New Delhi [India], September 25 : The Supreme Court on Friday refused to entertain Fortis Healthcare Limited’s challenge to the Delhi High Court order directing a forensic audit in proceedings concerning Daiichi Sankyo’s efforts to enforce its arbitral award against former Fortis promoters Malvinder Mohan Singh and Shivinder Mohan Singh.
A bench led by CJI Surya Kant and Justices Joymalya Bagchi and V Mohana clarified that the observations made by the High Court against Fortis were only tentative and were recorded to support the direction for a forensic audit. The bench said these observations would not affect or influence any other proceedings.
Senior Advocate Abhishek Manu Singhvi, appearing for Fortis, submitted that the company was being subjected to an audit despite there being no specific allegation against it, its directors or officers. He said Fortis was not a party to the Daiichi arbitration and was not a judgement debtor.
Singhvi said Fortis, as a listed company, had no legal power to stop transfers of dematerialised shares held by its shareholders. He said the shares were freely transferable, and the company could not have prevented the transactions involving the Singh Brothers’ shareholding.
The bench, however, indicated that the audit could itself establish whether Fortis had any role in the transactions. The Court observed that the company could first allow the audit to take place and obtain a clean chit if nothing was found against it.
Justice Bagchi questioned whether Fortis’ role did not require examination in view of the change in its ownership and management. He referred to the new promoter coming into the company and questioned whether the circumstances warranted an examination of Fortis’ role.
Singhvi responded that knowledge of transactions involving the company’s shareholders could not be converted into liability for Fortis. He said the proceedings concerned a number of entities associated with the Singh Brothers, and Fortis had nothing to do with those entities.
Singhvi also highlighted that Fortis now has around 2.5 lakh public shareholders. He said the company’s position had substantially changed after IHH Healthcare’s investment of around ₹4,000 crore through a fresh issue in November 2018. According to him, IHH had not purchased shares from the Singh Brothers.
Daiichi Sankyo’s counsel Darius Khambata opposed the challenge. He submitted that the Singh Brothers had initially held a substantial shareholding in Fortis, which was subsequently pledged, and, after the banks invoked the pledges, their holding fell sharply.
Khambata said the transactions were interconnected, and the forensic audit was required to examine the movement of funds and the role of financial institutions. He also referred to the Supreme Court’s earlier directions identifying areas in which forensic examination could be undertaken.
The Court ultimately declined to entertain Fortis’ appeal. At the same time, it clarified that the observations made by the Delhi High Court—including those in paragraphs 201, 202, 219, 220, 223, 225 and 241 and other paragraphs where certain “strictures” were issued against Fortis—were tentative observations made for the purpose of justifying the forensic audit.
The Court further directed that the forensic audit should proceed without being influenced by those observations.