Russian businessmen fight over Indian company

Dr. Reddy's Laboratories will no longer produce its medicines in Russia

In its previous publications PRAVDA.Ru has already informed its readers of all the problems of Russian pharmaceutical field, which is considered to be the most concealed and yet the most profitable area of our domestic economy. Several of our articles informed of a conflict which had arose between shareholders of Russia’s largest medicine manufacturer “Biomed”. One of the company’s major shareholders JSC “Biopark” (which holds 51% of shares) has addressed the Office of Public Prosecutor in regards to the actions administered by another shareholder with 46% of shares, Indian pharmaceutical company Dr. Reddy’s Laboratories LTD.

Company's present management has confirmed the fact that the company had suffered significant material loss due to the activities of Moscow's branch of Reddy's Labs with the help of Biomed’s director Yakushevich. Back then however, we were unable to receive any comments from the Indian party involved. In fact, they completely refused from providing any comments to PRAVDA.Ru concerning any of its future plans in Russia. However, soon after an article appeared in PRAVDA.Ru, we immediately received a comment concerning the situation from a company related to “Sistema.” As it turned out, it is them who intend to become future owners of the 46% packet of “Biomed” shares. Pyotr Perevoznikov, one of the managers of the “Sistema” subsidiary “System project” revealed to us his company's interests.

-The company “Dr. Reddy’s” refutes the fact that a criminal case has been filed against it. Their official statement which has been published on our site doesn’t appear to be quite clear though. It is unclear whether the company refutes the actual fact of having a criminal case against it or the fact that it is the company itself that should be held responsible.

-The case has been filed based on the article of “fraud” on the basis of “Biopark’s” official claim. According to JSC “Biopark”, in the course of the process of privatization of the entire packet of shares by the Indian company, fake documents have been submitted to the Federal Property Fund. The documents proved the fact that Dr. Reddy’s Laboratories had fulfilled the 4th clause of the privatization program. Consequently, according to “Biopark”, the Indian company has got a hold of the aforementioned shares illegally. One shouldn’t confuse the position of “Biopark” and the real situation. The fact that a case’s been filed doesn’t say much; special investigation will be conducted to check all the information. Being a lawyer myself, I can say that the case seems to be well fabricated. The case file already includes documents proving the absence of the fact of forgery of any sort of paperwork; and if there is a lack of forged docs, the fraud is considered nonexistent either. In addition, the fact that the Indian party has totally fulfilled its obligations, has been confirmed by “Biomed” itself and double-checked by the Property Fund.

As far as the status of Dr. Reddy’s Labs in this lawsuit is concerned, in connection with the Russian legislation, organizations cannot be merely natural persons; this in turn excludes the possibility of the company being sued on such grounds. Directors and staff of Dr. Reddy’s Laboratories have not been faced with any official accusations either. Company’s former general manager who is currently a member of the director’s board of “Biomed” Yuri Evgenievich Yakushevich is considered the main suspect so far. However, we still do not possess any exact claims against him.

-And what about "Dr.Reddy’s" position in regards to the statement?

-They assume that the privatization has gone in accordance to the law and that they have completely fulfilled their obligations outlined by the program. They provided a final audit copy including all the expenses made in accordance with the 4th clause of the program, in other words there was no fraud to begin with. Consequently, we think that this criminal case has no perspective.

An in order to settle the matter, shareholders could just as well use civil law courts or arbitrage. It is still unclear though why Mr. Mogutov (currently the head of Biomed’s Board of Directors, who controls 51% of the shares) preferred to settle the case in criminal court. Perhaps, this was done to pressure Dr, Reddy’s to make the company sell its shares to Mogutov’s organizations…

-Have you officially notified? Since such claims cannot be considered unilaterally.

-The claim hasn't been considered yet. They have only filed all the paperwork. Legally, if the claim is filed against a foreign company, a copy of the official documents is forwarded to the Russian branch of that company; and in case a company doesn't have a branch in Russia, then the paperwork goes to the Ministry of Justice through various embassy services and councils. Dr. Reddy's has a branch here in the Russian Federation, but probably Mr. Mogunov has deliberately concealed his awareness of such fact in his claim. And probably the arbitrage has sent the claim all the way via the “official” way. It has come to our knowledge post factum that the court had arrested Dr. Reddy's shares.    
 
-Now all of these legal matters concern you too, correct? Is it true that "System project", which you represent has signed an agreement with "Dr. Reddy's" not so long ago regarding the sale of 46% of their shares?

-The documents have all been signed by the company, which acts in the interests of the System project and the deal has already been partially executed. 
 
-Does this sale have anything to do with the criminal case and numerous scandals around “Biomed”?

-No. The documents have all been signed in the beginning of October 2004, that is before the arbitrage and the criminal case. I have personally met with the company’s president; we’ve discussed the deal and possible ways of cooperation of the two companies. That is why one shouldn’t look at the deal as a mere way of escaping the problems.

-Have you talked about the cooperation or about the acquisition of the shares?

-First of all, it concerned the actual acquisition of the shares. And secondly we’ve also discussed possible ways of cooperation. “Dr.Reddy’s Laboratories LTD” is one of the largest pharmaceutical companies in Asia. This is a reliable partner with untainted reputation. By the way, one of Mr. Mogutov’s goals is to damage the company’s reputation. As far as the business is concerned, it has been established here in Russia since mid 90s. However, just like any other foreign company trying to make its way in the foreign land, it appears rather difficult for the company to develop its business alone. They would like to have a strong business partner in our country with outstanding reputation. We in turn have medical-technological holding company, we produce medicine that is why there is room for cooperation. They didn’t have any problems at the time. Problems started to arise only after Mogutov learned the fact that the Indians had signed a contract with us. Although he did not have any evidence at the moment. We in turn didn’t even try to conceal the situation, in fact we are not concealing anything now either. We are absolutely open. However, the man refuses to cooperate with us.

In the end of December one of Mogutov's men attempted contacting us through our common acquaintances, asking us to “abandon the scene” for a certain sum of money. We had to explain that Mr. Mogunov perhaps had a wrong impression of the overall scale of the project. Besides, we are not leaving because we are involved in the deal and consequently will be defending our rights no matter what. Mogutov has already registered an extra load of shares illegally; he hasn’t allowed the Indians to redeem their portion of shares. Thus, he had “deluted” the entire packet of “Dr.Reddy’s” shares.

Our position in this case is to cancel the emission; we possess all necessary legal grounds for this. We have an entire system, lawyers who specialize specifically in this field, in fact we can and we enjoy getting involved in legal proceedings. We are not in a hurry here; we can remain in this situation for as long as it takes.

-How did you find this facility? Why did you get interested in the possibility of acquiringsuchabig packet of the company’s shares?

-We are the main shareholder of the “Ferment” company, which is located on the same grounds as “Biomed”. “Biomed” possesses vast territory. And “Ferment” owns small property in the middle of that territory; this is a rather small facility but it is headed by a very good leader. In comparison to its surroundings, the facility is a real “candy”. For some unknown reasons, Mogunov began causing troubles to our company; at times he refuses to let our cars to enter the territory; other times, he would turn off electricity or the heating. We had to call police a couple of times. We were simply oppressed by him and we had to search for methods to protect ourselves. It has come to our knowledge that Mogutov had been having talks with the Indians regarding purchasing their packet of shares. The situation took place in April-May of last year. He tried to lower the price the best he could…Nowadays, we are trying to sue him for pressuring those people to sign the deal. In reality, “Biomed” is a very profitable business with major perspectives. And we decided to interfere this time.

Having such partners as “Dr Reddy’s,” it would be possible to expand “Biomed’s” business while remaining the company’s main shareholder. I just do not understand why they haven’t done that yet. If Mogutov didn’t oppress them from the start, they would have invested in the business.

-Will the Indians transfer the shares to you? So you will be the only one to stay right?

-Yes, I will be the only one from “Biomed”.

-Do you intend to develop the production? Or are you going to execute legal proceedings and then resell the company?
     
-Up until the question regarding other shareholders is solved, the issue of investments seems irrelevant. If case we manage to reach an agreement with the second shareholder…, then we could talk about future development and expansion of the business. Just like the Indians, we are hesitant to invest money while in limbo.

-In your opinion, which is the most probable course of events in future?
 
-Only through negotiations will we ever be able to reach some agreements. He will have to take into account the shareholder's opinion.

-But they refused to consider the opinions of the Indians, just as you said…
 
-The Indians lack what it takes. They had neither the will power nor the skill to defend their interest in Russia. We on the contrary possess enough strength, skills and proper tactics. Besides, we own 46 percent of the shares.

-I have met with a spokesman of the second shareholder and can claim that they are also willing to negotiate in a civilized manner. However, they weren’t talking specifically about you, but about their Indian partners. They are still unaware of the fact that they have different partners now. So it turns out that both parties are interested in settling the matters, but the conflict nevertheless still exists.

-I think they have no grounds to claim that someone had at some point or another forced them to do anything. And as far as the information regarding new partnership, they are clearly aware of it, otherwise, nobody would have ever got a hold of us.

-So you intend to settle the matter peacefully then?

-Absolutely. Considering the packet’s value, we have enough rights. As far as using force in these matters, I strongly believe that such methods can never be used in solving such problems.

-Will “Dr.Reddy’s” leave Russia as a result of the conflict?

-Why? They will continue their trade here. The company doesn’t produce here anything anymore. They wanted to establish their production in Russia; that is why they have decided to come to Russia in the first place. However, they failed to establish any contacts with the leading companies. As far as I know, they possess a production line in Kazakhstan. In Russia they only sell medicine imported from India under their brand namee.