IMPORTANT POINTS
The element of the shared common objective or purpose is the sin qua non for the relationship of “persons acting in concert” to come into being.
Deeming fiction under sub-regulation (2) of regulation 2(e) can only operate prospectively and not retrospectively.

Headnote:(a) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 2(e)(2)(i) – On the date of the SPSSA both Ranbaxy and Zenotech became “Target Companies” for Daiichi, the acquirer, the former directly and the latter indirectly. (Para16)
       (b) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 20(4) r/w reg. 20(12) – Determination of share price – (a) By negotiation for direct takeover – (b) price paid by the acquirer or persons acting in concert with him for acquisition of shares of the target company within the period of twenty six weeks prior the date of the public announcement – (c) price of the shares of the target company as quoted on the stock exchange. (Para 26)
       (c) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 2(e)(1) – “Persons acting in concert” – There must be a target company – Two or more persons must join together with the shared common objective and purpose of substantial acquisition of shares etc. of the target company – The element of the shared common objective or purpose is the sin qua non for the relationship of “persons acting in concert” to come into being. (Paras 43 and 44)
       (d) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 2(e)(1) and 2(e)(2) – The deeming provision under sub-regulation (2) operates only within the larger framework of sub-regulation (1) of regulation 2(e) – Deeming fiction under sub-regulation (2) can only operate prospectively and not retrospectively. (Paras 46and 49)
       (e) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 2(e)(2) – In case of nine specified kinds of relationships, in each category, the person paired with the other would be deemed to be acting in concert with him/it. What it means is that if one partner in the pair makes or agrees to make substantial acquisition of shares etc. in a company it would be presumed that he/it was acting in pursuance of a common objective or purpose shared with the other partner of the pair. (Para 47)
       (f) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 20(4)(b) – 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 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. (Para 52)
       (g) Securities And Exchange Board of India (Substantial Acquisition of Shares And Takeover) Regulations, 1997 – Regulation 20(4)(b) and 20(4)(b) – In so far as Zenotech is concerned Ranbaxy was not acting in concert with Daiichi either from the date of the SPSSA or even after becoming a subsidiary of Daiichi – Acquisition of Zenotech shares by Ranbaxy in the month of January 2008 did not come within the ambit of regulation 20(4)(b) – The offer price in the public announcement for Zenotech shares made by Daiichi was correctly worked out. (Para 55)
       Facts of the case:
       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 is the question that falls for consideration in these two appeals.
       2.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
       Finding of the Court:
       1.On signing the SPSSA Daiichi and Ranbaxy did not come within the relationship of persons acting in concert within the meaning of regulation 2(e)(1) of the Takeover Code.
       2.Purchase of Zenotech shares by Ranbaxy in January 2008 cannot be said to be by a “person acting in concert” with Daiichi.
       Result : Appeals allowed.

JUDGMENT

Aftab Alam, J. —

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.

4.It needs to be stated here that up to this stage Daiichi was nowhere on the scene. It is no one’s case that the acquisition of Zenotech’s shares and control by Ranbaxy was at the instance of Daiich

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2010 Supreme(SC) 543

IMPORTANT POINTSThe element of the shared common objective or purpose is the sin qua non for the relationship of “persons acting in concert” to come into being. Deeming fiction under sub-regulation (2) of regulation 2(e) can only operate prospectively and not retrospectively.

IMPORTANT POINTS
The element of the shared common objective or purpose is the sin qua non for the relationship of “persons acting in concert” to come into being.
Deeming fiction under sub-regulation (2) of regulation 2(e) can only operate prospectively and not retrospectively.