The Delhi High Court on Tuesday (Oct 29) ordered auctioning of the Fortis trademark in connection with the Rs 3,500 crore arbitral award passed in favour of Japanese pharma major Daiichi Sankyo and against the former Ranbaxy promoters. Justice Sachin Datta passed the order on an application filed by Daiichi Sankyo seeking the sale of the Fortis trademark, owned by RHC Healthcare Management Services Pvt Ltd which is one of the judgment debtors in the matter.
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NEW DELHI: The Delhi High Court took a pivotal step in the enforcement of a substantial arbitral award by ordering the auction of the Fortis trademark, marking progress in a high-profile financial dispute. The court’s ruling is connected to the Rs 3,500 crore arbitral award previously issued in favor of Japanese pharmaceutical giant Daiichi Sankyo against the former promoters of Ranbaxy, Malvinder Mohan Singh and Shivinder Mohan Singh.
The order was passed by Justice Sachin Datta, in response to an application by Daiichi Sankyo seeking to liquidate the Fortis trademark, currently owned by RHC Healthcare Management Services Pvt Ltd, a judgment debtor in this case.
In Daiichi Sankyo’s pursuit of the Rs 3,500-crore award granted by a Singapore tribunal, this latest move represents a significant legal enforcement milestone. The award was issued in April 2016 against the Singh brothers, former Fortis Healthcare promoters, in response to a breach of disclosure obligations. As the court highlighted,
“The Joint Registrar (Judicial) concerned of this court shall proceed with the public auction of the aforesaid asset of the judgment debtors viz. the Fortis trademark, and shall issue a proclamation…,”
-indicating the structured approach toward the auction process.
Escalating Liabilities and Enforcement Challenges
The court’s order detailed that as of the current date, the joint and several liabilities of the judgment debtors have escalated to approximately Rs 4,900 crore, reflecting accumulated penalties and interest. Despite Daiichi’s extensive efforts to recover the owed amount,
“only a small fraction amount had been realised by the decree holders so far,”
as counsel for Daiichi informed the court.
The estimated recovery value of auctioning the Fortis trademark is anticipated to be around Rs 191.5 crore, a sum which, while significant, still only partially satisfies the total outstanding debt.
Fortis Hospitals Ltd initially raised objections to the proposed auction, but its counsel later clarified that it had
“no objection on its part to the auction of the trademark,”
while also requesting the court to proceed with adjudicating the matter. Likewise, representatives for the judgment debtors, including the Singh brothers, did not oppose the auction outright, although certain concerns were raised about the valuation process.
They requested that an auditor be appointed to conduct a comprehensive valuation prior to the auction to ensure a fair sale price for the Fortis marks.
However, the court dismissed this request, stating-
“there was no merit in the contention and it wasn’t appropriate to accede to the request to appoint an auditor prior to the auction.”
Court-Ordered Auction and Reporting
The Delhi High Court has directed the Joint Registrar (Judicial) to submit a comprehensive report upon the conclusion of the auction process.
The court stipulated that the final sale of the Fortis trademark would be confirmed and completed only with its authorization, ensuring transparency and adherence to due process.
Background of the Arbitral Award Against the Singh Brothers
This high-stakes arbitration case stems from a 2016 ruling by a Singapore tribunal, which ordered the Singh brothers to pay Rs 3,500 crore to Daiichi Sankyo. The ruling came after the tribunal concluded that the Singh brothers had failed to disclose critical information about an ongoing investigation by the U.S. Food and Drug Administration (FDA) and the Department of Justice (DOJ) when they sold their shares in Ranbaxy to Daiichi Sankyo in 2008 for Rs 9,576.1 crore.
On January 31, 2018, the Delhi High Court upheld this international arbitral award, enabling Daiichi Sankyo to initiate enforcement proceedings against the Singh brothers. Although the court reinforced the legitimacy of the award, it clarified that the order would not be enforceable against five minors who were also shareholders in Ranbaxy, citing that the minors could not be held accountable for fraud, whether direct or through an agent.
Following the 2018 ruling, Daiichi Sankyo approached the Delhi High Court, seeking directives that would compel the Singh brothers to take steps towards fulfilling the Rs 3,500 crore award. Daiichi Sankyo’s appeal sought, among other measures, the attachment of the brothers’ assets to facilitate recovery of the debt.
Supreme Court Dismissal of Singh Brothers’ Appeal
On February 16, 2018, the Supreme Court of India dismissed the appeal filed by the Singh brothers challenging the High Court’s decision. The brothers argued that the arbitral tribunal’s award, which included consequential damages, exceeded its jurisdiction and hence could not be enforced under the Arbitration Act.
They further contended that Daiichi Sankyo had been fully informed of all material facts and could have chosen to terminate the deal and return the Ranbaxy shares instead of proceeding with the transaction. Despite these defenses, the Supreme Court upheld the High Court’s enforcement of the award, reinforcing Daiichi Sankyo’s entitlement to compensation.
As the court-mandated auction of the Fortis trademark proceeds, this legal action underscores the robust enforcement of international arbitration awards in India, especially in cases involving corporate misrepresentation and non-disclosure.
The auction outcome may serve as a precedent for similar cases, affirming the courts’ commitment to upholding arbitral rulings and providing recourse for aggrieved parties.
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