Clariant gets reprieve on penal interest rate

The Supreme Court (SC) has settled the dispute between Swiss pharmaceutical company Clariant International Ltd and the Securities and Exchange Board of India (Sebi) over the rate of interest to be given to the shareholders of Colour Chem Ltd, which was taken over in a complex share deal.

The Securities Appellate Tribunal had approved of the Sebi's diktat to the Swiss company to pay 15 per cent to the shareholders for loss of interest to them as a result of the acquisition. The SC, on the appeal of the Swiss company, reduced the rate to 10 per cent, as a special case.

The dispute arose when the Swiss company and the German company Hoechst entered into an agreement by which 5.8 lakh shares of Colour Chem were transferred by the German company to Clariant.

Since the Swiss company did not get exemption from the requirement of making public offer to shareholders of Colour Chem, Hoechst sold the shares to a subsidiary of Clariant to complete the acquisition.

Sebi then received a complaint that 51 per cent shares/voting rights and control had been affected by the arrangement. The board, therefore, directed Clariant to pay 15 per cent to shareholders for loss of interest to them from the trigger date of 24.2.1998 till 2003.

The tribunal affirmed the board's view. On Clariant's appeal, the Supreme Court now reduced the rate of interest to 10 per cent.

The judgment contained two clarifications. If any dividend was paid during the period, it would be adjusted with the amount of interest.

The court added that only those persons who were shareholders till the trigger date and continued to be shareholders on the closure day of the public offer would be entitled to interest.

In the case of the administrator of the specified undertaking of the Unit Trust of India, the court made an exception, though it was not a shareholder at the relevant date.

Since it was a statutory beneficiary and successors of the UTI, the court directed that it would be entitled to interest irrespective of the fact that it came into being after 1998.