DAIICHI SANKYO COMPANY LTD Vs. JAYARAM CHIGURUPATI

JUDGEMENT

(1.) Whether the offer of rupees one hundred thirteen and paise sixty two only (Rs.113.62) per share made by the appellant, M/s Daiichi Sankyo Company Ltd. in its public announcement dated January 19, 2009 for acquisition of the shares of Zenotech Laboratories Ltd. was fair and lawful or whether the offer price could not be less than rupees one hundred and sixty only (Rs.160.00) per share This is the question that falls for consideration in these two appeals. A correct answer to the question requires a proper construction and understanding of certain provision of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the SEBI Takeover Regulations or Takeover Code).

(2.) The facts of the case are fairly simple and are admitted on all sides. The two appeals arise from almost identical facts but in this judgment we would be referring to the paper book of Civil Appeal No.7148 of 2009.

(3.) On October 3, 2007 Ranbaxy Laboratories Limited (respondent no.3), a company incorporated and registered under the Indian Companies Act, entered into a Share Purchase and Share Subscription Agreement jointly with Zenotech (respondent no.4) and its promoter, Dr. Jairam Chigurupati (respondent no.1 in Civil Appeal No.7148). The agreement provided for Ranbaxy to purchase from Zenotech's promoters a large block of equity shares (78,78,906 in number), representing 27.35% of the company's fully paid-up equity share capital, at the negotiated price of rupees one hundred and sixty (Rs.160.00) per equity share and to subscribe to 54,89,536 fully paid-up equity shares at the same price (rupees one hundred and sixty per share) under a preferential allotment by Zenotech. Having entered into the agreement to acquire shares that would entitle it to exercise voting rights in Zenotech far in excess of the statutorily prescribed limit of fifteen percent (and, in all likelihood, control over it) Ranbaxy was legally obliged to make a public announcement to acquire shares of the company from the ordinary shareholders. It did so on October 5, within four days of the agreement as required by law. In the public announcement it sought to acquire from the public shareholders, equity shares of Zenotech constituting twenty percent of its expanded share capital. In the public announcement Ranbaxy quoted offer price of rupees one hundred and sixty only (Rs.160.00) per equity share as the negotiated price under the agreement (SPSSA) was the highest of the prices arrived at by the different ways prescribed by law. On November 8, 2007 the share purchase transaction between Ranbaxy and the promoters of Zenotech (Dr. Chigurupati and his family) was completed and at the annual general meeting of Zenotech held on the same day, the shareholders of Zenotech approved the preferential allotment of shares to Ranbaxy. On November 23, 2007 Zenotech duly allotted (by way of preferential allotment) 54,89,536 fully paid-up shares to Ranbaxy. The 'open offer' made by Ranbaxy for Zenotech shares, in terms of the Takeover Regulations, closed on November 15, 2008. Following the completion of the open offer formalities, Ranbaxy issued a post offer announcement on January 30, 2008. The announcement disclosed that though in the public announcement it offered to purchase shares amounting to twenty percent of Zenotech's capital it actually received shares comprising only 2.2 percent of the expanded share capital of the company and further that on completion of all transactions Ranbaxy's shareholding in Zenotech stood at 46.85% of the latter's share capital. It may be stated here that even after the sale in terms of the agreement the promoters (Dr. Chigurupati and his family) retained a large portion of their shareholding in Zenotech.