A bench comprising justices BS Chauhan and AK Sikri asked the court to decide by Friday the application of Sun Pharma and others seeking vacation of the status quo order and posted the matter for further hearing before it on May 29.
Sun Pharma, Japanese pharma major Daiichi Sankyo and Ranbaxy Laborataries had last week approached the Supreme Court against the AP HC's April 25 order that directed the BSE and the NSE not to approve the merger of Sun Pharma and Ranbaxy, while admitting a petition by retail investors.
While observing that the petitions alleging insider trading in the $4-billion deal by the two investors in the Andhra HC would amount to the abuse of the process of law and forum shopping, the apex court said that the petitions against the merger could have been filed in the high courts of Gujarat and Punjab and Haryana High Court were the respective companies were based.
The judges in its order stated that since it is only an ad-interim order passed by the HC and the petitioners (pharma companies) have also filed applications for vacation of the stay order as well, it would be nore appropriate for the petitioners to first have theirapplication decided by the HC of AP... we request the HC to take up the applications and decide the same within two days.
Arguing that any delay in the merger would hurt Ranbaxy's 182,721 and its 139,546 shareholders, Sun Pharma in its petition before the apex court said that the HC should not have granted an exparte status quo order on the approval of scheme of arrangement to be obtained from Sebi, BSE and the NSE.
The counsel informed the bench that the petitions under Sections 391 and 392 of the Companies Act, 1956 seeking approval for the merger are yet to be filed in the HCs of Gujarat And Punjab & Haryana. However, they said that the companies were in the process of completing certain other formalities including getting a nod from market regulator Sebi.
Senior counsel Vgiri and K Ramkrishna Reddi, appearing for the investors, contested the claims of the drug majors. Questioning the jurisdiction of the AP High Court to entertain the petition as the registered offices of none of the companies are located in Hyderabad, Sun Pharma senior counsel Abhishek Singhvi and counsel Vinita Bhargava submitted that there is absolute abuse of process of law as the order would affect the biggest deal in the pharma sector.
The bench, however, said that shareholders have right to challenge the merger and asked the HC to decide the issue. According to the drug firms, the allegations of insider trading can be investigated independently by Sebi and there was no bar in initiating such investigation even if the scheme of arrangement would have been approved.
The two retail investors - Tammali Shiva Kumar and Undi Venkatasubbaraju - had alleged that Silver Street, a limited-liability partnership firm owned by two subsidiaries of Sun Pharma, was involved in the insider trading of Ranbaxy shares and benefited at the expense of small investors. They alleged that there was heavy trading of Ranbaxy stock before the merger with Sun Pharma was announced on April 6, and had requested the court to direct the Sebi to investigate the insider trading of Ranbaxy shares and take appropriate action against Sun Pharma and Silver Street.