CLB shoots down Zenotech founder’s one MD claim

The Company Law Board (CLB) has rejected submission of Jayaram Chigurupati, founder of Hyderabad-based pharma firm Zenotech and estranged partner of Ranbaxy Laboratories and Daiichi Sankyo, that there cannot be two managing directors in the company.

Passing an interim order, the Chennai-bench of the CLB observed that the Article of Association of Zenotech allows two managing directors in the firm, hence appointment of BK Raizada, a Ranbaxy’s nominee, as another was not illegal.

“Since the articles provided for two managing directors, there is prima facie no illegality in the appointment of the second managing director,” the CLB said.

It also slammed Chigurupati for representing himself as the only managing director of Zenotech before the investors and elsewhere.

“In the above circumstances the conduct of Jayaram Chigurupati in communicating that there is only one managing director is liable to be deprecated,” the bench said in its three page order.

Moreover, the CLB also clarified that its earlier order of November 24, 2010, regarding status quo on the board of the company would be applicable.

“In the best interest of the company, it is clarified that the order of this bench November 24, 2010, will not stand in the way of Raizada from performing his duties as per the resolution passed by the board meeting held on March 19, 2011,” the bench said.

Meanwhile, Chigurupati is preparing to challenge the directions of the CLB.

“It’s not a question of the Articles (of Association) of the company. Allowing me to continue as the MD of the company for five years was part of my agreement with Ranbaxy. The deal with Ranbaxy was concluded in 2007 and I should remain the MD of the company for five years from then. However, Ranbaxy is free to appoint a COO and a CFO. I don’t understand why they insist on appointing a second managing director contrary to the agreement we had,” Chigurupati told DNA.

Chigurupati continues to hold 25% equity in the company even after selling a similar amount to Ranbaxy-Daiichi.

“In fact, allowing me to manage the company for five years was an important clause in the sale agreement I had with Ranbaxy. If they had not agreed for that may be I would not have sold my holding,” he said.

Calling the prolonged litigation with Ranbaxy ‘unnecessary’ he said the pharma major was forcing him to spend significant resources on facing litigations.

“It’s not that they are not talking to me. But, end of the day they are filing a case. I must have spent nothing less than `3 crore so far on facing the litigations. Whereas for them, it is the company funds. I am forced to drain my personal resources,” he said.

Three nominees of the Ranbaxy group were inducted on Zenotech’s board on January 18, 2011.

In another board meeting of March 19, 2011, Raizada was appointed as second managing director and specific areas of operations were allotted to him and to Chigurupati.

However, soon after that Chigurupati approached CLB to set aside the resolution alleging that appointment of Raizada was illegal as it was not in the agenda of the board meeting of March 19, 2011.

The CLB directed to list the matter on May 2 for next hearing.