Malvinder Mohan Singh and Shivinder Mohan Singh, ex-promoters of Ranbaxy, are shielded from any compensation claims made by Japan?s Daiichi-Sankyo due to specific clauses on non-liability and indemnity (legal exemption from liability for damages) agreed by both parties during the pharma company?s sale in 2008.
Sources said that Daiichi, which wanted to expedite the takeover process, had not objected to the indemnity clause. ?There are also no guarantees in the sale agreement to indicate that ex-promoters can be held liable at a later stage for any loss accrued to the company,? the same sources added.
Daiichi has filed an arbitration in a Singapore court against the ex-promoters of Ranbaxy seeking damages for losses arising from a $500-million settlement that the drugmaker signed with US authorities (in May 2013) over charges of adulteration of medicines and data manipulation related to testing of drugs.
Differences between Malvinder and the Daiichi management over their approach in dealing with the US FDA issue also led to Malvinder stepping down from the post of Ranbaxy CEO and MD within a year of takeover (in May 2009), according to these sources. Originally, he was expected to stay on board for five years post acquisition.
While prior to the Daiichi deal, Ranbaxy had been negotiating with the FDA on the issue of fraudulent data stating that ?the company was not at fault?, post takeover the management took a diametrically opposite stance.
Daiichi-Sankyo did not respond to the detailed questionaire sent on the issue. Spokesperson for Malvinder said there was no fresh comment to be made on the issue. The former Ranbaxy promoter had in May said that the Japanese drug major was levelling ?baseless charges? against him, having failed to manage the company properly.
On May 22, 2013, Daiichi said it ?believes certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US department of justice and FDA investigations. Currently, Daiichi Sankyo is pursuing available legal remedies and cannot comment further on the subject at this time?.
The statement was made a week after Ranbaxy Laboratories agreed to pay $500 million to resolve fraud allegations made in a whistleblower?s lawsuit and federal criminal charges that the company sold adulterated drugs while lying about it to US regulators.
A month prior to making this statement, Daiichi had filed five caveats in the Delhi High Court seeking to prevent any ex-parte stay order against any arbitration proceedings it initiated at a later stage.
In May, Daiichi Sankyo also said it would continue to support Ranbaxy in its efforts to address and correct the conduct of the past which led to the investigations by the US DoJ and FDA. ?These efforts include significant changes to Ranbaxy?s management, culture, operations and compliance,? the company had said.
However, last month the US drug regulator blacklisted Ranbaxy?s Mohali plant ? which was commissioned in 2011, three years after the Japanese drug maker bought Ranbaxy ? effectively stopping shipments of 11 medicines.
?At all stages the FDA?s investigation into manufacturing processes of the company were disclosed to Daiichi and their legal firms,? said sources. The FDA investigated Ranbaxy between 2006 to 2008 to find incomplete testing records and non-compliance to manufacturing practices.
In July 2008, the US DoJ dragged the firm to a district court on charges of adulteration and data manipulation. Meanwhile, Daiichi and Ranbaxy signed the share purchase agreement (SPA) on June 11, 2008, under which the Japanese drug maker bought a 34.82% stake from Ranbaxy promoters for $4.2 billion after one-and-half years of negotiation and due-diligence.