Shivinder Singh (left) with Malvinder Singh (right)
What is the dispute all about?
Till the last week of August, Singh brothers Malvinder and Shivinder, former promoters of Fortis
Healthcare, were seen as “inseparable”. Even in his public letter announcing severance of ties with his brother Malvinder, Shivinder conceded, “For two decades now, Malvinder and I, Shivinder Mohan Singh, have been synonymous with one another.” It is difficult to pinpoint what triggered a sudden change of heart for Shivinder to take a stand against his elder brother and drag him to court. According to Shivinder, he decided to break his silence as effort was being made “to foist the responsibility of poor decisions taken to an elder in the family who always stood by us as a father-figure ever since the premature demise of our father” , referring perhaps to the head of the Radha Soami Satsang.
The current dispute relates to mismanagement in the group’s healthcare business Fortis, the financial services arm Religare Enterprises and the group’s holding company, RHC Holding.
Shivinder claims that he publicly supported his elder brother’s chairmanship of the group, “who took decisions on behalf of the family”. Mismanagement in the group’s operations were manifest through decisions taken in Religare’s NBFC arm, the transaction and subsequent sale of the group’s flagship Ranbaxy to Daiichi, the subsequent arbitration case that went against the brothers, the group’s growing losses, he said.“…all these only go to show that the malaise is systemic”, Shivinder said in his statement. This action was long overdue “but got delayed in the fond hope that better sense shall eventually prevail and another ugly chapter of family feud would not be written in our family business’ glorious history”, he added.
What are Shivinder’s key allegations against his brother?
In his plea before the New Delhi-bench of the National Company Law Tribunal, Shivinder has claimed that the actions taken by Malvinder, along with former Religare Enterprises chairman and managing director Sunil Godhwani, have lead the group into a debt trap. Calling this an “act of oppression and mismanagement”, Shivinder’s plea alleges that his brother forged the signature of his (Shivinder’s) wife. He claims both his brother and Godhwani misused their positions “to perpetrate illegal financial transactions and various acts of mismanagement” that lead to massive losses to RHC Holding and its subsidiaries. In his plea before the National Company Law Tribunal, Shivinder has asked the courts to restrain Malvinder from transferring, selling any assets in RHC Holding.
What are the legal implications of these allegations?
Experts say the legal fight between the brothers will not have any material impact on existing court cases. “The brothers are bound by all the duties, obligations and liabilities of a promoter and that of a director in a board,” said a company law expert. Lawyers point out that the infighting in the promoter group may put under scrutiny the operations of other group companies, such as RHC Holding and Religare Enterprises. “The Ministry of Corporate Affairs could decide to investigate these companies as well,” added another lawyer.
Does the current dispute impact the legal liability of Shivinder in existing cases?
Taking his brother to court on allegations of mismanagement does not absolve Shivinder from the legal liabilities in existing cases. “One cannot shy away from one’s responsibilities as a director by hiding behind the excuse that the other director was older and therefore dominant and play victim in the eyes of the law,” said a corporate lawyer.
JN Gupta, managing director, Stakeholders Empowerment Services, a proxy advisory firm, points out that a board of director has a collective liability. “No one can say that he was in a non-executive role and hence did not know what was happening,” he added.
Could this be a legal fig leaf to distract existing court cases?
Legal experts are divided on this. The new set of allegations could obfuscate existing cases confronting the brothers and help them “buy time” say lawyers. “This will further muddy the legal battleground for the brothers and for those fighting them,” added another lawyer.