The Supreme Court on Thursday refused to allow Malaysia’s IHH Healthcare Berhad to proceed with its open offer for Fortis Healthcare. It also asked the Delhi High Court to consider the appointment of forensic auditors to examine share sale in Fortis way back in 2018.
The apex court also sentenced Malvinder and Shivinder Singh, the former promoters of Fortis to six months in jail and imposed a fine of Rs 5,000 each on them to be paid within four weeks. In case of any default in payment, they will have to undergo a further jail term of two months. Both the brothers are currently in Tihar jail in a case related to causing wrongful loss worth Rs 2,397 crore in Religare Finvest, an arm of Religare Enterprises.
The development saw the biggest slide in shares of Fortis Healthcare, which closed down 14.65% at Rs 265.30 on the BSE.
On its part, Fortis Healthcare said in a statement, “We understand that the proceedings before the Hon’ble Supreme Court have concluded with certain directions and the suo-motu contempt has been disposed off. We will go by the directions of the Hon’ble Supreme Court and will be seeking legal advice regarding our future course of action.”
Malaysia’s IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for $1.1 billion through the bidding route. It needed to make the mandatory open offer for another 26% stake. However, the apex court had subsequently put it on hold on a contempt plea filed by Japanese drugmaker Daiichi Sankyo against Malvinder and Shivinder Singh, the former promoters of Fortis.
A bench led by Justice UU Lalit, while disposing of various appeals including suo motu contempt, directed the HC to decide all the related issues while considering the execution proceedings. “Everything goes back to the executing court,” Justice Lalit said, reading out the order.
The SC said the Delhi HC will have to order forensic audit to analyse whether transactions entered into by the banks and financial institutions were bona fide. It added that the forensic auditors should also look into the transactions between Fortis Healthcare and RHT and also other related transactions by which Rs 4,000 crore received from IHH were transferred.
Denying any violation or wrongdoing, Fortis Healthcare had argued that the status quo order restraining it from transferring Rs 4,000 crore it received from Malaysian company did not cover any transaction with RHT Health Trust, Singapore, in which Malvinder and Shivinder allegedly had substantial interest till 2017. The hospital chain also said that it was not even a party before the SC then.
The SC had on February 15, 2018, allowed banks and FIs to sell shares of Fortis pledged with them on or before August 11, 2017. However, it had barred sale of shares which were pledged after August 11, 2017.
After the sale of Fortis to IHH materialised in July 2018, Daiichi had moved the court alleging that the Singh brothers had created fresh encumbrances on their shares which was barred by the SC. According to Daiichi, despite the statements and undertakings given by the former promoters to the HC, they had alienated their shareholding from time to time without informing the HC.
Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008.
The Supreme Court had in 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 had given them a chance to purge themselves of the contempt if each of them deposited Rs 1,170.95 crore.