Fortis Healthcare has moved the Supreme Court against a Delhi High Court order directing a forensic audit into alleged asset erosion by its former promoters, brothers Malvinder and Shivinder Singh. According to The Times of India, the hospital chain filed a Special Leave Petition (SLP) on September 16, challenging the High Court order dated August 31. The bank is challenging the court order to a 'limited extent', arguing it was neither a party to the 2008 arbitral award nor made a party to the execution proceedings by Japanese pharma major Daiichi Sankyo. As reported by The Economic Times, the bank stated that no allegations or findings were made against it to mandate a forensic audit. In its latest Supreme Court plea, Fortis has sought a stay on the forensic audit, claiming that the High Court has 'unjustly stigmatised a revived company, its public shareholders and its investors'. The company emphasized that it is a publicly listed company with 2.5 lakh shareholders and was not a party to the arbitration between Daiichi and erstwhile promoters Malvinder Singh and Shivinder Singh.
The latest developments reveal that Daiichi Sankyo's outstanding claim has risen to approximately ₹5,300 crore from the original ₹2,562 crore Singapore arbitration award won in April 2016. The award carried pre-award interest of 4.44% and post-award interest of 5.33%, with the amount rising due to interest accumulation over the years. The court observed that almost a decade had passed since execution proceedings began, while assets originally available to satisfy the award had progressively diminished. The audit will extend beyond the brothers to include Fortis, its directors and officers, company secretary, compliance officer, registrar and transfer agent, depositories, and other intermediaries.
The forensic audit will examine multiple transactions involving Fortis Healthcare, including the IHH Healthcare Berhad-Northern TK Venture (NTK) transaction where NTK acquired a 31.1% stake in Fortis Healthcare through a subscription involving about ₹4,000 crore consideration in November 2018. The audit will also scrutinize the subsequent transaction involving RHT Health Trust, Singapore, under which Fortis paid about ₹4,666 crore to acquire proprietary interests in assets held by RHT. The court has specifically brought the IHH Healthcare Berhad-Northern TK Venture transaction within the scope of the forensic audit, requiring examination of approvals, regulatory filings, share movement, and consideration flow. Prior to IHH's takeover, Fortis operated the hospitals under an asset-light model, while the hospitals were owned by Singapore-based RHT Health Trust, with money infused by IHH subsequently used to buy out the trust.
The audit will focus on the dramatic reduction in the Singhs' shareholding in Fortis through Fortis Healthcare Holdings (FHHPL). According to Business Standard, FHHPL held about 71.7% in Fortis when the award was passed, but its holding had fallen to around 52% by September 2016, with 5.29 crore unencumbered shares. The unencumbered holding subsequently fell sharply, with the court noting that FHHPL eventually held less than 1% of Fortis. Daiichi has contended that 32.5 million unencumbered Fortis shares - corresponding to nearly all of the 32.6 million shares identified by the Supreme Court as missing - were disposed of after assurances were given to the court. The Singh brothers maintain that several transactions followed the invocation of pledges by lenders or contractual top-up requirements as the value of pledged shares fell.
Fortis shares fell 2% on August 31 after the Delhi High Court directed a forensic audit of the IHH investment and the acquisition of RHT Health Trust. In its Supreme Court plea, Fortis emphasized that it is a publicly listed company with 2.5 lakh shareholders and was not a party to the arbitration between Daiichi and erstwhile promoters Malvinder Singh and Shivinder Singh. The company argued that the listed company is not answerable for the personal debt of its erstwhile promoters and that there is no evidence to show that it aided or abetted the Singh brothers. Fortis described IHH as an unconnected investor that came as a 'knight in shining armour' for the company, noting that the Singh brothers exited Fortis nine months before IHH's investments. The matter is linked to Daiichi's efforts to enforce its arbitral award against the erstwhile promoters of Fortis, with Malaysia-based IHH currently holding a controlling stake in the hospital chain.
