Delhi HC Orders Forensic Audit in $4.6B Daiichi-Singh Case

The Delhi High Court has ordered a forensic audit to scrutinize transactions involving Fortis Healthcare, IHH Healthcare Berhad, and RHT Health Trust. This development comes as part of the ongoing legal battle over a $4.6 billion arbitration award secured by Daiichi Sankyo against former Ranbaxy promoters Malvinder and Shivinder Singh.

Daiichi Sankyo, a Japanese pharmaceutical giant, initiated the request for forensic scrutiny following directions from the Supreme Court in September 2022. The audit aims to investigate potential links between RHT, the erstwhile promoters of Fortis Healthcare, and other entities. Central to the probe is the dilution of Fortis Healthcare's shareholding and alleged breaches of previous commitments by the Singh brothers.

Focus on Fortis-IHH Transactions

The court has highlighted the necessity to examine the transactions between Fortis Healthcare and IHH Healthcare. IHH acquired a 31% stake in Fortis for Rs 4,000 crore in 2018. Daiichi alleges that these transactions included a covert transfer of Rs 4,666 crore to RHT Health Trust in Singapore, which requires thorough investigation.

Beyond Fortis and IHH, Daiichi has called for audits of dealings involving the Singh brothers and various Religare Group companies, such as Religare Capital Market and Religare Enterprises. The intent is to uncover any financial misconduct or breaches of court orders.

Involvement of Financial Institutions

Additionally, Daiichi has requested the High Court to appoint auditors to assess the conduct of 17 banks and financial institutions, including HDFC Ltd, Yes Bank, and Axis Bank. The petition accuses these lenders of violating court orders by invoking pledges on Fortis Healthcare shares, which were owned by Fortis Healthcare Holding, without appropriate due diligence.

The lenders are also alleged to have extended loans to financially unstable entities, potentially complicating the enforcement of the arbitration award. Daiichi argues that comprehensive forensic audits, overseen by retired high court judges, are essential to ensure the recovery of funds necessary to honor the arbitration judgment against the Singh brothers.

Legal Context and Implications

The legal proceedings stem from Daiichi's acquisition of Ranbaxy Laboratories from the Singh brothers in 2008. Subsequently, Daiichi won a Singapore arbitration award against the brothers, leading to prolonged legal disputes in India. The case's complexity has grown with the involvement of Fortis Healthcare, previously under the Singh brothers' control.

The ongoing forensic audit is expected to provide deeper insights into the financial transactions and relationships between the involved entities. This step marks a significant phase in Daiichi's efforts to enforce the arbitration award and holds implications for corporate governance and accountability in the healthcare sector.