If Daiichi Sankyo, the Japanese parent of Ranbaxy Laboratories, decides to pursue arbitration against the latter's previous promoters, this might be in Singapore, it is learnt.
According to sources in the know, the agreement signed between Daiichi Sankyo and the former promoters of Ranbaxy in 2008, at the time of purchase of the latter by the former, contains a provision to this effect.
On May 13, Ranbaxy pleaded guilty in the US of making fraudulent statements to the US Food and Drug Administration (FDA) related to testing of drugs in the past for gaining approvals. The company also agreed to pay a fine of $500 million. On May 22, Daiichi said it was evaluating legal remedies against the former promoters for hiding critical information related to investigations by the FDA and the US department of justice (DOJ) at the time of purchase.
"Daiichi Sankyo believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the DOJ and FDA investigations. Daiichi Sankyo is currently pursuing its available legal remedies and cannot comment further on the subject at this time," the Japanese drug maker had said.
When asked on the arbitration issue, Daiichi Sankyo said in an e-mail response to a questionnaire sent by Business Standard, "As we mentioned in the previous release, we will not be commenting further at this time."
Singapore is considered the hub for arbitration in Asia, according to Arun Chawla, assistant secretary general, Federation of Indian Chambers of Commerce and Industry. "The institutional arbitration structure is very strong in Singapore. Unlike India, where arbitrations are essentially carried out in English, institutions in Singapore have the capability to arrange for various laws and languages," he said.
"Singapore also has strict regiments for time and schedule. In India, arbitrations are slow, primarily because of judicial intervention," says Indian Council of Arbitration president N G Khaitan.
Daiichi Sankyo had bought the entire 34.82 per cent stake in Ranbaxy from its promoters, Malvinder Mohan Singh and family, in 2008 for $4.2 billion. Singh is now executive chairman of Fortis Healthcare.
Singh, however, counters Daiichi Sankyo's charges as "false and baseless". "Daiichi Sankyo purchased the Singh family's interests in Ranbaxy after a long negotiation process and after conducting full due diligence on the affairs of Ranbaxy. The negotiations on behalf of Daiichi Sankyo were led by Takashi Shoda, Daiichi Sankyo's current representative director and chairman, and Tsutomu Une, executive director, who is also the current chairman of Ranbaxy. They and Daiichi Sankyo were legally advised," he said.
Sources said the battle between the current owners of Ranbaxy and its former promoters is likely to get stretched and become a major corporate war in the near future.
According to reports, Daiichi on April 29, almost a month before it spoke about legal action against Ranbaxy's ex-shareholders, had filed five caveats in the Delhi high court, seeking to prevent any stay order being issued against it without being heard.
Daiichi started negotiations with the former Ranbaxy promoters in 2007 and signed the initial agreement in June 2008. The deal was finally concluded in November that year. Meanwhile, the US FDA imposed an import alert on Ranbaxy's facilities in Poanta Sahib and Dewas, and banned 30 drugs in the US from these units.