Daiichi-Ranbaxy case: Delhi HC orders forensic audit into transactions of Fortis, Singh brothers

New Delhi, The Delhi High Court on Monday appointed a forensic auditor to examine the transactions of former Fortis promoters Malvinder Mohan Singh and Shivinder Mohan Singh in connivance with Fortis Healthcare Ltd, leading to dissipation of shares in connection with a Rs 3,500 crore arbitral award passed in favour of Japanese pharma major Daiichi Sankyo.

Justice Subramonium Prasad said the purpose of the forensic audit is to identify and reconstruct the entire chain of events to enable the court to identify the persons and the companies involved in the dissipation of shares.

The high court appointed S Ramanand Aiyar and Co as the forensic auditor to conduct the audit and complete the exercise within six months.


In its 213-page judgment, the court allowed the applications of Daiichi seeking appointment of a forensic auditor to unearth the transactions between Fortis Healthcare Ltd (FHL), Singh brothers and others leading to dissipation of assets which would have otherwise been sufficient to pay the decree amount passed in favour of Daiichi and against Singh brothers.

The court noted that there was a sharp decline in the shareholding of FHL held by Fortis Healthcare Holdings Private Limited (FHHPL), which was controlled by Singh brothers.

"This court is of the opinion that rather than this court entering into a sale-by-sale analysis and examining its disclosures, an expert would be in a better position to unearth these transactions.

"They would also be able to identify the complicity by FHL or violation of SEBI regulations by the companies and judgment debtors, and banks which will attract its own penal consequences," it said.

The court said though much time has been spent by both sides, where one side has alleged a brazen violation concerning the sale of unencumbered shares that violated the undertakings given to this court by judgment debtors No. 1 and 6 (Malvinder and Shivinder Singh) in connivance with FHL, while FHL is trying to defend those transactions, it will not be proper or possible for this court to make a detailed analysis of the transactions.

Due to conflicting stances of the decree holder, the banks, and the judgement debtors, this court is inclined to take the assistance of a forensic auditor to unearth these disputed assertions, it said.

The counsel for FHL submitted that the execution proceedings cannot be converted into a forum for fastening an independent liability upon a third party.

It was contended that the jurisdiction of the executing court is confined to enforcement of the decree against the judgment debtors and their assets and does not extend to adjudicating fresh causes of action against entities who are strangers to the decree.

The court directed the forensic auditor to examine and reconstruct the complete evolution of the shareholding of FHHPL in FHL after May 24, 2016 (date of first assurance given to the court), including the reduction in its shareholding over time, the movement of encumbered and unencumbered shares, creation of fresh pledges and all consequential transactions affecting the shareholding pattern.

A tribunal in Singapore had passed an arbitral award of Rs 3,500 crore in 2016 in favour of Daiichi and had ordered the Singh brothers to pay the damages for concealing information that their company was facing a probe by the US Food and Drug Administration and the Department of Justice while selling its shares.

On January 31, 2018, the high court upheld the international arbitral award passed in favour of Daiichi Sankyo and paved the way for enforcement of the 2016 tribunal award against the Singh brothers who had sold their shares in Ranbaxy to Daiichi in 2008 for Rs 9,576.1 crore.

Sun Pharmaceutical Industries Ltd had later acquired the company from Daiichi Sankyo.

In its judgment on Monday, Justice Prasad quoted an observation made by another high court in 1872 that "the difficulties of a litigant in India begin when he has obtained a decree".

The high court also quoted another judgment of 1925 in which it was observed that "courts in India have to be careful to see that the process of the court and the law of procedure are not abused by judgment-debtors in such a way as to make courts of law instrumental in defrauding creditors, who have obtained decrees in accordance with their rights".

"It is tragic to note that even after such strong observations by the Indian courts through the years, nothing has changed even today. Generations pass, but decrees are not executed as the judgment debtor has several arrows up in his quiver to defeat the rights of a decree holder and a decree holder is unable to reap the fruits of the decree even after winning two to three legal battles.

"The present case is also an example where a foreign award was passed on April 29, 2016, which has yet not been executed even after the award has been upheld right up to the apex court," Justice Prasad said.

The court said it is settled law that procedures are meant to advance the cause of justice and not to retard it.

The high court had earlier restrained the Singh brothers and others from selling or transferring their shares or any movable or immovable property.

The Singh brothers had disclosed their assets to the court in sealed covers in December 2016 and March 2017 during the pendency of Daiichi's plea seeking enforcement of the 2016 arbitral award passed by the Singapore tribunal against them.

On February 16, 2018, the Supreme Court had dismissed Singh brothers' appeal against the high court verdict upholding the international arbitral award.