Fortis Healthcare moves Supreme Court against Delhi HC order directing forensic audit

Fortis Healthcare Limited has moved the Supreme Court challenging a Delhi High Court order directing a forensic audit into transactions linked to the hospital chain and the erosion of shareholding held by its former promoters, Malvinder Mohan Singh and Shivinder Mohan Singh. The company filed a Special Leave Petition before the apex court on Wednesday against the High Court’s August 31 judgment in proceedings arising from Japanese drugmaker Daiichi Sankyo’s long-running dispute with the Singh brothers.

Fortis challenges order

Fortis has argued that it was neither a party to the arbitration between Daiichi Sankyo and the former promoters nor a judgment debtor in the subsequent enforcement proceedings and therefore should not be exposed to liability for acts allegedly committed by its erstwhile promoters. The challenge concerns the High Court’s directions for a detailed forensic examination of the evolution and diminution of the shareholding of Fortis Healthcare Holding Private Limited (FHHPL) in Fortis, along with transactions involving lenders and the subsequent acquisition of a controlling stake in Fortis by Malaysia-based IHH Healthcare.

Audit ordered in August

The Delhi High Court had on August 31 appointed S Ramanand Aiyar & Co as forensic auditor and directed it to reconstruct the chain of transactions involving Fortis shares. The exercise is intended to examine how FHHPL’s shareholding in Fortis changed after May 24, 2016, including the creation and invocation of pledges, transfers and sales of shares and other transactions that affected the shareholding pattern. The court said the exercise was necessary to establish the factual position before questions of liability and legal consequences could be considered.

Daiichi dispute at centre

The proceedings stem from Daiichi Sankyo’s efforts to enforce a foreign arbitral award against the Singh brothers and related entities. The dispute traces back to Daiichi’s acquisition of Ranbaxy Laboratories and allegations that material information was concealed during the transaction. The enforcement litigation subsequently expanded to examine the movement of assets that could potentially have been available to satisfy the award.

Fortis has maintained that the company under its present ownership and management is distinct from its former promoters and cannot be held responsible merely because the disputed transactions relate to shares in the company. The Supreme Court challenge will now test the scope of the High Court’s forensic audit directions and whether a company that was not a party to the original arbitration can be subjected to such an inquiry in enforcement proceedings.