What brought down the Ranbaxy-Fortis promoters?

Before we get into the details of the current case, let's learn some history. In the 1980s, Parvinder Singh inherited Ranbaxy from his father, Bhai Mohan Singh, a wealthy contractor who hailed from Rawalpindi. What had started out as a small pharma business in Amritsar had by then grown into an empire. At a time when most Indian drug-makers were looking inwards, Parvinder decided to take Ranbaxy into international markets. By the time he passed away in 1999, he left behind a global pharma major.

And, the way in which Parvinder’s sons, Malvinder and Shivinder Singh, squandered away the empire in subsequent years has become the stuff of corporate folklore. According to reports, Malvinder and Shivinder squandered away Rs 22,500 crore over the span of just one decade.

So, what are the particulars of the case in which the latest orders have come? Former Ranbaxy promoters Malvinder and Shivinder Singh have been accused of concealing information about wrongdoings at Ranbaxy when they sold a majority stake in it to Daiichi Sankyo, a Japanese firm, in 2008. In 2016, the Singapore tribunal awarded Daiichi Rs 3,500 crore in damages. In 2018, Daiichi Sankyo approached the Indian Supreme Court with the allegation that the Singh brothers were diverting funds using a number of shell companies to avoid the payments. Daiichi had also approached the apex court to stop a deal between Fortis and Malaysia-based IHH Group. As part of the deal, the IHH Group was set to acquire a 30 per cent stake in the Fortis group for 1.1 billion dollars with an open offer of 26 per cent stake. While the deal was signed in August 2018, the SC stayed the IHH open offer in December that same year.

But, this too is only the tip of the proverbial iceberg since there are several other cases against the Singh brothers. In October of 2019, Malvinder and Shivinder were arrested by the Economic Offenses Wing of the Delhi Police for allegedly diverting money and causing losses to the tune of Rs 2,397 crore. The allegations were related to Religare Enterprises Limited, or REL, a company that was once led by the brothers. They were accused of diverting money from Religare Finvest Limited, or RFL, an REL subsidiary. According to the allegations, the brothers and other REL officials took loans in RFL's name and then diverted the money to other firms.

In 2019, the Serious Fraud Investigation Office, or SFIO, was also probing their role in an alleged fund diversion at Fortis Healthcare. After its initial probe, the SFIO had said that it believed that the fraud could be to the tune of Rs 2,000 crore. The Securities and Exchange Board of India and the SFIO suspected that the Singh brothers had diverted public money from Fortis Healthcare to Gurinder Singh Dhillon, the head of Radha Soami Satsang Beas and other religious bodies.

Long before the recent wranglings, there was also the episode with Dinesh Thakur, the whistle-blower who put Ranbaxy in the dock. Thakur joined Ranbaxy in 2003. But, in 2005, Thakur quit and waved a red flag about alleged violations and irregularities at the pharma company. Thakur ended up working with US authorities to expose the fraud and even filed a lawsuit to hold Ranbaxy accountable. Eventually, Ranbaxy pleaded guilty to making fraudulent statements to US regulatory authorities about how it tested drugs at its Indian plants. The firm had to pay $500 million to resolve the civil and criminal violations.

It remains to be seen if the recent developments will be the final chapter of their downfall, or whether more skeletons might tumble out of their cupboard. What we know for sure is that Malvinder and Shivinder Singh have all but destroyed the legacy of their grandfather Bhai Mohan Singh and father Parvinder.