Supreme Court orders forensic audit on Fortis-IHH share sale

The Supreme Court of India ordered a forensic audit of the share sale in Fortis Healthcare in 2018 and refused to allow the open offer from Malaysia’s IHH Healthcare Bhd to proceed, triggering a rout in Fortis’s stock. 

A ruling by three judge-panel, headed by Chief Justice U U Lalit on Thursday also sentenced former owners of Fortis Healthcare, Malvinder Singh and Shivinder Singh, to six months in jail.

The court sought a probe into sale of shares in Fortis by lenders and transfer of money to RHT Health Trust on a petition filed by Japanese drug maker, Daiichi Sankyo Co., which had acquired a pharmaceutical firm from the Singh brothers in 2008.

A lower court will decide on whether the open offer for Fortis can be allowed based on the evidence it gets, the judges said.

“Everything goes back to the executing court,” Justice Lalit said.

Daiichi is seeking execution of $500 million award against hospital chain’s former owners, the Singh brothers, in Delhi High Court.

Fortis’ shares plunged by as much as 19 per cent on Thursday, the most since February 2018, during trading in Mumbai after the court ruling. 

The verdict delays the takeover of the embattled hospital chain company by Malaysia’s IHH that has been pending for over three years.

IHH acquired about a third of Fortis in 2018 to became its largest shareholder.

The open offer for 26 per cent more shares could have helped IHH fortify position in the company.

After the first leg of the deal in August 2018, Fortis has embarked on a revamp with a cost cutting campaign implemented by Chief Executive Officer Ashutosh Raghuvanshi.

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