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Orders into Fortis Share Dissipation by Singh Brothers
In a significant move to enforce a long-pending , the on Monday appointed a forensic auditor to investigate the systematic dissipation of Fortis Healthcare shares by former promoters Malvinder Mohan Singh and Shivinder Mohan Singh, allegedly in defiance of multiple court undertakings and .
Justice Subramonium Prasad allowed applications by Japanese pharmaceutical major seeking a forensic examination of transactions involving , its holding entity controlled by the Singh brothers, banks, and Malaysia’s . The award, passed in 2016, directed the Singh brothers to pay ₹2,562 crore for concealing US regulatory probes during Daiichi's acquisition of Ranbaxy. With accrued interest, the amount now stands at approximately ₹5,300 crore.
"The difficulties of a litigant in India begin when he has obtained a Decree"
Opening his judgment with a quote from an decision, Justice Prasad lamented that despite decades of such observations, “nothing has changed even today.” He noted that the award has remained unexecuted for nearly a decade while the judgment debtors enjoyed “several arrows up in his quiver to defeat the rights of a .”
The court recounted that from to , FHHPL's unencumbered shareholding in FHL plunged from over 5.29 crore shares to a mere 6.01 lakh shares—a drop of nearly 99%—despite six solemn assurances given to the court by the Singh brothers that the asset base would be preserved. The had earlier convicted the brothers for and directed the executing court to consider appointing a forensic auditor.
Assurances Broken, Assets Vanished
The Singh brothers personally controlled both FHHPL and FHL, serving as its Managing Director and Director until . Despite repeated undertakings—first in , then in January, March, and —that the unencumbered shares would be available to satisfy the decree, the holding was progressively pledged, transferred, and sold. The court found that these transactions occurred even after the passed on , and , directing that the shareholding be maintained.
Fortis Healthcare contended that it was a separate legal entity and had no role in the transfers, arguing that shares of a listed company are freely transferable and that promoter entities were not required to obtain pre-clearance under insider trading regulations at the relevant time. The court rejected this defense, observing that the corporate veil must be pierced where the structure is used to defeat court orders.
“If FHL functioned as the of Judgment Debtors No. 1 and 6, its plea of complete ignorance cannot be accepted at face value without first undertaking a factual enquiry,” Justice Prasad held. The court noted that the entire share capital of FHHPL was beneficially held by the Singh brothers, granting them absolute control, and that FHL had knowledge of the proceedings through its own disclosures to stock exchanges.
Court's Power to
Relying on precedents including , , and , the court affirmed that the corporate veil may be lifted to prevent fraud or improper conduct. It also cited English authorities such as to hold that a third party who knowingly assists in violating an injunction is liable for contempt, even if not originally bound by the order.
“The Court cannot throw up its hands in despair and state that even if its Orders have been flouted, it cannot remedy the wrong other than by punishing the wrongdoers with imprisonment,” the judgment stated. The audit is intended to enable the court to “undo the wrongs committed” and restore the sanctity of judicial proceedings.
Scope of the
The court appointed , as the forensic auditor, directing it to complete the exercise within six months. The audit will cover:
- The complete evolution of FHHPL’s shareholding in FHL from (date of first assurance) onward, including pledges, top-ups, transfers, and sales.
- The role of FHL, its officers, directors, and compliance officer in processing or facilitating these transactions.
- Transactions of 17 banks and financial institutions that extended loans secured by FHL shares, to determine whether only encumbered shares were dealt with or whether unencumbered shares were also converted.
- The trail of consideration received from share sales and its destination.
- The acquisition of a controlling stake in FHL by and the subsequent transfer of ₹4,666 crore to , Singapore.
- All entities, downstream companies, and individuals involved in the decision-making at each stage.
All concerned parties—including banks, FHL, and downstream entities—must provide documents within two weeks of a requisition. Failure to comply will be treated as contempt.
Not a Finding of Liability
The court clarified that the is “purely investigative in nature” and does not by itself fasten liability. The opinion of the auditor will be enabling the executing court to determine appropriate relief, which may include from those found to have aided the violations.
“The direction for is not an exercise in futility. The will pin point the exact manner by which this Court was deceived, the who aided and abetted in evasion of Court Orders by misleading the Court, so that the Court can take steps by fixing liability on the perpetrators of dissipation of shares to ensure that the is upheld.”
