Mumbai: Dilip Shangvi, chairman and managing director of India’s largest drug maker by market value, Sun Pharmaceutical Industries Ltd, has urged the shareholders of its takeover target, Israel’s Taro Pharmaceutical Industries Ltd, to vote against the resolutions proposed by Taro’s board.

According to Sun Pharma, which owns a 36% stake in Taro, re-election of the directors on Taro’s board as proposed in the resolutions would only help protect them from taking responsibility for hiding facts of the company’s financials from its shareholders.

Taro’s board, which is resisting a merger it agreed with Sun Pharma in 2007, has proposed the resolutions for voting at the company’s annual general meeting on 31 December.

War of words: Sun Pharma chairman Dilip Shanghvi has urged Taro shareholders to vote against the resolutions proposed by Taro’s board. Ashesh Shah / Mint

“This failure is a result of the performance of these supposedly independent directors in discharging their fiduciary duties towards shareholders. Instead of correcting the situation they now want all Taro shareholders to pay for any damage claims made against them for this failure," he said.

Taro could not be reached for comments.

Shangvi’s letter was in response to a similar appeal from Taro’s key promoter and chairman, Barrie Levitt, to the shareholders earlier in December, seeking their support against Sun’s “proxy fight" to gain control of the company.

Levitt’s letter had followed a statement by another Taro shareholder, Templeton Asset Management Co. Ltd, that Sun’s attempts to take control of Taro had to be expedited as it had lost faith in the existing management.

Templeton had lost faith as Taro’s board had failed to share the audited financials of the company with the shareholders for several years. Templeton had also withdrawn its appeal against Sun’s tender offer to acquire more shares in Taro.

This sudden change in Templeton’s stand, which until recently supported Taro’s management, had irked Levitt.

In his letter to Taro shareholders, Levitt warned that Sun Pharma could not manage its US subsidiary Caraco Pharmaceutical Laboratories Ltd from being raided by the US regulators—leading to the closure of Caraco’s manufacturing operations last year—and Taro could face the same fate if the Indian firm took control.

Shangvi said Levitt is “spreading lies and misrepresentations" about Sun Pharma to distract Taro shareholders from the “encompassing protection being proposed to be given to independent directors as part of a payback for their complicity in illegally perpetuating control by the Levitt and Moros family over Taro in violation of contracts signed by the family."

The Moros family is the other promoter stockholder in Taro, which is listed on the Pink Sheet in the US, a stock exchange that deals with penny stocks.

Sun Pharma shares rose 1.12% on Friday to close at Rs1,497.85 a piece on BSE. The exchange’s benchmark index, Sensex, slipped by around 1% to close at 16,719.83 points.

Sun Pharma had in 2008 launched a share tender offer in the US to acquire a controlling stake in Taro, following a unilateral decision of the Israeli firm’s management to terminate a $454 million (Rs2,129 crore) merger agreement signed by Sun Pharma and Taro in May 2007.

Taro’s management challenged this tender offer. It sought orders from an Israeli court to force Sun Pharma to make a special tender offer that would require support from Taro’s majority shareholders. A lower court in Israel had ruled in favour of Sun, but a judgement on an appeal filed by Taro is still awaited from the Israeli Supreme Court.