Daiichi Sankyo : Daiichi Sankyo was Japan’s 3rd largest pharmaceutical company, established by the merger of Sankyo Co., Ltd. and Daiichi Pharmaceutical Co., Ltd in September 2005.
Ranbaxy : Ranbaxy Laboratories Limited, India’s largest pharmaceutical company, was an integrated, research based, pharmaceutical company producing a wide range of quality, affordable generic medicines, used across geographies.
Purchase Deal of Daiichi to Buy Ranbaxy: Daiichi Sankyo was Japan’s 3rd largest pharmaceutical company, established by the merger of Sankyo Co., Ltd. and Daiichi Pharmaceutical Co., Ltd in September 2005.
Problem: Immediately after the deal, in 2009, Daiichi found that Singh Brothers made false representations to them by concealing a document known as the Self-Assessment Report (“SAR”) and also about the genesis, nature, and severity of pending investigations by the FDA and DOJ against Ranbaxy, thereby fraudulently inducing the petitioner to acquire the shares.
The SAR was prepared by a former employee of Ranbaxy who found out that the company had resorted to data falsification and fabrication in order to obtain quick regulatory approval for hundreds of drug products in dozens of countries around the world. A copy of this document was provided to the US Authority by a whistle-blower.
Case Details:
“In 2013, Ranbaxy pleaded guilty to charges related to drug safety and agreed to pay $500 million in civil and criminal fines under a settlement with the US department of justice.The charges were of non-compliance with drug manufacturing quality norms and related falsification of data in filings made to the US Food and Drug Administration at least six years earlier” In November 2013, Daiichi took the dispute over the alleged “concealment and misrepresentation” of information to the Singapore arbitration tribunal.
Judgment Details: In 2016, the Singapore International Arbitration Centre had order the Singh brothers to pay $500 million for concealing information about alleged suppression of facts at Ranbaxy Laboratories when its shares were sold to Daiichi Sankyo for $4.6 billion in 2008. In May 2016, Daiichi moved the Delhi high court to enforce the arbitration award. 2.In January 2018, the Delhi High Court delivered judgment in the area of commercial contracts by upholding an award of an arbitral tribunal made in Singapore in the commercial arbitration between the previous owners of Ranbaxy Laboratories Limited and Daiichi Sankyo Company Ltd. The Ex Ranbaxy promoters had challenged the decision by the arbitration tribunal before the courts of law in India and Singapore. The counsel representing Singh brothers had argued before Delhi High Court that the Singh brothers are not liable to pay till the matter is sub judice in the Singapore Court of Appeal. 3. In December 2018,the High Court of Singapore has dismissed the plea to stay a Singapore tribunal arbitration award in favor of Daiichi Sankyo, and reserved its verdict.
After reviewing this case, some of the questions arise on legal aspects. Questions & views are listed below
Legal & Contractual Issues:
1. Who was at fault during due diligence stage?
The Singh brothers aware of the issues with US but was not informed to Daiichi about this issues , which is clearly evident the Dishonesty/misrepresentation by Singh brothers were found Fraud.
2. Whether the absence of an indemnity provision precludes the claimant from making a case of fraud?
“The tribunal found that the claimant did not have a right to indemnity under the agreement. However, it concluded that an act of fraud cannot be avoided by any express or implied agreement as per the Indian Contract Act”.Based on the Law , Court allows daiichi to claim the damage charges.
3. Whether Daiichi’s claim is time-barred under the Indian Limitation Act, 1963?
“The arbitral tribunal relied upon Section 17(1) of the Limitation Act, 1963 which states that ‘period of limitation’ of 3 years starts once the applicant has discovered the fraud or could, with reasonable diligence, have discovered it. It was decided that the burden of proof lies on the claimant. Daiichi found the issue in 2009 & Filed case in 2012, So the case was not barred by limitation accepted by tribunal “
Conclusion:
“The protection of indemnification is set forth in most commercial contracts to reduce chances of dispute between the parties. The Delhi High Court has now settled that the absence of an indemnity provision does not preclude a claim against fraud. Under the Indian contractual law landscape, this judgment also sets a precedent that the standard of awarding damages in cases of fraud reaches beyond the contractual principles of direct damages and in such cases, indirect damages can also be enforced.”
Reference:
1.//economictimes.indiatimes.com/articleshow/62712806.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
2.//economictimes.indiatimes.com/articleshow/62712806.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
4.https://barandbench.com/5-key-take-ways-from-ranbaxy-daiichi-dispute/
Business Management 