Court allows enforcement of Daiichi Sankyo award

By Shreya Gupta and Sneha Jaisingh, Bharucha & Partners

Delhi High Court on 31 January rejected the Malvinder Singh group’s challenge to enforcement of an international arbitration award obtained by Daiichi Sankyo Company. Under the award, the group has to pay to Daiichi ₹25.6 billion (US$394 million) as damages, pre-award interest of ₹8.5 billion, Daiichi’s legal costs of US$14.5 million and US$599,250 towards Daiichi’s arbitration costs.

Shreya GuptaAssociateBharucha & Partners
Shreya Gupta
Bharucha & Partners

Members of the group had sold their interest in Ranbaxy Laboratories to Daiichi for ₹198 billion. According to Daiichi, the sellers had fraudulently concealed and misrepresented the severity of US regulatory problems faced by Ranbaxy at the time of the sale. According to the sellers, in addition to information available on the website of the US Food and Drug Administration (FDA), Daiichi, prior to the transaction, had access to the data room which contained all correspondence and other documents relating to the FDA investigations. Daiichi bought the stake with full knowledge on an “as is where is basis”. The majority of the arbitrators (former chief justice AM Ahmadi dissenting) accepted Daiichi’s claim. The award was brought before the high court for enforcement by Daiichi.

The sellers resisted enforcement claiming that the award was contrary to Indian law (which governed the sale and purchase agreement), opposed to public policy and in any event beyond the arbitrators’ jurisdiction. The sellers’ argued that as Daiichi had affirmed the transaction of sale and purchase of Ranbaxy shares it could not claim damages; it could only insist that it be put in the position it would be in had there been no false or fraudulent representation. Daiichi had sold the Ranbaxy shares at a profit to Sun Pharma. Any damages were consequential loss, which cannot be granted under Indian law. By awarding pre-award interest on damages the arbitrators had awarded multiple damages. Under the award minors within the seller group, who could not contract, were made liable. The sellers challenged jurisdiction on the grounds that the contract expressly excluded consequential loss and that Daiichi’s claim was barred by limitation, which under Indian law is a jurisdictional issue.

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Shreya Gupta and Sneha Jaisingh are senior associates at Bharucha & Partners.

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