Gopal Subramaniam, P&A win for Daiichi: Singapore HC upholds 3,500 Crore ICC Award in Daiichi’s favour

The High Court of Singapore, in its decision by a single judge bench, Justice Belinda Ang, has upheld the Rs. 3,500 Crores ($ 720 Million) ICC Arbitral Award in favour of Daiichi Sankyo Company, Limited, a Japanese Pharmaceutical company (referred to as the “Buyer”).

The Award was passed by the tribunal comprising Professor Lawrence GS Boo, Karyll Nairn and Justice (Retd.) AM Ahmadi on April 29, 2016.

The Award was a decision of a majority (“the Majority”) of the tribunal. The Majority decided that the Sellers are jointly and severally liable in damages for the harm suffered by the Buyer as a result of the fraudulent concealment

By her order, Justice Ang has dismissed the application to set aside the award against Malvinder Singh, Shivinder Singh and other members of the Singh family, except the minors. (“Sellers”)

The enforcement proceedings had commenced in India and the decision of the High Court of Delhi dismissing objections under Section 48 of the Arbitration and Conciliation Act, 1996 was delivered by Justice Jayant Nath in favour of Daiichi Sankyo on 31 January 2018. The Supreme Court of India, Bench of Justice Ranjan Gogoi and Justice R Banumathi, had upheld the decision of the High Court of Delhi by dismissing the Special Leave Petitions in limine on February 16, 2018.

The Buyer/Plaintiff, Daiichi Sankyo was represented by senior advocate Gopal Subramanium briefed by Pavan Bhushan and Jayavardhan Singh from GS Chambers, P&A Law Offices; Anand S Pathak, Amit K Mishra,  Abhijeet Sinha, and  Samridhi Hota along with Singapore-based law firm, Oon & Bazul LLP.

The Defendants, Malvinder Singh, and others were represented by senior advocate Harish Salve,  Alvin Yeo, SC briefed by WongP LLP. The Minors were represented by Lee Eng Beng, SC briefed by Rajah and Tann LLP and DMD Advocates.

The hearing before the High Court of Singapore commenced on April 9, 2018, and continued for four days until April 13, 2018.

Subramanium and Salve had been granted leave by the High Court of Singapore to appear and argue on certain aspects of Indian Law which were essential for the adjudication of the case. This was the first time that two senior counsel from India had been granted leave to appear and argue in the High Court of Singapore.

Justice Ang placed extensive reliance on the observations made by Justice Nath in his judgment dated January 31, 2018.

“..The present case concerns a de novo review of the award in the face of jurisdictional challenges to the powers of the Tribunal. Given the essence of the challenges, I am of the view that issue estoppel should not feature. Nevertheless, the decision of the Indian enforcement court may have persuasive effect, especially because the proper law of the Arbitration Agreement is Indian law…”

Justice Ang, while dealing with the issue of extended res judicata in arbitration held as follows:

“..More importantly, in my view, the concept of the extended doctrine of res judicata is wholly inapplicable to a court’s review of an arbitral award. Strictly speaking, the doctrine applies to preclude points in a second set of litigation proceedings on the merits of the dispute between the same parties where the points could have been brought in the earlier proceedings on the same dispute. In contrast, an enforcement proceeding or a setting aside proceeding of an arbitral award involves the review of the outcome of the arbitration proceedings. The court would not be concerned with the merits of the substantive claims between the parties. The points brought before the court would address the grounds for refusal to enforce or grounds for setting aside, instead of the merits of the dispute. Thus, the concept of the extended doctrine of res judicata, which encourages parties to settle all their claims on their merits in one single litigation to prevent a party from being vexed by subsequent litigation, is extraneous to the role of the court in reviewing arbitral awards…”

The aspect of damages, which was central to this matter was also adjudicated as follows:

“..I conclude that the Majority, in awarding the damages, was simply compensating for the difference between the purchase price paid and the actual value of the Shares, and taking into account the dividends received by the Buyer.

This is not an award for loss of opportunity and not an award for consequential damages. The Sellers acknowledged that they would not take issue if the Majority awarded for the difference in value between the purchase price and the actual value of the Shares..”

Additionally, the aspect of limitation which was raised by the sellers as a jurisdictional argument was also dealt with in the following manner:

“.. For the reasons stated, the Sellers’ characterization of the limitation of action as a jurisdictional question is misplaced. The Majority’s decision on time limitation does not fall under any ground in s 24 of the IAA or Art 34 of the Model Law…”

On the issue of fraud, Justice Ang observed that the High Court of Singapore was precluded from reviewing the finding of fact by the Award:

“…The decision of the Majority in holding the Non-Management Sellers liable on the ground that the fraudulent misrepresentations made were within the apparent authority of their agents is in line with the position under Singapore law, and cannot be contrary to the public policy of Singapore. What the Non- Management Sellers are seeking to accomplish in fact is to reopen the Majority’s finding that the fraudulent misrepresentations made by BBA and the other agents were within their apparent authority. The court is precluded from reviewing the finding of fact by the Majority…”

Further, Justice Ang reiterated the scope of setting aside or refusal of recognition/enforcement on the ground of public policy by observing:

“168 Ultimately, the fact that the Non-Management Sellers were made jointly and severally liable despite the size of their shareholding smacks of an error made by the Majority that this court cannot review, rather than a public policy objection. The scope of setting aside or refusal of recognition/enforcement on the ground of public policy is very narrow, and courts have to be cautious of a back-door appeal on the merits through this ground.”

This is perhaps one of the few cases where the seat court had reserved its decision on the validity of the award after the court of enforcement, being the High Court of Delhi, had upheld the enforcement of the award.

During the hearing, Subramanium, on behalf of Daiichi Sankyo had conceded to the liability accorded to the minors under the Award. In his view, even under Indian Law, the minors could not be held liable as that was against public policy. This argument was accepted by Justice Ang and the decision sets aside the award as held against the minors but has imposed a joint and several liability of Rs. 3,500 Crores plus interest on the Singh brothers and other members.

Daiichi Sankyo Company, Limited is presently in execution of the Award in the High Court of Delhi. In a nutshell, this decision clears the way for Daiichi Sankyo to continue execution in the High Court of Delhi.

Read the Judgment here.