Fortis Healthcare Ltd on Monday said it is considering legal options after the apex court on Friday held former Ranbaxy promoters Malvinder Singh and Shivinder Singh guilty of contempt for violating its order that asked them not to divest their shares in the hospital chain and withheld an open offer by its new promoter IHH Healthcare Berhad.
The Supreme Court last week raised questions about Malaysian firm IHH's initial 31% acquisition of Fortis last year for a total of Rs 4,000 crore at Rs 170 apiece. “The order had in December 2018 directed that status quo with respect to the sale of controlling stake in Fortis to IHH should be maintained. We are told that this sale has already taken place,” the court had said.
“What is more shocking and clearly contemptuous is the manner in which in a well-thought-out plan, Fortis’ authorised capital was increased to transfer controlling interest in the company. Consequently, the controlling interest of Malvinder and Shivinder came down as the company changed hands,” the court had said.
Reacting to the court order, Fortis said that when IHH had bought 31% stake in the Indian company for Rs 4,000 crore, there was no stay on the sale. "The IHH transaction was consummated on 13 November 2018, which was more than a month before the status quo order was passed by the court, and the same would be adduced (cited as evidence) before the court during contempt proceedings," it said.
Fortis also said that the acquisition was done through fresh preferential allotment of shares after necessary approvals. It added that it did not buy shares from the company’s shareholders, including Malvinder and Shivinder.
The court also said that IHH’s fund infusion of Rs 4,600 crore into Fortis Healthcare to buy back hospital assets from Religare Health Trust was done in a very “dubious and clandestine" manner. The court underlined this transaction because around June 2017 Malvinder and Shivinder were the biggest unit holders of Singapore-listed Religare that owned several important hospital assets of Fortis. The court said transactions were done with an intent to ensure Japan’s Daiichi Sankyo Co. Ltd does not get the money Singh brothers were ordered to pay to the Japanese drug maker in 2016.
In February last year, the Singh brothers had resigned from the board of the hospital chain after the Delhi High Court upheld a plea by Daiichi against the duo. Their stake had fallen to just 0.77% in Fortis in May 2018 from nearly 25% at the end of December 2017. In June last year, Fortis said it will take legal measures against Malvinder for alleged fraud.
The following month, Fortis said that since the promoter group owned less than 1% in the company, the board had approved to reclassify the promoters from the “promoter category” to the “public category”.
The Supreme Court's contempt notice comes at a time when the hospital chain is back on the growth path. Fortis clocked a net profit of Rs 111 crore in the quarter ended September as compared to a loss last year. Its revenue rose 6.3% to Rs 1,212.2 crore during the quarter.