Malvinder and Shivinder Mohan Singh, the founders of Fortis Healthcare Ltd, have resigned from the board of the country’s second-largest hospital chain after the Delhi High Court upheld a plea by Japan’s Daiichi Sankyo Co. Ltd against the brothers.
The court last month dismissed the brothers’ objections to a Singapore arbitration panel’s ruling that had asked them to pay Rs 3,513 crore ($550 million) to the Japanese drugmaker.
“In light of the recent high court judgment upholding the plea of Daiichi to enforce the arbitration award, we believe this is in the interest of propriety and good governance,” the brothers said in a stock-exchange statement on Thursday.
They added that the Fortis board would be “better enabled and empowered to guide the organisation without being hampered by the judgement and our association at the board”.
Malvinder was executive chairman and Shivinder non-executive vice-chairman at Fortis. The board will discuss their resignation at a meeting scheduled for Tuesday, the statement said.
Fortis shares jumped as much as 24% on Friday.
The Singapore arbitration tribunal had, in May 2016, slapped a fine of Rs 2,563 crore ($385 million) on the brothers for allegedly concealing facts at the time of their stake sale in pharmaceutical firm Ranbaxy Laboratories Ltd to Daiichi in 2008. It had also asked them to pay Rs 950 crore more as interest, legal fees and other expenses that Daiichi incurred.
The brothers had challenged the Singapore tribunal’s ruling in a Delhi court, arguing the penalty could not be enforced under Indian law.
The Singh brothers had sold their stake in Ranbaxy to Daiichi in a deal worth $4.2 billion in 2008, following which the Japanese company posted a net loss of $3.45 billion in the year through March 2009. Daiichi sold Ranbaxy to Sun Pharmaceutical Industries Ltd in 2014.
The legal tussle with Daiichi has put the Singh brothers' reported plan to sell their stake in Fortis in limbo.
Over the past year, the Singh brothers have sold a slew of businesses under their flagship financial services firm Religare Enterprises Ltd such as global alternative asset management, health insurance, broking and wealth management.
However, the sale of Fortis has been stuck with different courts prohibiting its sale even as reports suggest potential bidders for the company. In March 2017, the Delhi High Court had directed the Singh brothers to disclose their assets after Daiichi asked the court to stop them from selling stakes in Fortis and Religare. In August 2017, the Supreme Court prohibited them from selling a stake in the hospital chain, landing a blow to their efforts to find a buyer for the company.
In another setback for the Singh brothers, private equity firm Siguler Guff & Co. LP’s fund Resurgence PE Investments Ltd (formerly Avigo PE Investments Ltd) filed a case in the Delhi High Court last month alleging that Religare Finvest Ltd fraudulently provided loans to Malvinder and Shivinder Mohan Singh.
Resurgence PE has a 6% stake in Religare Finvest. This was Resurgence’s second legal case against Finvest.