‘5B RUPEES TAKEN OUT OF FORTIS’
Auditor has refused to sign off on Q2 results until funds are accounted for or returned, say sources
INDIA’S tycoon Singh brothers took at least five billion rupees (RM308.5 million) out of the publicly-traded hospital company they control without board approval about a year ago, said sources.
The funds were reported on the balance sheet of Fortis Healthcare Ltd as cash and cash equivalents, but the money was routed and placed under the control of the Singhs at the time, according to the people.
Fortis’ auditor, Deloitte Haskins & Sells LLP, refused to sign off on the company’s second-quarter results until the funds were accounted for or returned, said the people.
It wasn’t immediately clear what the Singhs may have used the funds for. Fortis founders Malvinder and his brother, Shivinder, had been working to pay back the money so the company could release its results, said the people.
A spokesman for Fortis said the company loaned 4.73 billion rupees to “certain corporate bodies in normal course of treasury operations” as of July last year, and in the third quarter of the current financial year those companies subsequently became part of the Singhs’ corporate group. The loans had since been recognised as related party transactions and repayment had started, said the spokesman.
Fortis announced on Thursday that Malvinder was resigning from his executive chairman role and Shivinder was stepping down as vice-chairman. The brothers cited a court judgment relating to the sale of a drugmaker they previously controlled, saying their resignation would “free the organisation from any encumbrances whatsoever that may be linked to the Promoters”.
India’s Companies Act requires board approval for related party transactions, and when they exceed a prescribed size, approval from shareholders is required. Those who authorise a related party transaction without the proper approvals can be punished under Indian law with up to a year in prison or a fine of as much as 500,000 rupees.
Fortis, India’s second-largest hospital chain, announced on Thursday it would report both its second- and third-quarter results next Tuesday. The company reported cash and cash equivalents of 5.4 billion rupees as of March 31 last year, compared with 1.4 billion rupees in the previous year.