Hyderabad: The Andhra Pradesh high court on Friday reserved its order on an appeal by Sun Pharmaceutical Industries Ltd challenging a stay and status quo ordered by it on the proposed merger between the drugmaker and Ranbaxy Laboratories Ltd, the biggest in the Indian pharmaceutical industry.

Justice G.Chandraiah reserved the order for Saturday.

Sun Pharma and Ranbaxy lawyers said in court that the insider trading allegations on which the court based its order and the proposed merger are two different issues and the merger process should be allowed to continue.

On 7 April, Sun agreed to acquire Ranbaxy, controlled by Japan’s Daiichi Sankyo Co. Ltd, in an all-stock deal worth $3.2 billion. Sun also agreed to assume $800 million of debt on Ranbaxy’s books in a deal to create the world’s fifth largest generics (or off-patent) drugs company by revenue and India’s largest pharma firm by market share.

The Andhra Pradesh high court, acting on a petition filed by two shareholders who alleged insider trading in the shares of Ranbaxy in the run-up to the deal, then ordered status quo on the deal and directed the stock exchanges and capital markets regulator Securities and Exchange Board of India (Sebi) not to approve the merger.

“They (petitioners) are trying to overreach the statutory process that needs to be commenced by the two companies," B. Adinarayana Rao, counsel for Sun Pharma, said on Friday.

The merger process entails securing approvals from stock exchanges, Sebi, the Gujarat, and Punjab and Haryana high courts, the Competition Commission of India, creditors and shareholders of both companies.

Counsel for Sebi who was present at Friday’s hearing informed the court that there was no “inaction" on the regulator’s part as alleged by the petitioners.

“Sebi has taken up investigation on allegations of insider trading charges," the counsel, Y. Suryanarayana, said.

The pharma companies involved in the deal had challenged the high court order in the Supreme Court, which on Wednesday asked the Andhra Pradesh high court to decide on their appeal in two days. A Supreme Court bench comprising justices B.S. Chauhan and A.K. Sikri listed the matter to come up before it again on 27 May, after the high court hears the appeal.

Silverstreet Developers Llp, a Sun Pharma subsidiary, bought a 1.64% stake in Ranbaxy in December and March quarters, according to a shareholding disclosure by Ranbaxy to the stock exchanges. Sun Pharma previously said Silverstreet had bought these shares as an investment.

“The shares of Ranbaxy spiked 25% and volume of trading was up five times in the week preceding the announcement of the Sun Pharma- Ranbaxy merger deal, clearly indicating insider trading by those who had privilege of price-sensitive information, defeating the interest of minority shareholders," Vishnuvardhan Reddy, the counsel representing the shareholders, alleged.

Shares of Sun Pharma were up 0.79% to 584.70 on the BSE and those of Ranbaxy declined 0.87% to .438 on a day the benchmark Sensex gained 1.31% to 24,693.35 points.