New Delhi, Jan 31 (PTI) The Delhi High Court today upheld an international arbitral award of Rs 3,500 crore passed in favour of Japanese pharma major Daiichi Sankyo, which has alleged that the former promoters of Indias Ranbaxy Laboratories Ltd had concealed information about proceedings against them by American food and drug department.
A tribunal in Singapore had passed the award in favour of Daiichi holding that the former Ranbaxy promoters and brothers, Malvinder Singh and Shivinder Singh, had concealed information that the Indian company was facing probe by the US Food and Drug Administration and the Department of Justice, while selling its shares.
The high court paved the way for enforcement of the 2016 arbitral award passed by the Singapore tribunal against the Singh brothers who had sold their shares in Ranbaxy to Daiichi in 2008 for Rs 9,576.1 crore. Sun Pharmaceuticals Ltd later acquired the company from Daiichi.
Justice Jayant Nath, however, said the award is not enforceable against five minors, who were also shareholders in Ranbaxy, saying they cannot be held guilty of having perpetuated a fraud either themselves or through any agent.
The court said the award against the minors was "shockingly disproportionate" as they were acting through their natural guardians, the Singh brothers, and had received a total sale consideration of only Rs 14 lakh.
"At best on account of the fraud played by the guardian/ agent, the estate of the minor gained Rs 4-5 lakh. For this act, they have been saddled with a liability of Rs 3,500 crore approximately. If any fraud was committed by their natural guardian/agent the petitioners (Daiichi) were free to commence proceedings against him," the court said.
Regarding the award amount, the court said it was clearly within the domain of the arbitral tribunal to assess damages.
"The respondents (Singh brothers) received Rs 9,576.1 crore for sale of their shares. Damages have been assessed at Rs 2,562 crores plus interest and costs. The plea of the respondents cannot be accepted.
"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 court said.
Reacting to the verdict, the spokesperson of RHC Holding Pvt Ltd, which is owned by the Singh brothers, said, "Todays judgment by the 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."
Daiichi had approached the high court in 2016 to seek the enforcement of a Rs 2,562 crore Singapore arbitral award passed in April 2016, along with an additional claim of interest and lawyers fees incurred in connection with the proceedings.
The tribunals award had come after the Japanese company invoked arbitration clause against Singhs alleging that they concealed important information while selling Ranbaxy in 2008.
Daiichi had entered into a settlement agreement with the US Department of Justice, agreeing to pay USD 500 million penalty to resolve potential, civil and criminal liability.
The company had then sold its stake in Ranbaxy to Sun Pharmaceuticals for Rs 22,679 crore in 2015.
Singh brothers counsel had argued the award granted consequential damages which were beyond the jurisdiction of the arbitral tribunal and the award cannot be enforced under the provision of the Arbitration Act.
They had also raised the aspects of violation of fundamental public policy of India and time barred under the limitation act. They had alleged that Daiichi was fully aware of all facts and still chose to retain the Ranbaxy shares, instead of terminating the agreement and returning them. PTI SKV HMP PPS RKS ARC