Japanese drug maker Daiichi Sankyo on Wednesday scored a major victory against former Ranbaxy Laboratories promoters Malvinder and Shivinder Singh with the Delhi High Court allowing Daiichi to recover over Rs 3,500 crore as damages from the brothers as per an arbitration award from Singapore’s international tribunal in April 2016. Barring minors — the Singhs’ five children — the objections to the enforcement of award by 16 of the respondents were dismissed by the Delhi High Court, which said that the court does not exercise “appellate jurisdiction” over the foreign award nor does it go into procedural defects so as to excuse an award from enforcement on the ground of public policy of India. This paves the way for enforcement of the award under which the Singh brothers will have to pay the damages to Daiichi as per the ruling of the Singapore International Arbitration Centre.
The Singh brothers have the option of challenging the HC’s ruling in the Supreme Court. “Today’s judgment by the Hon’ble Delhi High Court has given partial success to some of the sellers of shares of erstwhile Ranbaxy (Respondents). The Court has held the award to be unenforceable against the minors. However we are disappointed with the ruling against the rest of the sellers. After studying the order in detail the respondents will decide on further course of action,” an RHC Holding spokesperson said in a statement after the court’s ruling came. RHC Holding is the holding company through which the Singh brothers had made the sale to Daiichi.
Daiichi Sankyo, which finally exited Ranbaxy in April 2014 by selling its stake to home-grown multinational Sun Pharmaceutical Industries, had filed the arbitration case in 2013 in Singapore. It had accused the Singh brothers of concealment and misrepresentation of facts and sought compensation for losses. Ranbaxy, under the management of Daiichi, had in 2013 paid $500 million to the US department of justice pleading guilty to charges of felony. In May 2016, Singapore’s arbitration tribunal asked the brothers to pay damages of Rs 2,562.78 crore ($400 million) to Daiichi Sankyo for concealing and misrepresenting information during their stake sale in 2008 to the Japanese firm. With interests and legal fees the payable amount now comes to around Rs 3,500 crore.
Daiichi had then moved the Delhi High Court for enforcement of the award to recover the damages from the brothers. However, the brothers challenged the petition. When Ranbaxy was acquired in June 2008 by Daiichi, Malvinder Singh continued to be the CEO and MD, a post from which he stepped down in May 2009. The allegations about the wrong practices of Ranbaxy was first noted by the US Food and Drugs Administration (FDA) in 2006 with a final banning of drugs taking place in September 2008. In December 2011 the company agreed to sign a consent decree with the US authorities to resolve the criminal charges and provisioned $500 million for that. Later, in 2013, it pleaded guilty and paid the amount.
In September 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas (Madhya Pradesh) and Paonta Sahib and Batamandi (Himachal Pradesh) units, citing gross violation of approved manufacturing norms. Later, the US department of justice had moved a motion against the company in a local court alleging forgery of documents and fraudulent practice.
After Daiichi’s allegations, Malvinder Singh had hit back at the Japanese firm stating that it failed to manage the company properly and, therefore, was levelling “baseless charges” at him.