Delhi HC orders forensic audit of Fortis

The Delhi High Court has ordered a forensic audit of transactions involving Fortis Healthcare Ltd (FHL), IHH Healthcare Berhad, and RHT Health Trust. This follows a petition from Japanese pharmaceutical firm Daiichi Sankyo, which is pursuing enforcement of a multi-billion rupee arbitration award against former Ranbaxy promoters Malvinder Singh and Shivinder Singh.

Daiichi alleges a clandestine transfer of Rs 4,666 crore from Fortis to RHT Singapore. The company also seeks to audit the dilution of Fortis's shareholding and transactions between Fortis and IHH. IHH had acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore in July 2018.

Scope of the Forensic Audit

The audit will investigate several key areas. It will examine any alleged nexus between RHT, the former Fortis promoters, and other parties. Daiichi has also requested an audit of transactions between the Singh brothers and companies within the Religare Group.

The targeted Religare entities include Religare Capital Market, Religare Capital Market International (Mauritius), Religare Enterprises, Religare Finvest, and Religare Comtrade.

Investigation into Lenders' Conduct

In a separate application, Daiichi asked the court to appoint forensic auditors to examine the conduct of 17 banks and financial institutions. The petition makes serious allegations against these lenders.

Daiichi claims the lenders invoked pledges on shares of Fortis Healthcare owned by Fortis Healthcare Holding. This was allegedly done in violation of Supreme Court and High Court orders, as well as undertakings given by the Singh brothers. The petition further alleges the lenders extended loans to loss-making entities without proper due diligence.

The list of financial institutions named includes:

Legal Background and Daiichi's Argument

The current High Court order follows directions issued by the Supreme Court on September 22, 2022. At that time, the Supreme Court directed the Delhi High Court to consider appointing forensic auditors. The top court said auditors could examine whether transactions entered into by banks were bona fide.

They could also probe transactions between Fortis Healthcare and RHT. This includes other related transactions through which the Rs 4,000 crore received from IHH was transferred.

Daiichi argues that extensive forensic audits are necessary. The company says these audits, supervised by retired high court judges, are needed to ensure a sufficient inflow of money to satisfy the arbitration award against the Singh brothers.

The long-running dispute stems from Daiichi's acquisition of Ranbaxy Laboratories from the Singh brothers in 2008. Daiichi subsequently won a Singapore arbitration award against them and has been pursuing its enforcement in Indian courts ever since. The enforcement efforts have now extended to transactions involving Fortis Healthcare, which was formerly controlled by the Singh brothers.