Daiichi Sankyo, which finally exited the company in April 2014 by selling it to home-grown multinational Sun Pharmaceutical Industries, had filed the arbitration case in 2013 in Singapore.
Former promoters of Ranbaxy Laboratories Malvinder and Shivinder Mohan Singh have suffered a big jolt with a Singapore arbitration tribunal asking them to pay damages of Rs 2,562.78 crore to Daiichi Sankyo for concealing and misrepresenting information during the sale of their stake in 2008 to the Japanese firm.
Daiichi Sankyo, which finally exited the company in April 2014 by selling it 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 Daiichi management, had in 2013 paid $500 million to the US Department of Justice pleading guilty to charges of felony.
“The arbitration tribunal has issued an award by a majority of 2:1 in favour of the claimant for damages of an amount of R2562.78 crore, with Justice AM Ahmadi, former Chief Justice of India giving a dissenting opinion dismissing all claims of the claimant,” RHC Holding said in a statement. RHC Holding is among the sellers of shares of the erstwhile Ranbaxy Laboratories along with Oscar Investments, which have been named as respondents in the arbitration suit by the claimant, Daiichi Sankyo.
The statement added that the damage amount to be paid include “quantified interest, costs and expenses of the arbitration till the date of award and interest on above until date of payment, against all the respondents jointly and severally”. On its future course of action, RHC Holding said: “The company is exploring further legal options to challenge the majority award.” It, however, declined to share details, stating that “all the parties to the arbitration are bound by confidentiality obligations as a part of the arbitration proceedings”.
Malvinder Singh, who is currently chairman of Fortis Healthcare, declined to comment. His younger brother Shivinder Mohan Singh has already stepped down from the executive role of group companies and joined the Radha Soami Satsang Beas, a philosophical and spiritual organisation.
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 at Ranbaxy were first noted by the US Food and Drug Administration 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 US FDA had banned 30 generic drugs produced by Ranbaxy at its Dewas (Madhya Pradesh) and Paonta Sahib and Batamandi units in Himachal Pradesh, citing gross violation of approved manufacturing norms. Later, the US DoJ 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.
“Nothing was kept away from them (Daiichi Sankyo). It was they who approached us to buy the company, there was a proper due diligence, long dialogue, all documents relating US DoJ and FDA were shown to them. Now after five years to hear from them that we concealed information from them is totally baseless,” Malvinder had told FE in 2013. He had said that issues such as the one with US authorities are faced by several companies in the business and the right thing to do is to “deal with them, not pass on the blame if you fail in handling them”.