Ranbaxy’s $500 mn US fine: Daiichi may sue ex-promoters

INDIA-JAPAN-ECONOMY-RANBAXYDaiichi Sankyo, the Japanese owner of Ranbaxy LaboratoriesBSE -10.00 %, appears to be moving towards taking legal action against Malvinder Singh and Shivinder Singh, the former promoters of the Indian drug maker, after it accused ‘certain former shareholders’ of concealing crucial facts about investigations into the company by US federal authorities and said it was pursuing legal remedies.

“Daiichi Sankyo believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US DoJ ( Department of Justice) and FDA investigations,” said a statement issued by the company in Tokyo on Wednesday. “Daiichi Sankyo is currently pursuing its available legal remedies and cannot comment further on the subject at this time,” the statement added.

A person familiar with the situation told ET that Daiichi was examining the option of suing the Singh brothers for reputational damage and to reclaim the $500-million penalty that Ranbaxy had to pay to settle criminal and legal suits levelled against it in the US. It will claim that it was kept in the dark about the full nature of the investigations at the time the company was sold to it by the Singh brothers.

A senior partner in a Delhi-based legal firm said Indian laws do not permit an acquirer to reverse a transaction. “Usually, the acquirer has some in-built protection in the contract to cover such situations, such as seeking damages and indemnification. However, if the case is one of fraud or cheating, even a criminal case can be initiated,” he said.

An email sent to Malvinder Singh, who now co-owns Fortis HealthcareBSE -1.30 % and Religare with younger brother Shivinder, did not elicit any comment.

The Japanese company’s statement comes nine days after Ranbaxy agreed to pay a fine of $500 million for selling adulterated drugs in the US market and pleaded guilty to seven criminal counts, including intention to defraud and failing to report that its drugs did not meet specifications.

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