The High Court of Delhi on 31.01.18, allowed a Japanese drug maker Daiichi Sankyo Company Ltd., to enforce a Foreign Arbitral Award passed by a Singapore Arbitral Tribunal, ordering former Ranbaxy Laboratories Ltd. owners (Singh brothers) and 13 others to pay around Rs. 3,500 crore (Rs. 2,563 crore in damages, along with interest @ 4.44% per year from November 7th, 2008 to the date of the Award) to the company.
Daiichi had accused the Singh brothers on charges of non-compliance with drug manufacturing quality norms and related falsification of data in filings to the US Food and Drug Administration. Daiichi had acquired a majority stake of the company in 2008, for $4.6 billion, through a Share Purchase and Share Subscription Agreement (“SPSSA”).
When disputes arose in November 2013, Daiichi invoked the Arbitration Clause of the SPSSA, seeking compensatory damages from the Singh brothers and 13 others, accusing them for ‘concealment and misrepresentation’, before an Arbitral Tribunal in Singapore.
In May 2016, Daiichi sought enforcement and execution of the Foreign Award passed by the Tribunal in the Delhi High Court, which was objected by the Singh brothers u/s 48 of the Arbitration & Conciliation Act, 1996 (“Act”), arguing that the Award granted consequential damages which were beyond the Tribunal’s jurisdiction, as the SPSSA specifically prohibited the grant of consequential damages and hence is unenforceable.
Few Respondents were minors and they objected to the enforcement of the Award, contending that a minor cannot be penalized for entering into a contract which per se was not enforceable. The High Court allowed their objection u/S 11 of the Contract Act, under which, a person competent to contract must be major and a contract must be entered into by a person who can make a promise or an offer.
Further, the court also considered Article 15, 39 (e) and (f) and 45 of the Constitution of India and noted that the present Award against the minor was “disproportionate”.
The objections of all other Respondents were dismissed by the Court, citing reasons that the scope of inquiry u/S 48 of the Act does not permit the court to “review” the Foreign Award on merits. Moreover, the Court does not exercise appellate jurisdiction over the Foreign Award and any procedural defect (like taking into consideration inadmissible evidence or ignoring any evidence of a binding nature) in a foreign arbitration does not lead to the non-execution of the Foreign Award on the ground of “public policy” under the said section. The Court held that the phrase “consequential damages” would not have been intended to oust/ exclude award of damages.