M/S Daiichi Sankyo Company vs Jayaram Chigurupati & Ors

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 3 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 4 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.

8. Against the decision of the SEBI, Dr. Chigurupati and N. Narayanan preferred separate appeals, being Appeal Nos.137 and 139 respectively of 8 2009 before the Security Appellate Tribunal. The Security Appellate Tribunal upheld the claim of the respondents and by order dated October 7, 2009 allowed the appeals, reversed the decision of the SEBI, modified the letter of offer (sic) issued by Daiichi and directed Daiichi to offer rupees one hundred and sixty (Rs.160.00) per share to the shareholders of Zenotech. Daiichi has now brought the matter in appeal before this Court.

regulation (4) shall be calculated with reference to twenty-six week period preceding the date of the board resolution which authorised the firm allotment or preferential allotment.

(12) The offer price for indirect acquisition or control shall be determined with reference to the date of the public announcement for the parent company and the date of the public announcement for acquisition of shares of the target company, whichever is higher, in accordance with sub-

49. Something else that is of utmost importance is to understand that the deeming fiction under sub-regulation (2) can only operate prospectively and 43 not retrospectively. That is to say the deeming provision would give rise to the presumption, as explained above, only from the date two or more persons come together in one of the specified relationships and not from any earlier date. Thus, in the case in hand, the deeming provision under sub- regulation (2) would give rise to the presumption that Daiichi and Ranbaxy were "persons acting in concert", provided of course the other conditions as explained above were also satisfied, only from October 20, 2008, the date on which Ranbaxy became a subsidiary of Daiichi and not before that. Hence, the purchase of Zenotech shares by Ranbaxy in January 2008 cannot be said to be by a "person acting in concert" with Daiichi.

50. In light of the discussion made above, we are of the view, that the Appellate Tribunal was in error in proceeding on the basis that the material date for Ranbaxy and Daiichi to be acting in concert was the date of the public announcement for the Zenotech shares. The Tribunal Observed:

52. We are clearly of the view that for the application of regulation 20(4)(b) it is not relevant or material that the acquirer and the other person, who had acquired the shares of the target company on an earlier date, should be acting in concert at the time of the public announcement for the target 45 company. What is material is that the other person was acting in concert with the acquirer at the time of purchase of shares of the target company.

58. In the result, the appeals are allowed but with no order as to costs.

..................................CJI.