By a judgment delivered on 31 January 2018, the Delhi High Court has held that the award passed in favour of Daiichi Sankyo Company Ltd. (the Petitioner) against the Singh Brothers and their associated companies (the Respondents) (erstwhile owners of Ranbaxy Laboratories Limited i.e. RLL) is enforceable (except against the minor Respondents). It may be noted that the arbitration proceedings were conducted under the aegis of the International Chamber of Commerce (ICC) whereas the Award was made in Singapore. The parties had chosen Singaporean law as procedural law of arbitration and Indian law as the governing law of the contract.


The facts in brief are: The Petitioner agreed to purchase from the Respondents their total stake in RLL for a value of over INR 1980 crores under a Share Purchase and Share Subscription Agreement dated 11 June 2008 (SPSSA) (aside from also purchasing shares from the public pursuant to SEBI Regulations), with payment being made in November 2008. Thereafter, in November 2009, the Petitioner claimed to have discovered the existence of an internal document known as a Self-Assessment Report (SAR), prepared sometime in 2004 by an RLL employee, which extensively dealt with widespread fraudulent practices at RLL including intentionally fabricating data for regulatory submissions to various regulators across the world, which had triggered a series of investigations by the US Food and Drugs Administration (FDA) and the Department of Justice (DOJ) from 2006 onwards. The Petitioner claimed that these investigations resulted in RLL having to eventually settle the matter with the said authorities at an estimated cost of USD 35 to 50 million per year (with the FDA) and USD 500 million (with DOJ) in 2011. It was alleged by the Petitioner that (i) SAR had been deliberately concealed by the Respondents in concert with some employees of RLL and (ii) the Respondents had deliberately misrepresented the genesis, nature and severity of the investigations against RLL, thereby fraudulently inducing the Petitioner to buy RLL to its peril. The Petitioner alleged that it had suffered direct and indirect losses as a result of entering into the SPSSA based on such fraudulent representations and claimed damages under Section 19 of the Indian Contract Act, 1872 (Contract Act). It is relevant to note that, during the pendency of the arbitration proceedings, on 23.05.2015, the Petitioner went on to sell its stake in RLL to Sun Pharma for a sum of INR 2267 crores.

The Award

The Arbitral Tribunal (AT) in Singapore rendered its award (2:1) in favour of the Petitioner and held that the Respondents had indeed misrepresented and actively concealed facts relating to the investigations against RLL in the United States and therefore fraudulently induced the Petitioner into buying their stake in RLL. The AT also held that merely because the Petitioner did not have /had forgone an indemnity claim in the agreement for losses suffered on account of such investigations, this would not preclude it from claiming damages since under Section 17 of the Contract Act an act of fraud could not be avoided by any express or implied agreement. The AT also held that on appreciation of facts, the Petitioner could not have reasonably discovered the fraud prior to 19 November 2009 and thus, given that the arbitration was invoked on 14 November 2012, the claim of the Petitioner was not time barred. In so far as the methodology of calculating damages is concerned, the Tribunal chose to resort to the “present value” of calculation and based on the return that the Petitioner expected to revive on its investment, as represented by the weighted cost of capital (WACC), and calculated the value that the Petitioner would have received from Sun Pharma had the sale taken place in November 2008.  The differential between the value that the Petitioner paid to the Respondents less the value that it would have received from Sun Pharma in November 2008 was calculated by the AT as damages payable to the Petitioner under Section 19 of the Contract Act.

Objections raised by the Respondents

The award rendered by the AT was objected to by the Respondents on various grounds. Primarily, it was argued by the Respondents that there had been no fraudulent representation on behalf of the Respondents and that the Petitioner was in no position to plead ignorance of the facts that it alleged were concealed from it. This was more so since significant information regarding the investigations was available in public domain. Thus, it was contended by the Respondents that Section 19 of the Contract Act has no application and that in any case there could be no grant of consequential damages under the Contract Act. The Respondents argued that in any case there was nothing to suggest that the disclosure of the investigations and consequent settlement with the authorities had any significant effect on the listed price of the shares meaning thereby that no loss was suffered by the Petitioner and the AT had, in fact, awarded restitution of loss of opportunities, which was a consequential damage which could not be granted either under the Contract Act or the agreement between the parties. It was contended that as there was no rescission of the contract by the Petitioner, the only damages that could be awarded to the Petitioner were compensating it for the impact of SAR and the penalty paid by Ranbaxy to the Authorities.

Judgement of the Delhi High Court

The Delhi High Court observed on the limited scope of interference in so far as enforcement of a foreign award is concerned and noted that under Section 48(2)(b) of the Act, the enforcement could be refused only if the award was contrary to the (i) fundamental policy of India (ii) interest of India and (iii) justice or morality. Further, the Delhi High Court affirmed that an award could not be said to be against the fundamental policy of Indian law in case there was violation of provisions of a statute but only if there was a breach of a substantial principle on which Indian law is founded. It further noted that under Section 19 the Contract Act, reasonable compensation was to be awarded to ensure that the plaintiff is put in the same position he would have been, if the fraudulent representation had been true. The Delhi High Court noted the analysis of the AT in awarding damages under Section 19 of the Indian Contract Act and stated that the AT had awarded damages taking into account various other aspects such as reputational issue faced by the Petitioner, opportunity cost of six years by not entering into a transaction with a different generic company, diminution in its dividend and the cost of dealing with the investigations pursued by the authorities. The Delhi High Court held that the approach of the AT as regards the methodology for calculating damages could not be faulted with, particularly given the limited scope of Section 48 of the Act. It also stressed on the fact that the legal position regarding quantification of damages is well settled and that the methodology that may be adopted in different circumstances was clearly within the domain of AT. It was also observed that no case had been made out for breach of statutory provisions much less breach of fundamental policy of Indian law. The Delhi High Court also rejected the plea of the Respondents that the AT had awarded consequential damages. On the issue that the claim of the Petitioner was time barred, the Delhi High Court held that the finding that the Petitioner could not have discovered the fraud committed by the Respondents prior to 19 November 2009 was a finding of fact recorded by the AT and thus could not be interfered with by the Court in exercise of its powers under Section 48 of the Act, since the arbitral tribunal was the master of quantity and quality of evidence. However, in so far as the issue of the award being against the minor Respondents is concerned, the Delhi High Court held that the finding of the AT that a minor is capable of a fraud through its agent under Section 183 of the Contract Act and that the minor Respondents were guilty of fraud through their agent was a finding which was contrary to the statutory position in India as laid down in the Contract Act and the Hindu Minority and Guardianship Act, 1956. Further, under Indian law, the fraud committed by the other major Respondents could not bind the minor Respondents. Thus, the Delhi High Court held that as regards the legal position on minors, it was the fundamental policy of Indian law to protect a minor and this was a substantial principle on which Indian law was founded. Thus, the award could not be held enforceable against the minor Respondents. Even otherwise, the Delhi High Court found the award to be ‘shockingly disproportionate’ to the minors in terms of the liability thrust upon them.


The present judgment of the Delhi High Court is yet another one in a series of recent judgments passed by the Indian Courts, prescribing minimal interference when it comes to enforcement of foreign awards. Taking a cue from judgments previously rendered by the Hon’ble Supreme Court in Shri Lal Mahal Limited vs. Progetto Grano Spa 2014(2) SCC 433 and Associate Builders. vs. DDA., (2015) 3 SCC 49 as also the recent judgements of the Delhi High Court in Xstrata Coal Marketing AG vs. Dalmia Bharat (Cement) Ltd. (2016 SCC Online Del 5861) and Cruz City 1 Mauritius Holdings v. Unitech Limited 239 (2017) DLT 649), the Delhi High Court, in the present case also, has refused to set aside the award simply because it may be possible to have another view on the factual and legal issues involved in the dispute. Moreover, by reaffirming that mere contravention of an Indian statute would not result in breach of the fundamental policy of Indian law and holding that it would take only a breach of substantial principle on which Indian law is founded to have the award set aside, the bar for setting aside foreign awards has indeed been set very high by the Delhi High Court.