Daiichi claim against children of ex-Ranbaxy promoters challenged before HC

The children of former Ranbaxy promoters—Malvinder Singh and Shivinder Singh—approached the Delhi High Court on Friday challenging Daiichi Sankyo's move to realise a Rs 2,562 crore Singapore arbitration award against them in favour of the Japanese pharmaceutical company.

Senior advocate Sandeep Sethi, appearing on behalf of the Singh brothers' children said that the decision of the arbitral tribunal to hold the juveniles joint and severally liable to pay the amount of the international arbitration award was bad in law as per the Indian Contract Act, 1872 under which minors were immune from liability.

Claiming that the protection of minors and their estates were part of the fundamental policy of India and an obligation of the court in enforcement proceedings relating to international arbitration, Sethi said the award could not be enforced against the juveniles as the arbitral tribunal had failed to even appoint a guardian on their behalf. According to the lawyer, even if the tribunal had appointed a guardian, it could only have been for the benefit of the interests of such minors and not against their detriment according to Indian law.

Sethi also highlighted that the award, which was for alleged misrepresentations made by Malvinder Singh, who had acted as an agent for the other parties during the negotiations in the Ranbaxy sale, could not be held against the children as they being minors were in no capacity to appoint an agent. "However, the tribunal wrongly concluded that the minors were liable for these (alleged) misrepresentations since Malvinder Singh had the authority to execute the share purchase agreement on their behalf," said the counsel for the children of the former Ranbaxy promoters.

Showing that the total shareholding of the children amounted to a mere Rs 14.7 lakh during the time of the sale, Sethi then tried to convince the court that the imposition of a Rs 2,562 crore liability on them was a severe penalty imposed by a tribunal which had proceeded without any authority of law.

The enforcement of the April 2016 Singapore arbitral award, along with an additional claim of Rs 1,000 crore in interest and lawyers' fees (bringing the total demand to Rs 3,562 crore) comes on the backdrop of actions initiated by Daiichi Sankyo against the former Ranbaxy promoters in relation to the purchase of a majority stake in the Indian pharmaceutical enterprise. The Japanese company had alleged that the stake sale was made through the concealment and misrepresentation of critical information regarding US Federal Drug Administration and Department of Justice proceedings, which cost Daiichi $550 million in settlement fees in the year 2013.

On March 6, the court had directed the Singh brothers to inform it before transferring any of un-encumbered assets in a bid to secure the amount of the award. The case is listed for further arguments on May 11.