Judgments

TECHNIP SA VS SMS HOLDING (PVT.) LTD. : CASE SUMMARY

The Supreme Court in Technip SA Vs. SMS Holding (Pvt) Ltd.  (2005) 5 SCC 465 held that law of domicile i.e. French Law will be applicable for determination date of acquisition of control of Coflexip by Technip, both of which were incorporated in France.

FACTS OF THE CASE

Coflexip was a company incorporated in France. Shareholders of the Cofexip were ISIS, EIF and Stena.  Coflexip through a chain of subsidiaries purchased 49.85% of shareholding of SEAMEC, a company incorporated in India,  on 25th October, 1999. On 31st March, 2000  Stena offered to sell its shareholding in Coflexip to Technip. Technip acquired the balance share of Coflexip at a premium of 25% on 3rd July, 2001. Coflexip’s shares were registered in the name of Technip on 19th October, 2011.

Certain shareholders of SEAMEC had initiated proceedings before SEBI against Technip. The SEBI held that takeover of Coflexip and consequently SEAMEC by acquiring 58.24% shares was in violation of Section 10 and Section 12 of Regulations as Technip had not made any public offer.  SEBI directed Technip to issue public announcement and also pay delayed interest on willing shareholder. SEBI held that SEAMEC has been acquired in July 2001.

An appeal was filed before SAT wherein SAT upheld the decision of SEBI but held that Indian law has to applied to find out when Technip has acquired Coflexip and concluded that Technip has acquired Coflexip in April 2000.

The issue involved before the Supreme Court was whether Technip acquired the control of SEAMAC in April 2000 or July 2001.

FINDINGS OF THE COURT

The Supreme Court noted that Coflexip and Technip were incorporated under laws of France. Thus, they are domiciled in France and French law will be applicable. Similarly SEAMEC is domiciled in India and will be governed by Indian Law.

The Supreme  Court noted that SAT has held that even the question whether Technip acquired control over Coflexip on 12.04.2000 and consequently over SEAMEC need to be tested in light of Indian Law.

The Court noted that it is a generally accepted rule of private international law, that questions of status of a person’s domicile ought in general to be recogonised in other countries unless it is contrary to public policy. Questions of status will include issues of legal competence, marriage and custody. Questions of status of a corporation has also to be decided according to laws of domicil subject to certain exceptions of domestic public policy. Such general rule will not be applicable when the issue relates to the discharge of application or assertion of rights imposed by statute or contract governed by laws of another country.

The Supreme Court observed that the relationship of Technip ad Coflexip was one of status and has to be determined according to French Law. Their obligation with SEAMEC has to be determined according to Indian Law.  The Supreme Court observed that SAT erred in not differentiating issues of status and obligation by reason of status.

The Supreme Court also negated the contention of Respondents that even if French Law was applicable, the same was contrary to public policy. The Supreme Court observed that domestic public policy 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. The supreme Court noted that French law on takeover is also rigorous and the difference between the Frech Law and their regulation relates to the prescribed limits of the share holdings for control by one company over another. 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.

The Supreme Court held that French law has to be applied to decide whether Technip took over the control of Coflexip in April 2000 or July 2001. Applying the French Law the Court held that Technip took control of Coflexip  in July 2001 and set aside the finding of  SAT.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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