Posted by : Varun Doshi
On : 03 June 2014
Comments : 0
Views : 1538
The Supreme Court on Wednesday gave the Andhra Pradesh high court two days to decide on an appeal challenging the latter’s stay on a proposed merger between Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd.
A bench comprising justices B.S. Chauhan and A.K. Sikri listed the matter to come up before it again on 27 May, after the high court hears the appeal.
Sun Pharmaceutical, Ranbaxy Laboratories and Daiichi Sankyo Co. Ltd of Japan appealed to the apex court against the order passed last month by the high court, which stayed the merger and ordered status quo on a petition brought by two investors alleging insider trading.
This order was passed ex parte, which means that it was passed in the presence of only one of the parties, in this case the investors.
Sun Pharmaceutical on 7 April agreed to acquire Ranbaxy, controlled by Daiichi Sankyo, in an all-stock deal worth $3.2 billion. Sun also agreed to assume $800 million of debt on Ranbaxy’s books in a deal to create the world’s fifth largest generics (or off-patent) drugs company by revenue and India’s largest pharma firm by market share.
The appeal challenged the high court ruling on grounds that the court did not have territorial jurisdiction and that it had passed the order without citing any reason.
It also stated that the investors had “forum shopped”. Forum shopping is when parties approach a court or adjudicatory authority most likely to give them a favourable decision, rather than one that is most appropriate.
The pharmaceutical companies contended that the appropriate forum in this case was either the high court of Gujarat, where Sun Pharma has its registered office or the high court of Punjab and Haryana, where Ranbaxy’s registered office is located.
One of the lawyers arguing on behalf of Sun Pharma said the main reason for filing the petition before the Supreme Court was to either be heard by the apex court or secure a direction from it to be heard by the high court. The lawyer didn’t want to be named.
Vivek Reddy, a counsel for the two shareholders, said the Supreme Court had recorded the contentions of parties to the case and sent the matter back to the high court. “If Andhra Pradesh high court doesn’t have the jurisdiction they wouldn’t have sent the matter back to the high court,” Reddy said. Sun Pharma declined to comment on the Supreme Court order.
The Andhra Pradesh high court, acting on the petition, last month asked the stock exchanges and capital markets regulator Securities and Exchange Board of India (Sebi) not to approve the merger between Sun Pharma and Ranbaxy. Silverstreet Developers Llp, a Sun Pharma subsidiary, bought a 1.64% stake in Ranbaxy in December and March quarters, according to a shareholding disclosure by Ranbaxy to the stock exchanges. Sun Pharma previously said Silverstreet had bought these shares as an investment.
Shares of Sun Pharma fell 1.73% to Rs.577.15 on the BSE and those of Ranbaxy declined 1.1% to Rs.436.85 on a day the benchmark Sensex fell 0.3% to 24,298.02 points.