The Delhi HC Forensic Audit order comes in the long-running dispute between Daiichi Sankyo and the former Ranbaxy promoters. The Delhi High Court has ordered a detailed forensic inquiry into Fortis Healthcare Limited (FHL) share transfers. Justice Subramonium Prasad appointed S Ramanand Aiyar & Co. to conduct the audit within six months.
Court Orders Detailed Forensic Inquiry
The case, Daiichi Sankyo v. Malvinder Mohan Singh, concerns the enforcement of an arbitral award against the Singh brothers.
The dispute began after Daiichi acquired Ranbaxy in 2008. Daiichi later alleged that the Singh brothers had concealed important information about US regulatory investigations.
In 2016, a Singapore arbitration tribunal awarded ₹2,562 crore to Daiichi Sankyo.
The Supreme Court later found the Singh brothers in contempt. It then directed further proceedings before the Delhi High Court.
Fortis Share Transfers Under Scrutiny
The court examined the significant decline in unencumbered Fortis shares.
In September 2016, the promoters held around 5.29 crore unencumbered shares. By December 2018, that figure had fallen to only 6.01 lakh shares.
The court raised serious concerns about the movement of these shares. It also criticised delays in enforcing the arbitral award.
The bench stressed that parties cannot use corporate transactions to avoid judicial orders.
Court Applies Reverse Corporate Veil
Fortis argued that no formal injunction prevented the sale or transfer of public shares under the Companies Act.
However, the court rejected this argument. It held that undertakings given to a constitutional court carry greater weight than ordinary commercial arrangements.
The court also applied the doctrine of reverse corporate veil piercing. This approach allows the court to examine corporate assets controlled by individuals who remain responsible for the obligations.
Scope of the Forensic Audit
The appointed auditor will examine the complete transaction trail.
The inquiry will cover share pledges and security transactions. It will also examine the later acquisition of FHL by IHH Healthcare Berhad through Northern TK Venture.
Furthermore, the auditor will review the conduct of relevant corporate officers and financial institutions.
The court expects the audit to establish how the shares moved and who played a role in those transactions.
Six-Month Deadline for Investigation
Justice Subramonium Prasad directed S Ramanand Aiyar & Co. to complete the forensic inquiry within six months.
The audit will help identify possible asset dissipation and establish accountability. It will also provide clarity on the role of different entities involved in the transactions.
The Delhi HC Forensic Audit order reflects the court’s effort to ensure that judicial awards remain enforceable and cannot be defeated through complex corporate transactions.
Key Takeaway
The Delhi High Court has ordered a detailed examination of Fortis share transfers in the Daiichi-Ranbaxy dispute.
The forensic audit will trace the movement of assets and examine the conduct of the entities involved. Meanwhile, the six-month deadline signals the court’s focus on resolving the long-running enforcement issues.
