Case: Technip Sa Vs. Sms Holding (Pvt.) Ltd.

1. 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) 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 majority shareholding in SEAMEC.2. The question which arises for consideration in these appeals is whether Technip acquired control of SEAMEC through Coflexip in April, 2000, or in July, 2001? There is no dispute that if Technip controls Coflexip 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 majority 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 was Rs. 238 per share which was much higher than the price of Rs. 43.12 per share in July, 2001. Technip had not made any public announcement at all, either in April 2000 or in July, 2001.3. On the complaint of certain shareholders of SEAMEC before the Securities and Exchange Board of India (SEBI), proceedings were initiated 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 Coflexip and consequently SEAMEC by Technip for the purpose of determining when such takeover was effected. It found that the Technip had obtained control of Coflexip in July 2001 and had violated Regulations 10 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, 2001 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 minority shareholders of SEAMEC, for the delayed public announcement.4. The minority shareholders of SEAMEC preferred an appeal from SEBIs order before the Securities Appellate Tribunal (SAT) constituted under the Act. Their grievance was that the date of control of Coflexip by Technip was 12.4.2000 and not 3rd July, 2001 as held by SEBI. While the appeal was 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 of SEAMEC by taking 3rd July, 2001 as the specified date. Technip has also made payment of the share consideration together with the interest thereof to the shareholders of SEAMEC who accepted the public offer.5. 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 SEBIs 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 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 that Technip had taken over Coflexip in April, 2000 was based on the fact that both the companies had been promoted by IFP and that IFP through ISIS acting in concert with Technip had brought about the takeover of Coflexip by Technip.In this background of the law we may consider briefly the relevant facts.56. 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, 2001.57. 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 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 de France, Elf and Technip entered into an agreement inter alia granting a right of pre-emption to each other in respect of their respective shareholdings.58. 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 similar shareholders agreement with a right of pre-emption.59. Coflexip through a chain of subsidiaries purchased 49.85% of the shareholding in SEAMEC on 25th October, 1999.60. 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 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 Stenas strategy to hold an equity stake in an engineering and construction company.61. On 31st March, 2000, Stena offered to sell its shares in Coflexip held by its and its associates J.P. Morgan, being 29.7% of the shareholding of Coflexip, to Technip.62. ISIS had three representatives on Coflexips Board of 11 Directors, who also had two Directors in Technip.63. 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.64. 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 have been financially possible for ISIS to have exercised its preemptive 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 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 Stenas 29.68% shares 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 equity shares in a competing company without prior written consent of Technip.65. The declaration required by French law was made to the CMF by Technip on 28th April, 2000 thatdid 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) undertaking not to acquire new equity shares in other companies involved in Coflexips 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 or statement of intent was given to COB. Both the authorities accepted the declaration and there was no protest to the publication by any member of Coflexip or anyone else for that matter. There is thus no dispute that Technip agreed to acquire 29.68% shares in Coflexip on 11.4.2000. Nor is it disputed that it complied with the requirements of Artreturn to the narration of facts:-68. 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 of Coflexip. Coflexips Board of Directors consisted of eleven Directors, of which Technips Directors were only three. The Presiding of the Board and the Managing Director continued to be the same.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) 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 majority shareholding in SEAMEC.2. The question which arises for consideration in these appeals is whether Technip acquired control of SEAMEC through Coflexip in April, 2000, or in July, 2001? There is no dispute that if Technip controls Coflexip 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 majority 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 was Rs. 238 per share which was much higher than the price of Rs. 43.12 per share in July, 2001. Technip had not made any public announcement at all, either in April 2000 or in July, 2001.3. On the complaint of certain shareholders of SEAMEC before the Securities and Exchange Board of India (SEBI), proceedings were initiated 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 Coflexip and consequently SEAMEC by Technip for the purpose of determining when such takeover was effected. It found that the Technip had obtained control of Coflexip in July 2001 and had violated Regulations 10 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, 2001 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 minority shareholders of SEAMEC, for the delayed public announcement.4. The minority shareholders of SEAMEC preferred an appeal from SEBIs order before the Securities Appellate Tribunal (SAT) constituted under the Act. Their grievance was that the date of control of Coflexip by Technip was 12.4.2000 and not 3rd July, 2001 as held by SEBI. While the appeal was 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 of SEAMEC by taking 3rd July, 2001 as the specified date. Technip has also made payment of the share consideration together with the interest thereof to the shareholders of SEAMEC who accepted the public offer.5. 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 SEBIs 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 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 that Technip had taken over Coflexip in April, 2000 was based on the fact that both the companies had been promoted by IFP and that IFP through ISIS acting in concert with Technip had brought about the takeover of Coflexip by Technip.In this background of the law we may consider briefly the relevant facts.56. 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, 2001.57. 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 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 de France, Elf and Technip entered into an agreement inter alia granting a right of pre-emption to each other in respect of their respective shareholdings.58. 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 similar shareholders agreement with a right of pre-emption.59. Coflexip through a chain of subsidiaries purchased 49.85% of the shareholding in SEAMEC on 25th October, 1999.60. 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 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 Stenas strategy to hold an equity stake in an engineering and construction company.61. On 31st March, 2000, Stena offered to sell its shares in Coflexip held by its and its associates J.P. Morgan, being 29.7% of the shareholding of Coflexip, to Technip.62. ISIS had three representatives on Coflexips Board of 11 Directors, who also had two Directors in Technip.63. 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.64. 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 have been financially possible for ISIS to have exercised its preemptive 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 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 Stenas 29.68% shares 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 equity shares in a competing company without prior written consent of Technip.65. The declaration required by French law was made to the CMF by Technip on 28th April, 2000 thatdid 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) undertaking not to acquire new equity shares in other companies involved in Coflexips 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.s was published by CMF on 4th May, 2000. A similar declaration or statement of intent was given to COB. Both the authorities accepted the declaration and there was no protest to the publication by any member of Coflexip or anyone else for that matter. There is thus no dispute that Technip agreed to acquire 29.68% shares in Coflexip on 11.4.2000. Nor is it disputed that it complied with the requirements of Artn to the narration of facts:-68. 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 of Coflexip. Coflexips Board of Directors consisted of eleven Directors, of which Technips Directors were only three. The Presiding of the Board and the Managing Director continued to be the same.

Reasoning:
12. Admittedly both Coflexip and Technip were incorporated according to 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 domicil, in this case FrenchBut then it came to the conclusion that even the question "whether Technip acquired control over Coflexip on 12.4.2000 and consequently over SEAMEC need be tested in the light of 2(c) definition". In other words Indian law would apply to determine whether the control of Coflexip was 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."14. SATs conclusion as to the applicable law is questioned by the appellant and that cannot be considered as a question ofThe jurisdiction of SEBI and SAT or indeed this Court to apply foreign law has not been questioned at any stage. What is referred to as "private international law" by some authorities [See Cheshire & Norths Private International Law] is referred to as conflict of laws by others [Dicey & Morris : The Conflict of Laws]. Whatever the nomenclature, it is based on the just disposal of proceedings having a foreign element. To quote fromKuwait Airways Corp. Vs. Iraqi Airways Co. (2002) UKHLjurisprudence 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.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 persons 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 such as legal competence, marriage and custody. (See in reLangleys Settlement Trusts (1962) Ch.. Russ (1962) 3 AllE.R.; Smt. Surinder Kaur Sandhu vs. Harbax Singh Sandhu: AIR 1984 SC 1224 ;Oppenheimer vs. Cattermole (1975) 1 All ER538). 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 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 to public policy. (See: In the matter ofAmerican Fibre Chair Seat Corporation. William Daum et al. vs. Arthur J Kinsman 265 N.Y. 416; 193 N.E.c. vs. Harry Lewis, 531 A.2did Rogers vs. Gauranty Trust Company of New York (288 US 123 - 151 (S.C.ss Stiftung vs. Rayner and Keller Ltd. (1966) 2 All ERon & others vs. Brahmachari & Others, 1998 Ch.Kuwait Airways Corp. vs. Iraqi Airways Co. (No. 3)9; LazardBrothers & Co. vs. Midland Bank Ltd. (1933) AC 289 atp.174).17. This general rule regarding determination of status by the lex incorporations 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 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 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). SATs 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.23. But, contend that respondents, the French law even if applicable, was contrary to the Act Regulations and is thereby contrary to the public policy underlying the Indian enactment. In our view, 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 gross breach of such principles.In a sense 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 India undisputedly subscribes: (See: Surinder Kaur Sandhu vs. Harbax Singh Sandhu (supra). To quote again from the Kuwait Airways caselaws of the other country may have adopted solutions, or even basic principles, rejected by the law of the forum country. 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 forum court to have recourse to the foreign law. If the laws of all countries were uniform there would be no conflict of laws".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 shares granting to such holder a majority of voting rights in the general meeting 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 concert with such third party.(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 facto control).40. The Stock Exchange authorities in France are the Conceil des Marches 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 1 and Article 2 of 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 33 of Chapter-I Title-II 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 24, 1966 aforesaid 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 a specified quantity of the companys securities. If this finding 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.41. 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.The difference between the French law and their regulations relates to the prescribed limits of share holding 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.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. 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 crosssubmission 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 but factors determining when a company could be said to hold control over another. It does not, as Article 356.1 does, speak of the method for acquiring such control.45. 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 Coflexip and Technip to each other, in order to trigger Regulations 10 to 12, it would have to be established that the purchase of the 29.68% shares by Technip in Coflexip was with the object of taking control of SEAMEC. That is what the relevant Regulations provide and also what is alleged in the Show Cause Notice issued to Technip by SEBI. The allegation in the show cause notice was that Technip, the acquirer and ISIS as a shareholder of Coflexip acted in concert to acquire control over Coflexip and therefore SEAMEC treating SEAMEC as the target company. The emphasis is on the target company whether the case is 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 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.53. 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 may be inferred that they must be acting together evidence of wide terms. It covers an understanding as well as an agreement, and an informal as well as a formal arrangement, which leads to 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 the basis of a 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 other. [Guinness PLC, The Distillers Company PLC (Panel hearing on 25th August 1987 and 2nd September, 1987 at page 10052 - Reasons for Decisions of the Panel.54. 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 consequence linked to the existence of a concerted action, only serious presumptions drawn from actual date on 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 shareholders may have adopted legitimately a similar position, independently, because of their own strategic interest". (Extract from the 1989 French Securities and Exchange Commission Report).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 notice or a financial publication. It may also be that those professional independent bodies have professionally verified the contents of such communications and have been satisfied with their accuracy. However, there is no adjudicatory process and there was no judicial decision of any authority which we could recognize as a foreign judgment on any principle of judicial comity or conflict of laws.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 April 2000. The evidence would rather suggest that it was nothing more than a strategic alliance. The mere fact that in two Annual General Meetings of 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 [Hindustan Motors Ltd. vs. Monopolies and Restrictive Trade Practices Commission AIR 1973 Calcutta 450]. 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 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 Stenas shares in Coflexip by Technip. That has not been established.73. Technips explanation for ISIS not exercising its preemptive 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 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 holdings 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 in breach of the relevant EU regulations as intervention of the State in Private Industry.74. In any event there is no evidence that Technip acquired Coflexip if it 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 of the admitted takeover of Coflexip by Technip in July 2001 directed the publication of an offer to SEAMECs taking that as the effective date.75. 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 determining Technips 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, 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 overWe need not go into the reasons separately although we must say that we disapprove of the introduction of the concept of a joint family into corporate law when the statutory provisions, particularly Regulation 2(e) exhaustively defines what would amount to acting in concert. More particularly when Regulation 3(1)(e)(i) provides"Nothing contained in Regulations 10, 11 and 12 of Regulations 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, 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 point of focus. The respondents have sought to adduce further evidence before us to the effect that SEAMEC was in the contemplation of Technip when it purchased Stenas 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 evidence of mere contemplation of SEAMECs assets would do. That should have been the principal objective in order to trigger the Regulations as it was not the respondents 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 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 of Coflexip as on December, 2000. The finding was not reversed by SAT.Admittedly both Coflexip and Technip were incorporated according to 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 domicil, in this case Frencht then it came to the conclusion that even the question "whether Technip acquired control over Coflexip on 12.4.2000 and consequently over SEAMEC need be tested in the light of 2(c) definition". In other words Indian law would apply to determine whether the control of Coflexip was 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."14. SATs conclusion as to the applicable law is questioned by the appellant and that cannot be considered as a question ofe jurisdiction of SEBI and SAT or indeed this Court to apply foreign law has not been questioned at any stage. What is referred to as "private international law" by some authorities [See Cheshire & Norths Private International Law] is referred to as conflict of laws by others [Dicey & Morris : The Conflict of Laws]. Whatever the nomenclature, it is based on the just disposal of proceedings having a foreign element. To quote fromKuwait Airways Corp. Vs. Iraqi Airways Co. (2002) UKHLe 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.e have already said and it must be taken to be a generally accepted rule of private international law, that questions of status of a persons 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 such as legal competence, marriage and custody. (See in reLangleys Settlement Trusts (1962) Ch.. Russ (1962) 3 AllE.R.; Smt. Surinder Kaur Sandhu vs. Harbax Singh Sandhu: AIR 1984 SC 1224 ;Oppenheimer vs. Cattermole (1975) 1 All ER538). 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 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 to public policy. (See: In the matter ofAmerican Fibre Chair Seat Corporation. William Daum et al. vs. Arthur J Kinsman 265 N.Y. 416; 193 N.E.c. vs. Harry Lewis, 531 A.2did Rogers vs. Gauranty Trust Company of New York (288 US 123 - 151 (S.C.ss Stiftung vs. Rayner and Keller Ltd. (1966) 2 All ERon & others vs. Brahmachari & Others, 1998 Ch.Kuwait Airways Corp. vs. Iraqi Airways Co. (No. 3)9; LazardBrothers & Co. vs. Midland Bank Ltd. (1933) AC 289 atp.174).17. This general rule regarding determination of status by the lex incorporations 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.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 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). SATs 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.23. But, contend that respondents, the French law even if applicable, was contrary to the Act Regulations and is thereby contrary to the public policy underlying the Indian enactment. In our view, 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 gross breach of such principles.In a sense 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 India undisputedly subscribes: (See: Surinder Kaur Sandhu vs. Harbax Singh Sandhu (supra). To quote again from the Kuwait Airways caselaws of the other country may have adopted solutions, or even basic principles, rejected by the law of the forum country. 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 forum court to have recourse to the foreign law. If the laws of all countries were uniform there would be no conflict of laws"., 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 shares granting to such holder a majority of voting rights in the general meeting 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 concert with such third party.(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 facto control).40. The Stock Exchange authorities in France are the Conceil des Marches 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 1 and Article 2 of 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 33 of Chapter-I Title-II 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 24, 1966 aforesaid 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 a specified quantity of the companys securities. If this finding 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.41. 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.e difference between the French law and their regulations relates to the prescribed limits of share holding 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.s 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. 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 crossn 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 but factors determining when a company could be said to hold control over another. It does not, as Article 356.1 does, speak of the method for acquiring such control.45. 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 Coflexip and Technip to each other, in order to trigger Regulations 10 to 12, it would have to be established that the purchase of the 29.68% shares by Technip in Coflexip was with the object of taking control of SEAMEC. That is what the relevant Regulations provide and also what is alleged in the Show Cause Notice issued to Technip by SEBI. The allegation in the show cause notice was that Technip, the acquirer and ISIS as a shareholder of Coflexip acted in concert to acquire control over Coflexip and therefore SEAMEC treating SEAMEC as the target company. The emphasis is on the target company whether the case is 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 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.53. 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 may be inferred that they must be acting together evidence of wide terms. It covers an understanding as well as an agreement, and an informal as well as a formal arrangement, which leads to 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 the basis of a 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 other. [Guinness PLC, The Distillers Company PLC (Panel hearing on 25th August 1987 and 2nd September, 1987 at page 10052 - Reasons for Decisions of the Panel.54. 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 consequence linked to the existence of a concerted action, only serious presumptions drawn from actual date on 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 shareholders may have adopted legitimately a similar position, independently, because of their own strategic interest". (Extract from the 1989 French Securities and Exchange Commission Report).y 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 notice or a financial publication. It may also be that those professional independent bodies have professionally verified the contents of such communications and have been satisfied with their accuracy. However, there is no adjudicatory process and there was no judicial decision of any authority which we could recognize as a foreign judgment on any principle of judicial comity or conflict of laws.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 April 2000. The evidence would rather suggest that it was nothing more than a strategic alliance. The mere fact that in two Annual General Meetings of 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 [Hindustan Motors Ltd. vs. Monopolies and Restrictive Trade Practices Commission AIR 1973 Calcutta 450]. 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 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 Stenas shares in Coflexip by Technip. That has not been established.73. Technips explanation for ISIS not exercising its preemptive 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 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 holdings 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 in breach of the relevant EU regulations as intervention of the State in Private Industry.74. In any event there is no evidence that Technip acquired Coflexip if it 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 of the admitted takeover of Coflexip by Technip in July 2001 directed the publication of an offer to SEAMECs taking that as the effective date.75. 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 determining Technips 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, 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 overe need not go into the reasons separately although we must say that we disapprove of the introduction of the concept of a joint family into corporate law when the statutory provisions, particularly Regulation 2(e) exhaustively defines what would amount to acting in concert. More particularly when Regulation 3(1)(e)(i) providesg contained in Regulations 10, 11 and 12 of Regulations 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, 1969 (25 of 1969)".e 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 point of focus. The respondents have sought to adduce further evidence before us to the effect that SEAMEC was in the contemplation of Technip when it purchased Stenas 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 evidence of mere contemplation of SEAMECs assets would do. That should have been the principal objective in order to trigger the Regulations as it was not the respondents 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 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 of Coflexip as on December, 2000. The finding was not reversed by SAT.