Calcutta HC orders SEBI to probe Calchem sale to Henkel

Shaw Wallace had sold its controlling stake in its consumer products division 8212; consisting of Calcutta Chemical and Detergents India 8212; for Rs 51.05 crore to Henkel Spic India Ltd. The deal was finalised on January 22 this year, and the money has been parked in an escrow account in line with the directions of the Calcutta High Court in a separate case relating to Shaw Wallace8217;s repayment plan for its creditors.

Paul and the others had been complaining that the price of Rs 266.30 per equity share, received by ShawWallace for the Calchem shares, had been quot;depressed by offering a composite bidquot;.

Paul, who held the sole distribution rights for Calchem products before the sale, had complained to SEBI also over the pricing angle. Paul had said the Rs 266.30 paid by Henkel for each of the 4,43,124 equity shares of Calchem bought by it had been understated. He had noted that while Henkel paid Rs 11.80 crore for the equity and cumulative shares, it paid around Rs 17 crore for buying the distribution rights.

On January 21, the day before the deal was clinched, Paul had taken SEBI to court by filing a writ petition under Article 226 of the Constitution. Justice PC Ghosh had refused to hear the case on personal grounds.

On January 27, Justice PK Samanta passed an order that put the deal under a cloud. He directed that all actions including the public offer shall abide by the final order of the writ petition.

Since no interim order had been passed, on February 2, Paul appealed before the division bench of Justices SBSinha and DP Sarkar.

Their order today had four specific directions:

The Chennai-based Henkel Spic8217;s managing director, A Satishkumar, could not be contacted for comment as he is not in the country. His office said the company is aware that an order has been passed by the court, but the company had received only oral information about the order and officials would not comment before taking legal advice.

Today8217;s order directing SEBI toinvestigate was based on Paul8217;s writ petition which had listed the complaints of alleged takeover code violation. There had been a series of correspondence between Paul and SEBI, starting on June 5 last year.

SEBI, in its letter of October 9, 1998, had dismissed Paul8217;s contention that the takeover code has been violated. SEBI had pointed out that Calchem8217;s scrip is seldom traded and so the price should be determined in line with Regulation 203 of the SEBI Substantial Acquisition of Shares amp; Takeovers Regulations 1997.

Paul, in his January 21 writ petition, had prayed for recalling of this letter. He had also petitioned the court to appoint an officer to probe the amount paid separately by Henkel for the equity stake, the distribution rights and as non-compete fees. The court was also urged to appoint an adjudicating officer under section 51 of SEBI Act.