Supreme Court refuses permission to sell shares in Fortis Healthcare

The apex court will now hear the matter on October 31

The Supreme Court has refused to afford any relief to Fortis Healthcare promoters, Malvinder Singh and Shivinder Sing, and lender banks of the company to part with their encumbered shareholdings. Encumbered assets are those shares that are pledged or offered as collateral to a lender.

Shares of the hospital chain closed 5.44 per cent lower to trade at Rs 146 per share on Thursday.

Directing the applicants to maintain status quo on shareholding, the court clarified that its August 11 order mandating them not to sell their stock included both encumbered and unencumbered assets and extended to even lender banks and shares pledged to them by the company. 

Japanese pharmaceutical giant Daiichi Sankyo, had earlier in August moved the SC to block the sale of Fortis shares by promoters and other entities. It moved the apex court to preserve assets in the company to realise a Rs 2,562-crore Singapore arbitration award against the Singh brothers in favour of the foreign company. On Thursday, Axis Bank and Yes Bank — which also hold mortgaged shares in Fortis Healthcare — approached the SC to sell their shares, which the court refused.  

Thursday’s order comes in addition to the proceedings currently pending at the high court in Delhi for enforcement of the arbitral award. The SC will now hear the matter on October 31, till which time the status quo on the sale of any Fortis Healthcare shares will have to be maintained.

On August 22, Rekha Jhunjhunwala, wife of investor Rakesh Jhunjhunwala, bought 4.5 million shares, or 0.9 per cent stake, in Fortis Healthcare through a bulk deal at Rs 134.65 per share, NSE data showed. 

The April 2016 international arbitral award in favour of Daiichi — along with an additional claim of Rs 1,000 crore in interest and lawyers’ fees made by the company — comes on the backdrop of actions initiated against the former Ranbaxy promoters in relation to their purchase of a majority stake in the Indian pharmaceutical enterprise for $4.6 billion in 2008. 
 

The Japanese company had alleged that the stake sale was made through the concealment and misrepresentation of critical information regarding US Federal Drug Administration and Department of Justice proceedings, which cost Daiichi $550 million in settlement fees in the year 2013. 

Daiichi then merged Ranbaxy with Sun Pharmaceuticals in 2015, a fact that has been highlighted by lawyers of the Singh brothers to attempt to invalidate the award in the high court.