The Delhi High Court has directed the appointment of a forensic auditor to examine transactions involving Fortis Healthcare (FHL), Malaysia-based IHH Healthcare Berhad and Singapore’s RHT Health Trust, in connection with the long-running dispute between Japanese pharmaceutical major Daiichi Sankyo and former Fortis promoters Malvinder Singh and Shivinder Singh.
Audit to Examine Fortis-IHH-RHT Transactions
The order follows directions issued by the Supreme Court in September 2022, after Daiichi Sankyo sought a detailed investigation into transactions involving Fortis, RHT, the former Singh promoters and other related entities.
Daiichi has sought scrutiny of the dilution of Fortis Healthcare’s shareholding, alleged breaches of undertakings given to the courts and transactions between Fortis and IHH. It has also alleged that Rs 4,666 crore was clandestinely transferred to RHT in Singapore.
IHH Acquired 31% Stake in Fortis
IHH Healthcare acquired a 31% stake in Fortis Healthcare for around Rs 4,000 crore in July 2018, following a competitive bidding process. The transaction has since become a key focus of Daiichi’s efforts to trace funds and enforce its arbitration award against the Singh brothers.
Religare Transactions Also Under Scrutiny
Daiichi has separately sought a forensic audit of transactions involving the Singh brothers and companies associated with the Religare Group. These include Religare Enterprises, Religare Finvest, Religare Capital Market, Religare Capital Market International (Mauritius) and Religare Comtrade.
Banks and Financial Institutions Named
In another application, Daiichi has asked the High Court to appoint forensic auditors to examine the conduct of 17 banks and financial institutions, including HDFC Ltd, Yes Bank, Axis Bank, Citicorp Finance, Aditya Birla Sun Life Insurance and Kotak Mahindra Investments.
The petition alleges that certain lenders invoked pledges over Fortis shares held by Fortis Healthcare Holding despite Supreme Court and High Court orders and undertakings provided by the Singh brothers. Daiichi has also alleged that loans were extended to loss-making entities without adequate due diligence.
Supreme Court Had Ordered Consideration of Forensic Audit
In September 2022, the Supreme Court directed the Delhi High Court to consider the appointment of forensic auditors to determine whether transactions undertaken by banks and financial institutions were bona fide.
The Supreme Court had also permitted examination of transactions between Fortis Healthcare and RHT, including transactions through which the Rs 4,000 crore received from IHH was allegedly transferred.
Dispute Stems From Ranbaxy Acquisition
The legal battle dates back to 2008, when Daiichi Sankyo acquired Ranbaxy Laboratories from the Singh brothers. Daiichi later secured a Singapore arbitration award against them and has been pursuing its enforcement in Indian courts.
The dispute subsequently expanded to transactions involving Fortis Healthcare, which was previously controlled by the Singh brothers. Daiichi maintains that extensive forensic audits are necessary to trace funds and ensure that sufficient assets remain available to satisfy the arbitration award.