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Supreme Court Allows Forensic Audit in Fortis-Daiichi Dispute
Daiichi Sankyo bought Ranbaxy Laboratories from the Singh brothers in 2008.
Daiichi later said important information about US investigations had not been disclosed.
An arbitration tribunal ordered the brothers to pay about ₹3,500 crore.
Indian courts upheld that award, so Daiichi is trying to find assets that could help pay it.
A Delhi court ordered an audit of transactions involving Fortis Healthcare and related entities.
Fortis asked the Supreme Court to stop the audit.
Fortis said it was not part of the arbitration and should not be treated as owing the money.
The Supreme Court allowed the audit but said this does not prove that Fortis is responsible for the brothers’ debt.
The Supreme Court refused to stop a forensic audit involving Fortis Healthcare and the Singh brothers.
The audit relates to Daiichi Sankyo’s efforts to enforce a ₹3,500 crore arbitral award.
Daiichi alleged the Singh brothers concealed information about US regulatory investigations before selling Ranbaxy Laboratories in 2008.
Fortis argued it was not an arbitration party or judgment debtor and that the Singh brothers left the company in 2018.
The Supreme Court said the audit could proceed but that adverse observations against Fortis remained tentative and prima facie.
- Who
- Daiichi Sankyo, the Singh brothers, Fortis Healthcare, and the Indian courts are involved.
- What
- The Supreme Court allowed a forensic audit connected to enforcement of Daiichi Sankyo’s arbitral award against the Singh brothers.
- Where
- The proceedings are before the Delhi High Court and Supreme Court of India, concerning an award from a Singapore tribunal.
- When
- The dispute began with the 2008 Ranbaxy sale; the arbitral award was issued in 2016, and the Supreme Court issued its latest order after Fortis challenged the Delhi High Court’s August 31 order.
- Why
- Daiichi Sankyo seeks to trace transactions and assets that could potentially be used to satisfy the award against the Singh brothers.
Fortis Healthcare’s position
Daiichi Sankyo’s enforcement position
Fortis’s role in the dispute
Fortis Healthcare’s position
Fortis argued that it was never a party to the arbitration and should not be treated as a judgment debtor.
Daiichi Sankyo’s enforcement position
Daiichi sought an examination of transactions involving Fortis, the Singh brothers, and other entities while pursuing enforcement of its award.
Purpose of the audit
Fortis Healthcare’s position
Fortis challenged the Delhi High Court’s order directing the audit and highlighted that the Singh brothers had exited Fortis in 2018, followed by investment from IHH.
Daiichi Sankyo’s enforcement position
The audit is intended to reconstruct transactions, identify involved persons and companies, and examine the alleged dissipation of shares and other assets.
Legal significance of the order
Fortis Healthcare’s position
Fortis is not, by this order alone, finally found liable for the Singh brothers’ obligations.
Daiichi Sankyo’s enforcement position
The Supreme Court’s refusal to interfere allows the forensic audit to proceed, while leaving the Delhi High Court’s observations as tentative and prima facie.
Key facts
- Arbitral award
- Around ₹3,500 crore, ordered by a Singapore tribunal in 2016.
- Underlying transaction
- The Singh brothers sold Ranbaxy Laboratories to Daiichi Sankyo in 2008.
- Allegation
- Daiichi said information about US FDA and Department of Justice investigations had been concealed.
- Indian enforcement
- The Delhi High Court upheld the award on January 31, 2018, and the Supreme Court dismissed the brothers’ appeal on February 16, 2018.
- Forensic auditor
- S Ramanand Aiyar and Co was appointed by the Delhi High Court.
- Audit timeline
- The auditor was given six months to complete the examination.
- Supreme Court clarification
- The observations against Fortis supporting the audit are tentative and prima facie.
Quotes
Supreme Court bench
Bench comprising Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana
“We see no reason to interfere with the impugned judgment of the Delhi High Court.”
livemint.com
Sources
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