The ongoing legal woes of beleaguered promoters Malvinder Singh and Shivinder Singh may cast a shadow on the acquisition of Fortis Healthcare by IHH Healthcare Berhad. The Delhi High Court on Wednesday issued a notice to Fortis Healthcare, on a plea by Japanese drug maker Daiichi Sankyo, to restrain the share sale transaction. The next hearing of the case is slated for August 1.
The high court did not pass a stay order on the transaction. It, however, observed that the court will reverse the transaction if it finds Fortis muddying waters. The court has issued an injunction on sale and transfer of Fortis trademarks and directed the Singh brothers to disclose their foreign assets, said Amit Mishra, counsel for Daiichi Sankyo. On Wednesday, Daiichi Sankyo's lawyers argued for a stay on stake sale by Fortis, which was opposed by counsels of the hospital chain and promoter entities.
The Japanese drug maker, which won an arbitration award against Singh brothers, moved the court seeking an injunction on Fortis Healthcare stake sale to IHH. A similar application was moved in March this year when Fortis Healthcare and TPG-backed Manipal Hospital decided to merge their business.
Last week Fortis Healthcare announced Rs 40 billion deal with Malaysia’s IHH Healthcare after a long drawn out search for new owners. Fortis, the second largest hospitality chain in the country, has been under the regulatory scanner on charges of fund diversion by its erstwhile promoters. The healthcare chain has been looking for a suitor following widening losses and increasing pressure on it operating profit margins.
Daiichi Sankyo in its plea to the court said the implementation of the Fortis Healthcare-IHH transaction will contravene various orders issued by courts and defeat the execution of the arbitration award by the Singapore tribunal.
Daiichi has accused the Singh brothers of contravening court orders and rendering the arbitration award to a paper decree by divesting/encumbering assets, including those of Fortis Healthcare. The Singapore tribunal had directed the Singhs to pay Rs 25.62 billion in damages, including interest and legal fees. The award is now valued at Rs 35 billion.
The Japanese drug maker had acquired Ranbaxy from the Singhs for $4.6 billion in 2008. Daiichi took the Singh brothers to the Singapore tribunal in 2013 on allegations of concealing information related to wrongdoings at Ranbaxy. The Singhs have held in the court that Daiichi did not suffer any monetary loss after selling off Ranbaxy to Sun Pharma for Rs 227 billion in 2015. Daiichi has been trying to execute the arbitration order in India since 2016.
In a statement, Fortis Healthcare said it was neither a party in the arbitration award nor in the disputes between Daiichi and Malvinder Singh, Shivinder Singh and others. “We would like to confirm that the grounds raised by Daiichi in the said application are unfounded,” Fortis said. The health care group noted that Malvinder Singh and Shivinder Singh had already tendered their resignations as directors on February 8, 2018, and currently hold negligible shareholding in the company.
An email questionnaire sent to IHH Healthcare in this regard did not elicit any response. Experts said Fortis Healthcare’s legal woes may delay the closing of the deal with IHH Healthcare and might impact the cash flow of the cash-strapped healthcare chain.