Ten years on, still struggling to execute foreign arbitral award: Daiichi tells Supreme Court

Japanese pharmaceutical company Daiichi Sankyo told the Supreme Court on Tuesday that nearly ten years after securing a foreign arbitral award against former Ranbaxy promoters Malvinder Mohan Singh and Shivinder Mohan Singh, it was still struggling to execute the award [Yes Bank Vs Daiichi Sankyo]..Senior Advocate Arvind Datar, appearing for Daiichi, said the company had pursued arbitration, obtained an award on April 29, 2016 and then initiated execution proceedings, but was yet to realise the award."It’s 10 years to execute an award, international award,” Datar said.He added that the situation has become a “spider’s web”, with disputes continuing over what happened to shares of Fortis Healthcare Limited (FHL) held by the judgment debtors..The submissions were made before a Bench of Chief Justice of India (CJI) Surya Kant and Justices Joymalya Bagchi and V Mohana during the hearing of challenges by banks and financial institutions to the Delhi High Court’s directions for a forensic audit in the execution proceedings initiated by Daiichi.Datar told the Court that the banks and the judgment debtors have taken conflicting stands on whether certain Fortis shares were encumbered, who invoked the pledges and who ultimately sold the shares.“The banks blame the judgment-debtors, judgment-debtors blame the bank, and I am the decree-holder, I am not getting any relief at all,” he submitted.Datar also explained why Daiichi had earlier stated that it did not want to pursue a forensic audit against the banks.He said there were 17 banks involved and that Daiichi had taken the stand out of “sheer frustration”, since hearing every bank separately would further prolong the execution proceedings. Daiichi had therefore asked that the forensic exercise proceed “once and for all”..The banks, on the other hand, argued that they were neither judgment debtors nor garnishees and that some of them were themselves owed money by the judgment debtors or their group entities..Senior Advocate Shyam Divan argued that opening up the books of a bank to a third-party forensic auditor would have serious consequences, particularly when Daiichi itself had ultimately said that it did not want a forensic audit of the banks.Divan, however, offered to extend full cooperation and provide records to the extent were required for the forensic audit concerning Fortis and the transactions in question.The banks also relied on Daiichi’s stand before the High Court. Divan pointed out that Daiichi had initially sought an audit concerning 17 banks, later restricted its prayer to three banks and subsequently filed a written note stating that it did not wish to pursue a forensic audit of any bank..However, the Supreme Court indicated that examination of bank records could still be necessary to bring the execution proceedings to their logical conclusion.At the same time, the Court accepted the banks’ concern that the High Court’s directions could be read too broadly.CJI Surya Kant clarified that the directions issued to the banks have to be read in the context of the commercial transactions and relationship between the judgment debtors, FHL, its holding company and the banks.“These directions pertain to the commercial transactions/relationship between the judgment-debtors, FHL, FHHPL and the banks,” the Court said..The Bench made it clear that the High Court order could not be understood as permitting a roving inquiry into the unrelated affairs of the banks.Thus, the forensic auditor may examine the banks’ records to the extent they relate to the Fortis share transactions in question, but the exercise cannot extend into an omnibus forensic audit of the banks’ wider affairs, the Court said while eventually turning down the appeals..The Court had on September 25 dismissed Fortis' appeal against the same order. .Divan was briefed for Yes Bank by Advocates Malak Bhatt, Samridhi and Tashi Saraf.Fortis was represented by Senior Advocate Abhishek Manu Singhvi instructed by a team from Saraf and Partners led by Vaibhav Kakkar (Senior Partner), Abhishek Swaroop, Sahil Arora, Sanya Sud, Gauhar Mirza (Partners), Paayas Pandit, Kaveesh Nair (Principal Associates), Anuj Garg (Senior Associate), Sonia Mangtani, Ria Surbhi, Ashvi Jain, Jay Sharma (Associates).Axis Bank was represented by Senior Advocates Shyam Divan and Ritin Rai with Advocates Shally Bhasin, Prateek Yadav, Jyotsna Punshi, Sonsie Khatri, Adit Deshmukh and Apporva Nangia from Shardul Amarchand Mangaldas. .Daiichi Sankyo was represented by Senior Advocates Mukul Rohatgi, Arvind Datar, Amit Rawal and Arvind Nigam, Advocates Giriraj Subramanium and Pawan Bhushan, along with a team from P&A Law Offices led by Managing Partner Anand S Pathak and comprising Nabik Syam, Anindita Burman, Shashank Kumar Anand, Chirag Gupta, Sai Srijan Neti and Rahul Krishna Sharma..Advocates Aditya Dewan and Naman Tandon appeared for Shivender Mohan Singh.