Daiichi case: Supreme Court directs Singh brothers to maintain status quo on Fortis

August 12, 2017 , Indu Bhan

In a big relief to Japanese drugmaker Daiichi Sankyo, the Supreme Court on Friday asked former Ranbaxy promoters Malvinder and Shivinder Singh to maintain the status quo with regard to their stake in Fortis Healthcare. A bench headed by Justice Ranjan Gogoi while issuing notice to 11 respondents, including the Singh brothers, Oscar Investments and RHC Holdings, also in effect blocked the two Fortis promoters from selling their stakes in the hospital chain till further orders.

The order came on a petition filed by Daiichi against the Delhi High Court’s June order that cleared the way for Singhs to potentially sell a stake in Fortis Healthcare. The Singhs control RHC and Oscar, which jointly own Fortis Healthcare Holding — the company that holds their stake in the hospital group.

RHC Holdings has an 80.67% in Fortis Healthcare Holding while Oscar Investment holds the remaining 19.33%. Fortis Healthcare Holdings in turn has a 52.5% stake in Fortis Healthcare.

Though the HC’s interim order of June 22 had ensured that the value of unencumbered assets held by the Singh brothers in holding companies should not change, the HC had said that “corporate transactions cannot be stalled at the behest of a decree holder, Daiichi in this case.” A Singapore tribunal had last year ordered the Singh brothers to pay the Japanese drugmaker Rs 2,562-crore damages for concealing information regarding wrongdoing at Ranbaxy while selling it for $4.6 billion in 2008. The Singh brothers are contesting this arbitration award in the HC. Along with interest and legal fees, the total liability was last pegged at Rs 3,500 crore.

Daiichi, which is no longer the owner of Ranbaxy after it sold the company to another Indian pharmaceutical major Sun Pharma for $3.2 billion in 2014, alleged that the Singh brothers had “wilfully and brazenly” disregarded the HC’s orders to protect its interests. “The respondents are attempting to frustrate the enforcement of an arbitral award in favour of the applicant (Daichii) by systematically selling their assets, thereby obstructing the enforcement of the award of April 29, 2016…” the petition stated.

The Japanese company further said that while Fortis Holdings had 52.20% stake in Fortis Heathcare on March 31, 2017, its shareholding decreased by more than 6% to 46.08% on June 221, 2017, the day when it moved the apex court.

Citing various disclosures made to BSE, Daichii said that as on July 20 the Fortis Holdings’ stake has reduced to 39.71% pursuant to a sale of shares in the open market.

According to it, in a short span of four months, the respondents have alienated approximately 15% of their shareholding in Fortis Healthcare and the hospital chain no longer remained a subsidiary of the respondents, thus they are “intentionally, systematically and consistently violating” the March 6 order of the HC that asked them to maintain the status and value of the unencumbered assets disclosed to it. It further stated that Fortis Heathcare, Fortis Malar Hospitals and SRL have applied to NCLT, Chandigarh, for sanctioning of a merger scheme of the three subsidiaries.

This, according to the Daichii, would lead to a change in the status of Singh brothers unencumbered assets as disclosed to the HC. “..after implementation of the scheme, the shareholdings of the promoters of Fortis Malar, will reduce from 62.40% to 41.92%, as per the filings made to BSE. Moreover, SRL, in which the respondents hold 61.72%, would cease to exist after implementation of the scheme,” the petition stated.

Daiichi had alleged that the brothers had concealed crucial information while selling majority stake in Indian drugmaker Ranbaxy Laborataries for $4.6 billion in 2008.

Reference:

http://www.financialexpress.com/industry/daiichi-case-supreme-court-directs-singh-brothers-to-maintain-status-quo-on-fortis/805032/

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