TECHNIP SA V. SMS HOLDING (P) LTD. & ORS.

Citation: (2005) 5 SCC 465

Bench: Ruma Pal, Arijit Pasayat, C.K. Thakker

FACTS
1. For this situation, an appeal has been recorded under the steady gaze of the Supreme Court of In-
dia. The appellant, Technipis, a company consolidated in France, and the respondents are the in-
vestors of South-East Asia Marine Designing and Development Ltd. (from here onward alluded to
as 'SEAMEC'), a company consolidated/enrolled in India and an auxiliary of Coflexip (integrated in
France) which controls the larger part shareholding of the company [SEAMEC] through a chain of
entirely possessed auxiliaries.

2. The appeal includes two different gatherings, the Institut Francais du Petroleum (from this point
forward alluded to as 'IFP') and ISIS. ISIS (consolidated in France) is IFP's auxiliary, and IFP is an
investor in Technip and Coflexip.

3. In accordance with the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the "SEBI Regulations"), Tech-
nip was required to make an offer to buy the shares of the minority shareholders in SEAMEC as a
result of acquiring control of SEAMEC through Coflexip. Some SEAMEC shareholders com-
plained about Technip to the Securities and Exchange Board of India (hereafter "SEBI") in accor-
dance with the SEBI Act, 1992, about a number of concerns. According to the ruling, the takeover
in question fell under French legislation, meaning Technip acquired ownership over Coflexip by
July 2001.

4. Moreover, Technip obtained 58.4% of the offers/casting a ballot rights and control in SEAMEC
in July 2001 without making a public deal. In doing as such, there was an infringement of Guide-
lines 10 and 12 of the SEBI Guidelines.

5. SEBI took 3 July 2001 as the predetermined date for computation of the offered cost and coordi-
nated Technip to pay revenue at the pace of 15% per annum to the minority investors of SEAMEC
for the postponed public declaration — who, as a result, favored an appeal before Protections Re-
drafting Court (SAT). SAT held that Indian regulation was pertinent, and the significant control
date was 12 April 2000, not July 2001.
6. Consequently, SAT coordinated Technip to pay SEAMEC investors the contrast between the cost
of the divides among July 2001 and April 2000, along with a 15% loan fee on the such distinction.
The appellant has, in this manner, moved toward the Supreme Court of India now.

ISSUES BEFORE THE COURT

I. Whether the Petition is maintainable before the Hon’ble Supreme Court ?

II. If Indian law—where the respondent is incorporated/registered—or French law—where the ap-
pellants were incorporated—would be the appropriate law.
III. Whether in July 2001 or April 2000, the appellant used Coflexip to take over control of the re-
spondent.
IV. The identification of shareholders, the modification of the dividend, and the 15% interest rate.

CONTENTION OF THE PARTIES

Petitioner
The petitioner argues that because Technip and Coflexip are both registered in France and because
the acquisition of Coflexip by Technip also occurred there, French law is the one that should be fol-
lowed. According to Technip, SEAMEC's control was not changed until July 2001 because, in ac-
cordance with French law, Technip did not control Coflexip in April 2000. Further, it is argued that
Regulation 12 did not apply to the acquisition because SEAMEC wasn't the target company and
that, in taking over Coflexip, Technip neither had a shared goal nor an agreement with Coflexip re-
garding SEAMEC. Additionally, the interest rate has come under scrutiny. Despite the fact that the
SEBI-set rate was not challenged, it is claimed that the impact of interest will be substantially big-
ger if the Tribunal's ruling is affirmed.

Respondent
The respondents, on the other hand hand, have contended that Indian law applies to SEAMEC and
that the terms of the Regulations would take effect if SEAMEC's administration and control
changed. A public statement offering to buy the shares of the other shareholders in the target com-
pany must be made by anyone who obtains more than 15% of the voting or shareholding rights in a
registered company (referred to as a target company under the Regulations) or who gains control of
the targeted company, according to Regulations 10, 11, and 12 read with Regulation 2. The respon-
dents contend that in April 2000, Technip acquired de facto control of Coflexip and, as a result,
SEAMEC, in accordance with Indian and French law. The respondents also assert that Technip had
really requested an exemption from the application of the Regulations from SEBI. The request had
been turned down. According to the reply, this matter could not be reopened. When Technip opted
to acquire Coflexip, it is said that SEAMEC was a key consideration. Therefore, it is claimed, Reg-
ulations 10, 11, and 12 applied in full. In April 2000, Technip was not only acting jointly with ISIS,
another Coflexip shareholder, but it was also in a position to control Coflexip and consequently
SEAMEC on its own.

JUDGEMENT
In light of the aforementioned justification, the Supreme Court noted that the claim that ISIS and
Technip had collaborated on the acquisition of 29.68% of Coflexip shares had not yet been proven.
Additionally, there was no proof that Technip bought Coflexip in April 2000 in order to control
SEAMEC. As a result, it was decided that SEBI's order would take precedence, and the SAT order
was subsequently revoked. The remaining concerns about the interest rate, the dividend adjustment,
and the identification of SEAMEC's stockholders would only become relevant if SAT's order had
been upheld.

The court concluded by holding that Technip's bank guarantees, which were provided to protect the
amounts between the share prices that Technip would otherwise be obligated to pay, were dis-
charged.

CONCLUSION
In this instance, determining the amount owed to the shareholders depended on the law that was in
effect at the time the appellant took over Coflexip as well as when that control was acquired. The
Bombay High Court stated that "the status of an entity established overseas needs to be decided
even in India according to the legislation of the nation where the company was incorporated" after
taking into account the case of Aberdeen Asia Pacific including Japan Equity Fund v. DCIT 1.
Therefore, the Supreme Court correctly noted in the current case that a corporation's status as an ar-
tificial legal entity must be ascertained in conformance with the laws of the nation in which it was
formed or has its domicile, with the exception of grave domestic public policy violations that vio-
late fundamental principles of morality and justice. Since a straightforward distinction or conflict
between Indian and French law cannot be deemed to be such since doing so would undermine the
essential goal of private international law, the law applicable unquestionably must be the French
Law as determined by SEBI.

Additionally, based on the case's facts, the respondents argued that the appellant collaborated with
Coflexip's shareholder; yet, given these circumstances, it is clear that ISIS had no interest in obtain-

1 [2020] 117 taxmann.com 185 (Bom HC)

ing additional Coflexip shares. It also had the financial resources necessary to do so. Both IFP and
ISIS were under government control, so there is a good reason why ISIS did not exercise its power
to preempt under the shareholder's agreement. Finally, given the circumstances of the case, IFP
lacked the policies necessary to govern the business it just so happened to invest in. 

In the current case, SAT and SEBI determined that Technip had violated Regulations 10 to 12 of the
SEBI regulations; however, in order to reach the same conclusion, it would also be necessary to
demonstrate that the appellant's purchase of shares in Coflexip was made with the intention of con-
trolling SEAMEC, which the respondents failed to do; consequently, the appellants cannot be held
liable under that standard as well. Additionally, the SEBI noted that with regard to Regulations 10
to 12, "SEAMEC formed a minor and insignificant portion of the total business of Coflexip making
a contribution merely 2% of the total asset base of Coflexip as on December 2000"; this finding was
not disregarded or overturned by the SAT either. As a result, a simple assessment of SEAMEC's as-
sets is insufficient to establish that Technip acquired Stena's share [29.68% shares] in In order to de-
termine when the disputed transaction actually took place, this case looked at the facts primarily as
they related to a legal issue and pursued a comprehensive interpretation of the facts in light of all
relevant case law and statutes. The case's main highlights include how foreign laws might be inter-
preted in Indian cases, when they result in a flagrant violation of public policy, and that their appli-
cation must be limited.  

According to the ruling in this case, in order to resolve a particular dispute, a court must review the
French Law's (as translated) text and decide how to apply the relevant sections in light of the evi-
dence presented.

Numerous other instances addressing related legal issues have furthered the court's decision in this
case and the justification used. Thus, the Supreme Court correctly upheld the SEBI decision in the
historic case of Technip SA v. SMS Holding (P) Ltd. & Ors. and provided for the application of for-
eign law of a company's domicile in India after reviewing a number of foreign statutes, case law,
and the 1997 Bhagwati Committee Report.