 3rd July, 2001. The price offered by Technip was not
immediately acceptable to the Board of Coflexip. A Special Committee was
set up to consider whether the price was adequate. ISIS voted in favour of
setting up of the committee. As it happened, the Special Committee
recommended a higher price, so that the Technip had to improve its offer to
F purchase Coflexip's share. These facts according to Technip showed that
ISIS was not acting in concert with Technip.

Technip has said that the purchase of 100% shareholding was duly
approved by Regulatory Authorities of USA, Finland and Netherlands and on
11th October, 200 I Technip acquired control of 99.04% of the share capital
G of ISIS and 98.36% of the· share capital of Coflexip. Coflexip's shares were
registered in the name of Technip on 19th October, 2001.

We are of the opinion that having regard to the balance of probabilities
there was no evidence that Technip obtained de facto control of Coflexip in
H April 2000. The evidence would rather suggest that it was nothing more than
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 255

a strategic alliance. The mere fact that in two Annual General Meetings of A
Coflexip Technip was in the majority cannot by itself establish its control
over Coflexip. It may be that in a company with a large and dispersed
membership, a comparatively small proportion of the total shares, if held in
one hand, may enable actual control to be exercised.8 But the obtaining of a
majority in a shareholders' meeting may have been the outcome of absenteeism B
or some other factor. It is not as if Technip exerted its influence over any
policy matters of Coflexip. Besides this was not the case in the Show Cause
Notice. The allegation was that ISIS and Technip acted in concert in the
matter of purchase of Stena's shares in Coflexip by Technip. That has not
been established.

Technip's explanation for ISIS not exercising its pre-emptive right under
c
the shareholders agreement is plausible. The explanation was that ISIS was
a subsidiary of IFP and it is not the policy of IFP to manage companies in
which it invests. ISIS therefore was not interested in acquiring further shares
in Coflexip nor did it have the financial means to do so. ISIS was a Government
controlled company and was holding shares on behalf of IFP, a Government D
body, and its failure to exercise its rights of pre-emption could be a Government
decision should IFP have caused ISIS to proceed with such a huge investment,
it could have been in breach of the relevant EU regulations as intervention
of the State in Private Industry.

In any event there is no evidence that Technip acquired Coflexip if it
E
at all did so in April 2000, so as to gain control of SEAMEC. Yet that is the
aspect with which we are .concerned. SEBI said that on the material before
it, it was difficult to hold that IFP along with ISIS was acting in concert with
Technip for the purpose of acquiring shares/voting rights/control of Coflexip
so as to indirectly acquire control over SEAMEC in April 2000. But in view F
of the admitted takeover of Coflexip..by Technip in July 2001 directed the
publication of an offer to SEAMEC's taking that as the effective date.

In reversing this judgment, SAT held that ISIS and Technip had acted
in concert to gain control over Coflexip in April, 2000. We are of the opinion
that the approach of the SAT was entirely wrong. For the purposes of G
determining Technip's obligations under the Regulation it should have
'~
addressed itself as SEBI had done to the question whether ISIS and Technip
were acting in concert to obtain control over the target company, namely,
8
Hindust~n Motors Ltd. v. Monopolies and Restrictive Trade Practices Commission, AIR
(I 973) Calcutta 450 · H
256 SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A SEAMEC. In other words, did the shareholding of Coflexip in SEAMEC
constitute a substantial part of the assets of Coflexip, or was the main purpose
of acquiring control of Coflexip the acquisition of control over SEAMEC?

According to the SAT, the reasons which established that ISIS and
Technip were acting in concert in April 2000 were as follows:
B
(i) .......... there was shareholders agreement dated 2.11. I 994 between
Stena group on one side and ISIS and others on the other to control
Coflexip ........ .It is also noted that, ISIS group had not exercised its
pre-emptive right to block Technip's entry."
c (ii)" ........ (it was clear) from the shareholding pattern of Technip,
Coflexip and ISIS that IFP was having common interest."

(iii)" ......... Whether these companies belonged fo ohe "group" or that
they were companies under the same management" may be in dispute.
But no one can dispute that they belonged to'one family in the real
D
sense .... .ISIS and IFP had one lineage - the common parenthood in
IFP.. Gaz de France and Total Fina Elf-both associated with IFP
family."

(iv) "Coflexip and Technip are having interest in the Petroleum sector,
E IPF could be interested in these 2 entities joining together and forming
a combine and that having regard to their common interest, it may be
inferred that they must be acting together."

(v) "Technip Chairman's letter that they were ultimately planning to
take over Coflexip and they "were on this merger, passing· through a
F number of necessary stages: ·.vhich included "the acquisition of 30%
of Coflexip in April 2000 ..... "

(vi) "ISIS has its nominees on the Board of Technip. ISIS has its
nominees of Coflexip ....... Thus in a 11 member Board of Coflexip
Technip ISIS combine had a majority."
G
(vii) "From the material available on record there is every justification
to infer that the plan was to combine Technip and Coflexip and form
a strong combined entity to be a business leader in the petroleum
sector and that it was with this end in view Technip in which ISIS
had interest acquired Coflexip in which also ISIS had interest."
H
TECHNIP SA v. SMS HOLDING (PVT.) LTD. [RUMA PAL, J.] 257

(viii) " ........ total holding of these two companies were around 47% A
sufficient enough to control Coflexip in view of its 48% shares widely
held by public. It is also noted that in fact in the annual general
meeting of Coflexip held in May 2000 and May 200l(before the
merger effected on 3.7.2001) Technip had exercised 54% and 57% of
the voting rights, that this itself is indicative of the fact that Technip B
had more than 50% voting rights at its command, even though on
record it was holding only 29%."

(ix) "ISIS objecting to the setting up of a committee to revise the
offer price, is but nat~ral as an increase in offer price was ~o its
advantage and by doing so it was not in any way acting against its C
objective of helping Technip to acquire control over Coflexip. Adding
a little more financial burden on Technip by asking for higher offer
price can not be viewed as a hostile action from ISIS or as evidence
of non co-operation."

(x) "Technip possibly wanted to strengthen its position dejure as well D
with 99% and they acquired shares to that level through the public
offer in July, 2001. In my view the acquisition raising the shareholding
to 99% in Coflexip was the final act whereas the process started on
12.4.2000."

(xi) " ..... in my view Technip had decided to, take over control of E
Coflexip and to achieve the said objective, acquired 29 .68% shares of
Coflexip on 12.4.2000. the_ evidence before me leads to the conclusion
that ISIS had acted in concert. for the said purpose."

We need not go into the reasons separately' altho~gh we must say that
we disapprove of the introduction of the concept of a joint family into corporate F
law when the statutory provisions, particularly Regu.Jation 2(e) exhaustively
defines what would amount to 'acting in concert'. More particularly when
Regulation 3(l)(e)(i) provides that:-

(l) "Nothing contained in Regulations 10,11 and 12 of Regulations G
10, 11 and 12 these Regulations shall apply to;

(e) Interse transfer of shares amongst:-

(i) group companies, coming within the definition of group as
defined in the Monopolies and Restrictive Trade Practices Act,
H
258 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

--A 1969 (25 of 1969)".

The 'IFP family' if any would be nothing more than such a group.
Furthermore, it is abundantly clear that even the name of SEAMEC does not
feature in any of the several reasons put forward by SAT whereas that, as we
must emphasise, should have been the primary poiQt of focus. The respondents
B have sought to adduce flirther evidence before us to,the effect that SEAMEC
was in the contemplation of Technip when it purchased Stena's shares in
Coflexip. There is no question of allowing any fresh evidence to be adduced
at this stage. Besides we do not think that any evid~nce of mere contemplation
ofSEAMEC's assets would do. That should have been the principal objective
C in order to trigger the Regulations as it was not the respondent's case before
SAT that the shareholding of Coflexip in SEAMEC constituted a substantial
part of the assets of Coflexip nor has SAT so found. SEBI had noted that the
takeover ofSEAMEC was only an incidental fall out of the control ofCoflexip
and that SEAMEC formed a 'small and insignificant portion of the total
business ofCoflexip' contributing merely 2% of the total asset base ofCoflexip
/D as on December, 2000. The finding was not reversed by SAT.

We are thus of the opinion that SEBI's order must prevail and the order
of SAT must be set aside. The other issues as to the rate of interest, the
adjustment of dividend and the identification of the shareholders of SEAMEC
would arise only if SAT's order had been upheld. As we are allowing the
E appeals of both Technip and IFP it is unnecessary to determine them.

Consequent upon our decision to allow the appeals the bank guarantees
furnished by Technip to secure the difference in amounts betWeen the share
prices which would be payable by Technip had SAT's view prevailed must
F be and are hereby discharged.

The appeals are for these reasons allowed without costs.

D.G. Appeal allowed.