articles

March 22, 2018

Rate This Article
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

IS IT GAME OVER FOR THE SINGH BROS


- , [ ]

singhbros

From putting Ranbaxy on the global pharmaceutical map to selling their stake in it to daiichi sankyo to their subsequent downfall, Legal Era chronicles the saga of the company’s former Promoters, Malvinder and Shivinder Singh

Back in 1937, when cousins Ranjit and Gurbax started a drug distribution firm in Amritsar, Punjab, little did they imagine that Ranbaxy would go on to become the face of India’s booming pharmaceuticals industry. After defaulting on a loan however, the duo was forced to sell the company to one Bhai Mohan Singh, a man who had left Rawalpindi, Pakistan, for Delhi, following the Partition. Under Bhai Mohan Singh, the firm launched its first bestselling drug, Calmpose, in 1961. Over the years, the baton passed from Bhai Mohan Singh to his son Parvinder Singh and finally to his grandsons Malvinder and Shivinder Singh who became Promoters of Ranbaxy Pharmaceuticals. In 2008, when Ranbaxy was at the peak of its glory, particularly in the generics’ space, Malvinder and Shivinder Singh decided to sell their stake in it to Japanese drug manufacturer Daiichi Sankyo for a jaw-dropping $4.6 billion.

A marriage gone wrong

The Ranbaxy deal could not have come at a more opportune time for Daiichi Sankyo which was looking to enter the generics’ space. However, days into the deal, the US Food and Drug Administration (FDA) decided to ban nearly 30 drugs manufactured by Ranbaxy at two of its factories, on grounds of poor quality of drugs. A shocked Daiichi posted a net loss of $3.45 billion in the year through March 2009. In 2013, it sued Ranbaxy promoters Malvinder and Shivinder Singh for fraudulent misrepresentation and active concealment of material facts and information related to Ranbaxy Laboratories Limited at the time of the Daiichi-Ranbaxy deal. A year later in 2014-15, Daiichi sold Ranbaxy to Sun Pharmaceuticals but by then, the Japanese drug maker had reportedly already lost INR `6,000 crore.

International Arbitration Award favors DAIICHI

On 29 April, 2016, the Singapore Arbitral Tribunal comprising Ms. Karyl Nairn, Justice A.m. Ahmadi (Retd.), And Professor Lawrence G.S. Boo issued an international arbitration award favoring Daiichi Sankyo, which had purchased a majority stake in Ranbaxy in 2008. The Arbitral Tribunal concluded that Malvinder Singh and his affiliates were aware of an incriminating internal document called the Self- Assessment Report (SAR), which chronicled in great detail the fabricated regulatory filings in over 40 countries in relation to over 200 products manufactured by Ranbaxy and sale of adulterated drugs by the company; and yet, they misled, actively concealed, and fraudulently misrepresented to Daiichi about the SAR, its genesis and severity, and its possession by the US authorities. Accordingly, the Arbitral Tribunal granted Daiichi Sankyo `2500 Crore plus interest in damages. In May 2016, Daiichi Sankyo approached the Delhi High Court to collect its dues; however, the Singh Brothers had challenged the petition saying that “substantive objections” existed under India’s arbitration law to make the award unenforceable. That’s not all. Late in January this year, there were media reports about a New York investor having dragged the Singh brothers to the Delhi High Court for allegedly siphoning nearly $300 million to their privately-held firms. The brothers had also allegedly siphoned out $78 million from the hospital chain, Fortis Healthcare, of which they are Founder-Promoters.

Delhi HC upholds foreign award

On 31 January, 2018, the Daiichi Sankyo Vs Malvinder and Shivinder Singh battle took yet another interesting turn, with the Delhi High Court dismissing objections raised by the Singh Brothers and passing a landmark judgment which paved the way for enforcement of the international arbitration award in favor of Daiichi Sankyo. The Delhi High Court, in its 115-page order, found the foreign award to be enforceable under Indian law. The HC said that it was clearly within the Arbitration Tribunal’s domain to assess the damages. On the subject of Daiichi having sold Ranbaxy to Sun Pharmaceuticals, the HC said that Daiichi did not suffer any monetary loss thereafter but the negative effects of Daiichi’s acquisition far outweighed the positives. With the Delhi High Court verdict, Daiichi was free to recover `3500 crore from the assets of the Singh Brothers towards satisfaction of the award amount.

Soon after the Delhi HC order, on 8 February, 2018, the Singh Brothers resigned from the Board of the country’s second-largest hospital chain, Fortis Healthcare. In a stock-exchange statement, the brothers reportedly said, “In light of the recent High Court judgment upholding the plea of Daiichi to enforce the international arbitration award, we believe this is in the interest of propriety and good governance.” They added that the Fortis Board would be “better enabled and empowered to guide the organization without being hampered by the judgment and our (their) association at the Board.” Within a week of resigning from the Board of Fortis Healthcare, on 14 February, the Singh Brothers also quit the Board of financial services firm Religare Enterprises, of which too, they were Promoters.

SC rejects appeal against Delhi HC order

While the Singh Brothers moved the Supreme Court against the Delhi High Court’s order allowing Daiichi Sankyo to recover `3500 crore from them, the highest court of the land, too, rejected the brothers’ appeal. The apex court bench said, “Heard the counsels for the petitioners and perused the relevant material. We are not inclined to interfere. Special Leave Petitions are accordingly dismissed. Consequently, all applications are also disposed of.” Justice Ranjan Gogoi said, “We can only say: Wish you all the best for Singapore.” Reacting to the SC verdict, the Singh Brothers in an official statement said, “We respect the ruling by the Hon’ble Supreme Court of India. However, we are disappointed by the decision. The court decided not to go into the merits of the majority arbitration award. We maintain that there was no misrepresentation in the Ranbaxy deal to Daiichi Sankyo and these are false accusations against us made four years after Daiichi bought Ranbaxy” The brothers also said that they were now evaluating the option to challenge the majority arbitration award in Singapore courts. Amit Misra of P&A Law Office, which represented Daiichi Sankyo, issued a statement reading, “Meanwhile, the Apex Court’s ruling ‘clears the way’ for the award to be executed and for Daiichi to recover the money.”

Rocky road

Even as the Singh Brothers consider challenging the majority arbitration award in Singapore courts, the Delhi HC has barred them from selling or mortgaging their assets. The court order will be effective till 26 February, which is the next date of hearing for a plea for execution of the `3,500 crore international arbitration award passed by the Singapore Tribunal. It is disheartening that the Singh Brothers, who at one time were credited with putting India on the global pharmaceutical map, are today the subject of much scrutiny and litigation. That the Securities and Exchange Board of India (SEBI) has initiated an investigation into their alleged siphoning of funds only adds to their cup of woes.

 

Disclaimer - Statements and opinions expressed in this article are those from the editorial and are well researched from various sources. The content in the article is purely informative in nature.


Related Post

follow us

Publication & Enquiries

phone icon  +91 8879635570/8879635571

mail icon   editor@legalera.in

shares