Supreme Court upholds Fortis forensic audit probe

The Supreme Court on Friday refused to interfere with a Delhi High Court order directing a forensic audit of Fortis Healthcare in connection with the Daiichi Sankyo-Singh brothers dispute. However, a Bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana clarified that the High Court’s observations against Fortis were only tentative and prima facie and would not bind the forensic auditor.

The investigation will focus on transactions related to the Singh brothers’ stake in Fortis, which fell from approximately 70% to less than 1% by 2018. The dispute originated from Daiichi’s attempts to enforce a 2016 arbitral ruling against the Singh brothers and other debtors. During legal proceedings, their shareholding plummeted just as Malaysia-based IHH Healthcare injected ₹4,000 crore into the company in November 2018. Fortis maintained that the investment occurred after the brothers had divested their holdings and was approved by an independent board.

The Delhi High Court subsequently directed a forensic audit while examining the dissipation of shares and other transactions connected with Fortis. Fortis contested the order, arguing it had no involvement in the arbitration or enforcement process and could not be held responsible for the actions of its former promoters. The company’s legal team emphasized that, as a publicly listed entity, it lacked authority over dematerialized share transfers under the Depositories Act.

Senior Advocate Abhishek Manu Singhvi, appearing for Fortis, argued that the company has around 2.5 lakh public shareholders and had no role in the arbitral proceedings. The Supreme Court, however, questioned whether Fortis’ management could have been unaware of the status quo orders concerning the Singh brothers’ shareholding and whether the role of those managing the company during the relevant period required examination.

Meanwhile, Senior Advocate Mukul Rohatgi, appearing for Daiichi, opposed the challenge.He told the Court that Daiichi had obtained its award in 2016 against several judgment debtors, including the Singh brothers, and alleged that their substantial holding in Fortis had disappeared despite assurances given during court proceedings. Rohatgi also raised concerns about IHH’s investment and transactions linked to RHT Health Trust, which Fortis disputed.

However, the Court refused to interfere with the order directing forensic audit. The curt also made it clear that the specific observations recorded by the Delhi High Court against Fortis would not come in the way of the forensic audit or operate as findings against the company. The court stressed that the audit must remain impartial and free from bias against Fortis. Legal representatives for Fortis included Saraf and Partners, while Daiichi was led by Mukul Rohatgi. The Singh brothers were represented by Aditya Dewan and Naman Tandon.