Case Title:

Daiichi Sankyo Company Limited (Petitioner) Vs. Malvinder Mohan Singh and Ors. (Respondents )

Facts:

Daiichi Sankyo Company Ltd. ("Daiichi") filed a petition before the Hon'ble High Court of Delhi seeking enforcement of foreign arbitral award passed in its favour on April 29, 2016. The arbitration arose out of a Share Purchase and Share Subscription Agreement dated June 11, 2008 ("SPSSA") whereby Daiichi agreed to purchase from the Respondents their total stake in the Company named Ranbaxy Laboratories Limited. According to this agreement, the place of arbitration was to be Singapore while ICC rules were to be followed. The applicable procedural law for arbitration was International Arbitration Act of Singapore while the substantive law was the law of India.

Disputes arose between the parties when Daiichi claimed to have found out about the existence of an internal Self-Assessment Report ("SAR") that had details about the data falsification and wrongful practices carried out at Ranbaxy by the respondents. Daiichi claimed that it was kept in the dark by the Respondents about the seriousness of the matters pending with the US FDA and Department of Justice. It further claimed that it was induced to buy out shares of Ranbaxy due to such false representations made by the Respondents. It claimed that it had to suffer substantial direct and indirect losses as a consequence of such fraud. Daiichi subsequently sold Ranbaxy to Sun Pharma in April 2014. The arbitration between the parties was invoked on November 14, 2008 by the petitioners claiming compensatory damages on account of such false and misleading representations made by the Respondents. Award was passed on April 29, 2016 and thereafter the Petitioner filed petition against the Respondents for execution and enforcement of the said Award before the Hon'ble High Court of Delhi. Vide elaborate Order dated 31.01.2018, the Hon'ble High Court dismissed the objections of the Respondents raised as per Section 48 of the Arbitration and Conciliation Act, 1996 against the enforcement and execution of the said Award dated April 29, 2016.

Issues involved:

The following issues came up for consideration before the Hon'ble High Court:

  1. Whether the Award can be refused enforcement in terms of Section 48 of the Arbitration and Conciliation Act, 1996 ("Act")?
  2. Whether the arbitral tribunal exceeded its jurisdiction in awarding consequential damages and hence the same would be unenforceable?
  3. Whether the Award cannot be enforced as Award of Interest on awarded damages amounts to award of multiple damages?
  4. Whether the award is unenforceable as the claim was barred by limitation?
  5. Whether the award against minor respondents is unenforceable being against the public policy of India?

Decision:

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.