Delhi High Court has ordered a forensic audit in the alleged asset dissipation of Fortis Healthcare. The court-appointed forensic auditor is required to examine transactions related to Fortis Healthcare, IHH Healthcare Berhad and RHT Health Trust.
This ruling emerges from the case of Daiichi Sankyo Company Limited v Malvinder Mohan Singh & Ors (2026). The forensic auditor will also audit the company shareholders and brothers, Malvinder Mohan Singh and Shivinder Mohan Singh.
Daiichi Sankyo Company filed an application in Delhi High Court to execute an international arbitration award dated 29 April 2016. Under the award, Daiichi is to receive INR25.62 billion (USD1.3 billion) with pre-award interest at 4.44% and post-award interest at 5.33%.
Daiichi submitted before the court that at present INR52 billion was due and payable.
The judgment debtors included the Singh brothers, who both wholly own Fortis Healthcare Holding (FHH), an entity that had a substantial controlling interest in Fortis Healthcare (Fortis) on the date of the award. The brothers directly owned FHH and indirectly through affiliated entities.
The judgment debtors sought high court intervention to stop enforcement of the award, which was rejected and subsequently affirmed by the Supreme Court of India.
Daiichi sought the appointment of a forensic auditor to audit 17 banks and financial institutions, under the directions of the Supreme Court of India. Daiichi also submitted multiple documents to show the court that the judgment debtors had vigorously tried to do disperse the money they had and aided others to avoid liability under the award.
The high court admitted the applications with a view to see if a forensic audit was required to expose any dissipation of assets, which was in contravention of the Supreme Court’s order. Delhi High Court also endeavoured to lay down a framework to recover money from those that tried to block enforcement of the decree.
The court found that the judgment debtors had started dissipating their assets from the day the award was granted.
The judgment debtors’ share in Fortis through their wholly owned FHH, had been reduced from 71.7% to 52% within one year of the award, the court said. The dissipation was done despite repeated assurances from the judgment debtors that they would protect Daiichi’s interests.
The court also said the judgment debtors had deliberately made assurances of their ability to cover the amount required comfortably, so they could prevent the court from passing an adverse order against them or asking them to deposit the amount with the court, or ordering attachment of their assets.
On the order date, the court said the judgment debtors’ company, FHH, had no shares in Fortis, showing complete dissipation.
The court said the dissipation largely happened through downstream loans taken by other companies of the judgment debtors against the shares of FHH. The court added that there was no clarity available as to the purpose of the loans, or the exact business of the companies.
This dissipation occurred when judgment debtors were submitting multiple reassurances in the court that they would protect Daiichi’s interests.
Contempt proceedings were then initiated against the judgment debtors, where the court ordered imprisonment of six months and sought the executing court, i.e. Delhi High Court, to consider initiating the process of and appointing foreign auditors to analyse transactions.
Senior advocate Arvind Nigam appeared for Daiichi along with P&A Law Offices’ managing partner Anand Pathak and partner Nabik Syam along with the rest of their team.
Daiichi argued before the court that the judgment debtors were complicit in connivance of violating their undertakings to the court. On the day of the award, judgment debtors showed their ability to pay the required amount and yet during the nine years since have only paid around INR2.5 billion. In the 10 years since the award was granted, the judgment debtors’ net worth “has vanished into thin air”.
Daiichi also argues that the judgment debtors were not only in contempt of the court but also in contravention of several securities, and financial laws and regulations.
Daiichi relied on Noorali Babul Thanewala v KMM Shetty & Ors (1989) and Balwantbhai Somabhai Bhandari v Hiralal Somabhai Contractor (Deceased) Rep by LRs & Ors (2023) to submit that “breach of undertaking is tantamount to a breach of injunction”.
Fortis submitted that its shares were pledged and sold by FHH, during the proceedings before various courts, as their value was declining and required a top-up to meet the necessary value. It was also submitted that shares in neither Fortis nor FHH were ever attached.
It was submitted that neither of the companies, Fortis nor FHH, were judgment debtors in the case.
It was also submitted that all assurances given before the court and otherwise were from the personal assets of the judgment debtors and not shares in the companies, and that Fortis and FHH never gave those assurances. They also submitted that Fortis had no role in the sale of its shares.
The submissions also included that any references of liability of the companies in which the judgment debtors had shares was also misplaced.
The cases Reliance Natural Resources Limited v Reliance Industries Limited (2010) and Bacha F Guzdar v Commissioner of Income Tax, Bombay (1954) were relied on submit that limitation of shareholder’s interest was to a company’s shares and did not include company assets.
Relying on State of UP & Ors v Renusagar Power Co & Ors (1988), the court observed that the corporate veil may be lifted where required in modern jurisprudence.
It also relied on ArcelorMittal India v Satish Kumar Gupta & Ors (2018), where the corporate facade must be disregarded to unearth the “real individuals” orchestrating the entity’s affairs. The corporate veil cannot be used as a convenient shield to evade statutory prohibitions.
The court then evaluated the sales of shares, and submissions by the banks and parties involved.
An expert would identify and unearth the truth of the transactions and submissions, the court said. This would also identify any violations of law or complicity by Fortis, FHH and/or judgment debtors. Ordering a forensic audit aimed to investigate and facilitate discovery, and did not affect the scope of the decree, the court said.
The court then discussed the series of events and principles of law involved at length, and concluded that a detailed forensic examination assumed importance in the case.
Allowing the applications filed by Daiichi, the court then appointed chartered accountants S Ramanand Aiyar & Co as the forensic auditor. The court ordered them to examine and reconstruct the complete transaction, events, key personnel, companies, banks, books, ledgers etc., along with detailed instructions for each.
