Malvinder, Shivinder guilty of contempt: SC
NEW DELHI: The Supreme Court held Malvinder Mohan Singh and Shivinder Mohan Singh guilty of contempt of court on Friday, the latest blow to the founders of Ranbaxy Laboratories Ltd, which they sold to Daiichi Sankyo Ltd more than a decade ago without revealing to the Japanese drugmaker that it faced regulatory action in the US.
The apex court acted against the brothers for failing to heed an earlier order not to sell their shares in hospital chain Fortis Healthcare Ltd until they pay Daiichi the ₹3,500 crore awarded to it by a Singapore-based arbitration tribunal that upheld its complaint against the Singhs.
Also named in the contempt verdict was Indiabulls Housing Finance Ltd, the lender that accepted Singh brothers’ Fortis shares as collateral and then seized them when they failed to repay.
NEW DELHI: The Supreme Court held Malvinder Mohan Singh and Shivinder Mohan Singh guilty of contempt of court on Friday, the latest blow to the founders of Ranbaxy Laboratories Ltd, which they sold to Daiichi Sankyo Ltd more than a decade ago without revealing to the Japanese drugmaker that it faced regulatory action in the US.
The apex court acted against the brothers for failing to heed an earlier order not to sell their shares in hospital chain Fortis Healthcare Ltd until they pay Daiichi the ₹₹3,500 crore awarded to it by a Singapore-based arbitration tribunal that upheld its complaint against the Singhs.Also named in the contempt verdict was Indiabulls Housing Finance Ltd, the lender that accepted Singh brothers’ Fortis shares as collateral and then seized them when they failed to repay.
A Supreme Court bench comprising Chief Justice of India Ranjan Gogoi and Justice Deepak Gupta set sentencing in the contempt case for later. The bench refused to lift the block it clamped on the completion of the takeover of Fortis by Malaysia’s IHH Healthcare Bhd, saying it could start similar proceedings against that company too.
IHH is awaiting the written judgment from the court and will thereafter “consult its advisers for its next course of action”, according to its spokesman. Fortis didn’t immediately respond to an email seeking comments.
The court effectively halted IHH’s open offer to Fortis shareholders that would have brought its stake in India’s second largest hospital company above 50%.
Fortis shares ended 7.4% lower at ₹143.70 on BSE after plunging as much as 17.4%, the biggest intraday drop since February 2018, after the verdict was read out. The benchmark BSE Sensex gained 0.17% to 40,356.69 points.
Daiichi brought a contempt case against the Singhs, alleging that the execution of their arbitral award was in jeopardy because the brothers sold their controlling stake in Fortis to IHH.
After purchasing Ranbaxy from Malvinder and Shivinder in 2008, Daiichi found that the company faced action from the US Food and Drug Administration for wrongdoing that resulted in it agreeing to pay the Department of Justice $500 million to resolve potential civil and criminal liability. Daiichi eventually sold its stake in Ranbaxy to Sun Pharmaceuticals
Ltd.
The top court on March 14 asked the brothers to submit a concrete plan for paying the arbitral award to Daiichi Sankyo.
Friday’s decision came a day after the Enforcement Directorate arrested Malvinder Singh and former chairman and managing director of Religare Enterprises Sunil Godhwani in a money-laundering case.
Fortis now will have to prove that it has not violated any court orders and request that the open offer be allowed to go through, in future hearings. It can also seek review of the verdict by the court.
The block comes just as IHH’s efforts to turn around Fortis’ fortunes through cost-cutting was starting to show results. It will hobble the company’s attempt to move past a scandal in which it was allegedly defrauded of millions of dollars by its founders. The Singh brothers are no longer shareholders in Fortis.