INTERNAL ASSIGNMENT III

SEMESTER VI
Corporate Governance

NAME: BEE BEE ZAINAB

PRN: 16010126466
CLASS/DIVISION: IIIRD YEAR/E
 Daiichi Sankyo Company Limited vs Malvinder Mohan Singh And Ors.
INDEX
TOPIC PAGE NO.
Basic Information 2
Facts 3
Issue 4
Rules 4
Analysis 4
Conclusion 5
Bibliography 5

BASIC INFORMATION

Name of the Case

Daiichi Sankyo Company Limited vs Malvinder Mohan Singh And Ors.Court

Delhi High Court

Petitioner

Daiichi Sankyo Company Limited

Respondent

Malvinder Mohan Singh And Ors

Citation
2016(5) CTC54, 2016-4-LW615

Date of Judgment

31.01.2018

Names of the Judges

JAYANT NATH, J.
FACTS

1. The Petitioner agreed to purchase from the Respondents their total stake in RLL for a
value of over INR 1980 crores under a Share Purchase and Share Subscription
Agreement dated 11 June 2008 (SPSSA) (aside from also purchasing shares from the
public pursuant to SEBI Regulations), with payment being made in November 2008.

2. Thereafter, in November 2009, the Petitioner claimed to have discovered the existence
of an internal document known as a Self-Assessment Report (SAR), prepared
sometime in 2004 by an RLL employee, which extensively dealt with widespread
fraudulent practices at RLL including intentionally fabricating data for regulatory
submissions to various regulators across the world, which had triggered a series of
investigations by the US Food and Drugs Administration (FDA) and the Department
of Justice (DOJ) from 2006 onwards.

3. The Petitioner claimed that these investigations resulted in RLL having to eventually
settle the matter with the said authorities at an estimated cost of USD 35 to 50 million
per year (with the FDA) and USD 500 million (with DOJ) in 2011.

4. It was alleged by the Petitioner that (i) SAR had been deliberately concealed by the
Respondents in concert with some employees of RLL and (ii) the Respondents had
deliberately misrepresented the genesis, nature and severity of the investigations
against RLL, thereby fraudulently inducing the Petitioner to buy RLL to its peril.

5. The Petitioner alleged that it had suffered direct and indirect losses as a result of
entering into the SPSSA based on such fraudulent representations and claimed
damages under Section 19 of the Indian Contract Act, 1872 (Contract Act).

6. It is relevant to note that, during the pendency of the arbitration proceedings, on

23.05.2015, the Petitioner went on to sell its stake in RLL to Sun Pharma for a sum of
INR 2267 crores.
ISSUE

1. Whether the matter was not disclosed earlier when Daiichi took over through a
whistle-blower and whether the Singh brothers needed to invest in good governance?

ANALYSIS

Malvinder Singh and his brother Shivinder singh have a majority shareholding in RHC
Holding, a private limited company with assets of over Rs. 10,000 Crore. Listed Companies
such as Fortis Healthcare, and Religare, and unlisted companies including SRL Diagnostics
and Fortis Heathworld are controlled through RHC holdings.

According to page 301, point number 913 of Tribunal report “It is an extraordinary set of
circumstances where the CEO of the company material information about the FDA and DOJ
investigations which he deliberately withholds from the Board and from the majority
shareholders.”

The order lays out the path of deception that Ranbaxy took and how it kept Japan’s Daiichi
Sankyo – which bought Ranbaxy in 2008 for Rs 19804 Crore – in the dark even a year after
its purchase.

The Court upheld the enforcement of the award and observed that section 48 of the Act does
not allow the Court to reassess the correctness of an award on merits or re-appreciation of the
evidence. The ourt refused the claim of the respondents that since Daiichi sold Ranbaxy at a
profit, the tribunal was wrong in awarding such consequential damages. The objection raised
qua claim being barred by limitation was also rejected as the findings of the Arbitral Tribunal
regarding the date of knowledge of fraud were based on the appreciation of evidence on
record. The High Court held that it cannot go into the finding of fact recorded by the Arbitral
Tribunal, and also the findings recorded by the Arbitral Tribunal cannot be said to be contrary
to Fundamental

Policy of Indian Law. The Court held that the award does not pertain to grant of
consequential damages and is enforceable as per the Indian Law. The grant of pre-award
award was also upheld relying upon the relevant clause in the agreement between the parties
as well as in view of the law laid down by the Hon'ble Supreme Court of India in Renusagar
Power Company Limited vs. General Electric Company 1994 Supplementary 1 SCC
644 wherein it has been clarified that there is no absolute bar on the award of interest by way
of damages and it would be permissible to do so if there is usage or contract, express or
implied, or any provision of law to justify the award of such interest.

The Court although held that the award will not be enforced against the few minor
respondents as the same would be against the public policy of India. The Court observed that
minors are incapable of carrying out fraud through an agent and hence, in the present case,
they had no role to play in the fraud played upon the petitioner.

CONCLUSION:

The case at hand is an example where the Court has recognized the principle of minimum
interference in a foreign award. The Court went into detailed analysis as to the claim of the
respondent with respect to lack of inherent jurisdiction of the tribunal but once it was
established that the tribunal was within its powers in awarding damages, it did not find any
reason to interfere with the same. The only relief granted to the respondents is, with respect to
the enforceability of the award against the respondents being minor. However, since
substantial amount is involved in the matter and the points of law with respect to limitation,
awarding of interest on damages are debatable aspects, the parties are expected to battle it out
in further challenge to this Order passed by the Hon'ble High Court. We look forward to
further updates on this and will share the same with our esteemed readers.

BIBLIOGRAPHY

1. Legal databases referred:

a. Manupatra: http://elibrary.symlaw.ac.in:2053/pers/Personalized.aspx
b. SCC online:
https://elibrary.symlaw.ac.in:2191/Members/SearchResult2014.aspx/