Malvinder Singh and Shivinder Singh, promoters of Fortis Healthcare, need to pay Japanese drug maker Daiichi Sankyo Rs 35 billion ($550 million), awarded in arbitration over the $4.6-billion sale of Ranbaxy Laboratories to Daiichi in 2008.
The verdict was pronounced by the Delhi High Court’s single-judge bench of Justice Jayant Nath. He rejected all objections raised by the Singh brothers and said the arbitration award was in line with Indian laws and policy. The ruling can still be appealed in a two-member panel of the Delhi HC or the Supreme Court.
The Japanese firm had moved the Delhi HC to enforce the arbitration award announced by a Singapore tribunal, which had found that the brothers had concealed critical information at the time of selling Ranbaxy to Daiichi. The brothers had contested that ruling in the Singapore court and also opposed implementation of the award in India.
Daiichi has also been appealing to the Delhi HC to stop the brothers from selling their assets to ensure they have enough funds to pay up the arbitration award. The brothers have been asked not to dilute their assets.
The court said Daiichi can claim the amount from the brothers and their companies but not from their children, who were also named in the suit filed by Daiichi.
RHC Holding, the holding company of the brothers, said, “Today’s judgment 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 didn’t immediately respond to Business Standard’s email seeking comments. However, P&A Law Office, a firm representing the Japanese company issued a statement. “Daiichi will now file an application with the court seeking execution of the award with steps such as the sale of shares and assets held by companies controlled by the Singh brothers including Fortis and Religare,” said Amit Mishra, a spokesperson of the law firm.
While shares of Religare Enterprises fell 3.1 per cent to Rs 43.20 a share on the BSE on Wednesday, Fortis Healthcare declined 5.3 per cent to Rs 139.1 a share. The benchmark S&P BSE Sensex dropped 0.2 per cent on the day.
The brothers have been under pressure to sell assets to deal with debt at RHC Holding. The credit rating on RHC’s long-term non-convertible debt was downgraded to “default” by India Ratings & Research in July after RHC missed scheduled coupon payments on its non-convertible debentures the previous month and reflects the group’s impaired ability to service debt, as per the rating agency.
The sale of Ranbaxy to Daiichi took place just months before the US Food and Drug Administration banned imports from two of the generic drug maker’s Indian plants. That same year, the US department of justice launched a probe, eventually resulting in a guilty plea by Ranbaxy and a $500-million settlement for selling adulterated drugs. The bothers were not named in the Ranbaxy probe.
In 2012, Daiichi filed a case with an International Court of Arbitration in Singapore, accusing the Singhs of concealing and misrepresenting critical information about the US probes into Ranbaxy. In 2016, the tribunal decided the Singhs should pay Daiichi both damages and interest. Daiichi sold Ranbaxy to Sun Pharmaceutical Industries for $3.2 billion in 2014.
The verdict was pronounced by the Delhi High Court’s single-judge bench of Justice Jayant Nath. He rejected all objections raised by the Singh brothers and said the arbitration award was in line with Indian laws and policy. The ruling can still be appealed in a two-member panel of the Delhi HC or the Supreme Court.
The Japanese firm had moved the Delhi HC to enforce the arbitration award announced by a Singapore tribunal, which had found that the brothers had concealed critical information at the time of selling Ranbaxy to Daiichi. The brothers had contested that ruling in the Singapore court and also opposed implementation of the award in India.
Daiichi has also been appealing to the Delhi HC to stop the brothers from selling their assets to ensure they have enough funds to pay up the arbitration award. The brothers have been asked not to dilute their assets.
The court said Daiichi can claim the amount from the brothers and their companies but not from their children, who were also named in the suit filed by Daiichi.
RHC Holding, the holding company of the brothers, said, “Today’s judgment 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 didn’t immediately respond to Business Standard’s email seeking comments. However, P&A Law Office, a firm representing the Japanese company issued a statement. “Daiichi will now file an application with the court seeking execution of the award with steps such as the sale of shares and assets held by companies controlled by the Singh brothers including Fortis and Religare,” said Amit Mishra, a spokesperson of the law firm.
While shares of Religare Enterprises fell 3.1 per cent to Rs 43.20 a share on the BSE on Wednesday, Fortis Healthcare declined 5.3 per cent to Rs 139.1 a share. The benchmark S&P BSE Sensex dropped 0.2 per cent on the day.
The brothers have been under pressure to sell assets to deal with debt at RHC Holding. The credit rating on RHC’s long-term non-convertible debt was downgraded to “default” by India Ratings & Research in July after RHC missed scheduled coupon payments on its non-convertible debentures the previous month and reflects the group’s impaired ability to service debt, as per the rating agency.
The sale of Ranbaxy to Daiichi took place just months before the US Food and Drug Administration banned imports from two of the generic drug maker’s Indian plants. That same year, the US department of justice launched a probe, eventually resulting in a guilty plea by Ranbaxy and a $500-million settlement for selling adulterated drugs. The bothers were not named in the Ranbaxy probe.
In 2012, Daiichi filed a case with an International Court of Arbitration in Singapore, accusing the Singhs of concealing and misrepresenting critical information about the US probes into Ranbaxy. In 2016, the tribunal decided the Singhs should pay Daiichi both damages and interest. Daiichi sold Ranbaxy to Sun Pharmaceutical Industries for $3.2 billion in 2014.
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