Delhi HC appoints forensic auditor to probe transactions linked to Fortis in Daiichi case

A Delhi court has ordered a forensic audit of Fortis Healthcare’s transactions and summoned former billionaire founders Malvinder and Shivinder Singh as Daiichi Sankyo seeks to push ₹arbitration award in the amount of 3,500 million crowns.

High Court judge Subramonium Prasad granted Daiichi’s application seeking an independent review of transactions involving Fortis Healthcare Ltd (FHL), Singapore’s RHT Health Trust, Malaysia’s IHH Healthcare Berhad and other entities linked to the Singh brothers. The decision is a significant point in one of India’s longest legal battles to enforce an international arbitration award.

A detailed order was not available at the time of publication.

The inquiry will examine how the brothers’ stake in Fortis has changed through share pledges and liquidations, as well as ₹4,666 million transaction that included the acquisition of a controlling stake in Fortis by RHT and IHH in 2018. Independent investigators are also reviewing the conduct of 17 financial institutions that sold pledged shares despite court restrictions.

The decision carries out a mandate from the Supreme Court, which found the Singh brothers guilty of contempt for violating asset-freezing orders. Daiichi’s recovery efforts depend on the forensic auditor’s findings.

The dispute started after that Daiichi acquired Ranbaxy Laboratories from the Singh family in 2008 and later claimed that important information about regulatory issues at the drugmaker was not disclosed.

The enforcement proceedings later expanded beyond the direct assets of the Singh brothers. Daiichi expressed concern about transactions involving companies linked to the brothers, including Fortis, and entities that held or handled Fortis-related assets.

The Singh brothers, through group companies, held a substantial stake in Fortis. Daiichi argued that the stake was gradually diluted through pledges and sales of Fortis shares, potentially reducing the assets available to satisfy its assignment.

Daiichi argued that detailed forensic audits were needed to track the movement of funds and assets and determine which assets remained available to meet its arbitration award.

However, the Singh brothers and the banks argued that the pledges and subsequent sale of shares were based on existing credit arrangements and business considerations.

In September 2022, the Supreme Court found Malvinder and Shivinder Singh guilty of contempt for breaching court orders designed to protect assets available for Daiichi’s recovery. The court noted that their stake in Fortis plummeted after the shares were frozen and sold.

However, the Supreme Court did not conclude that the Fortis-RHT transactions were fraudulent. Instead, it directed the Delhi High Court to consider the appointment forensic auditors to examine transactions involving Fortis, RHT, banks and financial institutions to determine whether they were bona fide and is done for genuine business reasons.

This led to the current proceedings in the Delhi High Court, where Daiichi sought a forensic examination of the transactions.