The Hindu Business Line : CLB says it has no jurisdiction to decide on Zandu-Emami case

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CLB says it has no jurisdiction to decide on Zandu-Emami case

The Board view
Unless Zandu’s allegations are investigated by the authorities concerned and confirmed as a violation of law, the CLB has no power to issue orders for rectification of registrar of members.

P.T. Jyothi Datta

Mumbai, Aug. 27 Ayurveda products-maker Zandu Pharmaceutical’s petition on the takeover moves by Emami Ltd has been dismissed by the Company Law Board (CLB), saying that the Board had no jurisdiction on the issue.

In a virtual reiteration of its earlier view, the CLB said that Zandu’s allegations of the violation of the takeover code (by Emami) and insider trading (by the Vaidya family) were issues to be decided by the SEBI.

Similarly, allegations of investments beyond the limit as outlined by the Companies Act and acquisition of shares, creating thereby a dominant undertaking are issues to be investigated by the Central Government, the order said.

Zandu had resorted to a legal course to stave off predatory overtures from Kolkata-based Emami, after it purchased shares from the Vaidyas, who were part of Zandu co-promoter’s family. In May this year, Emami had announced that it had bought 24 per cent in Zandu through a share purchase agreement with the Vaidyas, taking Emami’s total stake in Zandu up to 27.5 per cent.

The allegations (as outlined earlier) made by Zandu against Emami, the Vaidyas and others acting in concert, are yet to be investigated by the authorities concerned and confirmed as a violation of law, the CLB said.

“Unless it is confirmed as a violation of law, the CLB has no power to issue orders for rectification of registrar of members and further this Bench has no power to declare these allegations as violations of law,” the order said.

Voting rights

Zandu’s annual general meeting that had been postponed from being held earlier this month, can be allowed, the order said.

The CLB also observed that Emami while making the open offer for additional shares in Zandu, had said it would not exercise its voting rights on those shares acquired through the open offer till SEBI approves it. Under these circumstances, the CLB did not find any need to intervene in the matter.

The voting right that the Emami management would exercise at Zandu’s shareholder meet is on 14.82 per cent equity.

Zandu’s promoter family, the Parikhs, have more than 33 per cent voting rights and, therefore, at any time they will have the necessary majority, the order noted.

“As there is no eminent danger to the management of the petitioner company (Zandu) and further it is believed that the shareholders voting right should be suspended in the rarest of the rare occasions mainly because the corporate democracy should prevail at any cost.”

The legal tussle involving Zandu and Emami had returned to the CLB, after Zandu approached the Bombay High Court, when its earlier attempt to knock the CLB’s door resulted in the Board advising it to take the issue up with SEBI. The Bombay HC, however, in its directive earlier this month returned the issue to the CLB asking it to look into the issue and pass its order.

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