Malvinder and brother Shivinder Singh, Fortis founder-directors, quit
What's the story
Billionaire Malvinder Mohan Singh and brother Shivinder Mohan Singh, founder-directors of Fortis Healthcare, have stepped down from their positions amid ongoing legal cases against them. Malvinder was serving as executive chairman and Shivinder as non-executive vice-chairman. With this, the promoters seek to distance themselves from the brand to "enable continuity of the operations of the organization." The brothers are fighting a multibillion-dollar fraud case.
Case
Singh brothers embroiled in Rs. 3,500cr battle with Japanese drugmaker
Japanese pharma major Daiichi Sankyo had accused the two former directors of Ranbaxy Laboratories of hiding information about themselves while selling their shares for Rs. 9,576.1cr in 2008. They didn't inform Daiichi that Ranbaxy was facing a probe by the US FDA and DoJ. In 2016, a Singapore tribunal directed them to pay Rs. 2,563cr plus annual interest of 4.44% to Daiichi.
Fraud
Brothers also accused of "diversion, siphoning and digression of assets"
On January 31, the Delhi HC upheld the tribunal's order and ordered the brothers to pay Rs. 3,500cr to Daiichi. Incidentally, they have recently been accused of "diversion, siphoning and digression of assets" by a New York-based investor. Singh-owned Religare Enterprises Ltd allegedly issued 21 loans to seemingly independent companies, which routed over Rs. 1,930cr to firms held by them on the same day.
Factors
Resignation an attempt to insulate Fortis from legal cases: Singh
The brothers' decision to step down is an attempt to shield the Fortis Healthcare brand from the legal cases against them that were hurting its performance, Shivinder Singh said. Banks were even unwilling to extend working capital loans, he added. However, they will continue to own their joint 34% stake as an earlier SC order restrains them from selling shares.
Implication
Is there more to the development than protecting Fortis?
Sources said their resignation indicates they had found a buyer for Fortis, which would bring in money so they could pay off lenders. Fortis said after the resignation, the board will be "better enabled to guide the future direction of the organization without being hampered by the Daiichi Sankyo judgement." The board will now discuss the resignation at a February 13 meeting.
Information
Fortis in the news for medical negligence, unlawful conduct
Fortis was in the news in December after its Gurugram unit charged a family Rs. 16L for a two-week treatment of seven-year-old dengue patient Adya, who eventually died. A Haryana government panel had found it guilty of medical negligence and unlawful conduct.