Daiichi-Fortis case: SC gives six-month jail to Singh brothers, declines to lift stay on Fortis-IHH open offer

The Supreme Court (SC) on Thursday announced a six-month jail term for Fortis’ erstwhile promoters, brothers Malvinder Singh and Shivinder Singh, in the Daiichi-Fortis case. The apex court also ordered a Rs 5,000 fine in the case. The Singh brothers were dragged to the apex court after Japanese drugmaker Daiichi Sankyo had challenged the Fortis-IHH deal to recover the Rs 3,600 crore arbitration award it had won in a Singapore tribunal against them.  

Along with this, the apex court has also refused to lift the stay on the Fortis-IHH open offer, and also ordered a forensic audit into the deal. The Delhi Court has been directed to decide on the open letter.  

It is to be noted here that the former Ranbaxy promoters were accused of hiding information regarding irregularities at Ranbaxy when its majority stake was sold to Daiichi Sankyo in 2008.  

On Thursday after the ruling, Fortis Healthcare said that the SC has concluded hearings with certain directions and that the suo-motu contempt has been disposed off. The company is now seeking legal advice to decide its future course of action. 

Also read: Fortis Healthcare crashes over 18% after SC declines to lift stay on IHH open offer

The open offer 

Malaysia-based IHH Healthcare had taken hold of a 31 per cent controlling stake in Fortis in November 2018 at a per-share value of Rs 170. This led to a mandatory open offer to acquire another 26 per cent of Fortis shares from the market. Thereafter in August 2018, IHH took over the stake in Fortis Healthcare by paying $1.1 billion in a bidding process overseen by an independent board. 

But due to legal tangles, the open offer could not be materialised as Daiichi Sankyo filed a plea challenging the deal. 

Daiichi Sankyo’s claim 

In 2018, Daiichi Sankyo moved the Supreme Court accusing Singh brothers for diverting funds through various shell companies to avoid the payments, which was in violation of the SC orders. It alleged that the Singh brothers and Indiabulls had together pledged 1.7 million shares of Fortis Healthcare held by Fortis Healthcare Holding, which was against the apex court’s order. It is to be noted that the Singh duo had sold Ranbaxy to Daiichi in 2008. Then, Sun Pharmaceuticals bought Ranbaxy from Daiichi for $3.2 billion. 

Daiichi also approached the court to stop the deal between the Fortis and Malaysia-based IHH Group, where the latter acquired a 30 per cent stake in the group for $1.1 billion with an open offer of 26 per cent stake. 

Following this, the Supreme Court stayed the Fortis-IHH open deal in December 2018.