Subramanium, Nigam, Kathpalia win for Daiichi against former Ranbaxy owners

The Delhi High Court last week allowed the petition filed by Daiichi Sankyo seeking enforcement of a Rs. 3500 crore foreign award passed in 2016 against former Ranbaxy CEO Malvinder Singh and his brother Shivinder Singh.

The Court upheld the award passed by the Arbitral Tribunal in Singapore consisting of Karyl Nairn QC, Professor Lawrence G Boo and former Chief Justice of India AM Ahmadi, which settled an arbitral dispute between the parties in 2016.

The dispute stems from a Share Purchase and Share Subscription Agreement (SPSSA) signed in 2008 whereby Daiichi agreed to purchase the entire stake of the Singh brothers in Ranbaxy for Rs. 198 billion.

However, Daiichi argued that during the acquisition process, Malvinder Singh and his business associates Vinay Kaul and Jay Deshmukh made false representations to it by concealing the Self Assessment Report.

It was further stated that false representations were also made about the genesis, nature and severity of pending investigations by the US Food and Drug Administration and Department of Justice against Ranbaxy, thereby fraudulently inducing Daiichi to acquire the shares.

Arbitration proceedings followed, and after successfully getting the award from the tribunal, Daiichi proceeded to approach the Delhi High Court for its enforcement.

In the High Court, Daiichi was represented by Senior Advocates Gopal Subramanium, Arvind Nigam and Arun Kathpalia, who were instructed by P&A Law Offices team led by Managing Partner Anand S Pathak and Partner Amit Kumar Mishra.

Senior Advocate Harish Salve represented the Singh brothers, whereas Senior Advocate Sandeep Sethi appeared for their minor children against whom the award was also applicable. Senior Advocates Neeraj Kishan Kaul and Rajeev Nayyar had also appeared for other respondents.

During the course of the hearings, Salve had contended the following:

• There is no fraudulent representation for grant of any relief under Section 19 of the Contract Act
• The award grants consequential damages which were beyond the jurisdiction of the arbitral tribunal and the award cannot be enforced under Section 48(1)(c) of the Arbitration Act.
• The arbitral tribunal has awarded damages beyond Section 19 of the Contract Act and is hence contrary to the provisions of codified law of India, the fundamental policy of Indian law, morality and justice and against the public policy of India.
• The claim of the petitioner was barred by limitation.
• The majority award has awarded multiple damages by way of award of
  interest.

Subramanium submitted that review of a foreign award on merits or re-assessment of evidence is not permissible under Section 48 of the Arbitration Act. He also submitted that the plea of limitation cannot be a bar to the enforcement of a foreign award and that the damages awarded to Daiichi are consistent with the Contract Act.

Sandeep Sethi submitted that no guardian was ever appointed to defend his clients before the arbitration proceedings. It was stressed that counsel did appear for the said minor respondents, but the Arbitral Tribunal in its wisdom chose not to appoint any guardian, which vitiates the Award.

The Single Judge Bench of Justice Jayant Nath observed that under Section 48 (2)(b), enforcement of a foreign award can only be refused if such an enforcement is found to be contrary to fundamental policy of Indian Law,  interest of India and justice or morality.

“It is not possible to come to a conclusion that the computation done by the Arbitral Tribunal is in complete breach of statutory provisions or is contrary to fundamental policy of Indian Law inasmuch as the said computation suffers from patent illegality going to the root of the matter.”

The Bench, while rejecting the contention of the respondents, held that the damages awarded cannot be said to be beyond the jurisdiction of the Arbitral Tribunal and that the claim is not time barred.

However, the Court accepted the objections against the award for damages passed against the minors and observed,

“Clearly, a minor is incapable of carrying out a fraud through an agent. As per Section 183 of the Contract Act a minor cannot employ an agent. In the facts and circumstances, it is manifest that respondents No.9 to 12 could not employ Mr.Malvinder, Mr.Deshmukh or Mr.Kaul as an agent and could not have committed a fraud through the said alleged agents.”  

Referring to the award against the minors as “shockingly disproportionate”, the Bench held that the conclusion of the Tribunal that the minor respondents are guilty of fraud through the said agent is a finding contrary to the statutory position in India.

The press release by Daiichi stated,

“The battle between the Daiichi Sankyo, the Japanese pharmaceutical company and Mr. Malvinder Mohan Singh and Mr. Shivinder Mohan Singh the promoters of Fortis and Religare took an interesting turn as the Delhi High Court on January 31, 2018, passed a landmark judgement by dismissing the objections by Mr. Singh and his associates and paved the way for the enforcement of the foreign award in favour of Daiichi Sankyo. Daiichi Sankyo can now proceed for execution to recover approximately INR 3500 Crores from the assets of the Singh brothers towards satisfaction of the award amount.”

Litigation in this dispute is also pending in the Supreme Court of Singapore, where the Singh brothers have challenged the Arbitral award. Salve was recently granted permission to appear for the Singh brothers in the case, which is likely to come up for hearing soon. Gopal Subramanium is slated to appear for Daiichi in that case as well.

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