The Supreme Court on Monday sought a response from former Ranbaxy promoters Malvinder and Shivinder Singh, and others on an appeal by Japanese pharma major Daiichi Sankyo alleging that the brothers have diverted Rs 1,500 crore through their three dozen shell companies, including Pawan Impex and Sharan Hospitality.
A bench led by Justice UU Lalit while issuing a notice to the Singh brothers and other related entities, stayed the insolvency proceedings initiated against Pawan Impex and Sharan Hospitality, which are allegedly linked to the brothers and are instrumental in the fund diversion. It posted the matter for further hearing on January 31.
Challenging the Delhi High Court order that allowed insolvency proceedings to continue against the two shell companies allegedly set up by Singh brothers to divert funds, senior counsel Mukul Rohatgi, appearing for Daiichi, argued that despite the apex court staying insolvency process of 23 companies linked to the brothers, the latter have managed to get the two firms into insolvency so as to “frustrate” the arbitration award. He also wanted the apex court to freeze the assets of the two companies.
It said the HC had erred in directly allowing fraud to be legitimised by the Singh brothers and their garnishees to be granted a clean slate without having to compensate for it.
“The HC has failed to record any safeguard for the lawful decree holder (Daiichi) that has been systematically refused its rightful claim by the judgment debtors (Singhs) and their web of companies and garnishees … the impugned order sanctioned fraud to be wiped clean by way of statutory proceedings notwithstanding the status of the proceedings before the SC,” the petition said.
Stating that the insolvency proceedings seem “not only collusive but also mala fide,” Daiichi said the HC should have appreciated that CIRP “is a mere cloak to keep this tangible asset beyond” its reach. The HC erred in analysing the status of Pawan Impex and how it forms part of an enormous inter-linked web of companies, commanded and regularly used Singh brothers and related entities to siphon off monies, it said.
Daiichi Sankyo is pursuing the enforcement of a Rs 3,500-crore arbitration award against the Singh brothers, pronounced by a Singapore tribunal for concealing information regarding wrongdoing at Ranbaxy Laboratories during its sale for $4.6 billion in 2008. So far, Daiichi has been able to recover only `50 crore, despite having initiated execution proceedings more than four years ago.
While the Supreme Court had in April reserved its judgment on the issue, including contempt proceedings initiated against the Singh brothers, it had in December 2018 imposed status quo on the shareholding in Fortis Healthcare, thus stalling the sale of stake in Fortis Healthcare to Malaysian company IHH Healthcare.
The Supreme Court had in November 2019 held the Singh brothers guilty of contempt for violating its earlier orders that had restrained them from divesting their shares in Fortis Healthcare. However, it gave them one more chance to purge themselves of the contempt if each of them deposited Rs 1,170.95 crore. Both the brothers are in Tihar jail in the case filed by Religare FinVest, an arm of Religare Enterprises, for allegedly causing wrongful loss worth `2,397 crore.