In December the Securities and Exchange Board of India (SEBI) had directed Fortis Healthcare (FHL) and Fortis Hospitals to take necessary steps to recover Rs 403 crore, along with interest, from former promoters Shivinder Mohan Singh and Malvinder Mohan Singh along with seven other entities within three months. This was the amount that had gone out of the company as secured inter-corporate loans.
But due to non-compliance with the directive to return the diverted money totalling Rs 472 crore, FHL Chairman Ravi Rajagopal recently asked SEBI to order the arrest of the Singh brothers. "Since they have failed to refund the due amounts in compliance of SEBI order, an application under Section 28A of SEBI Act has been filed, praying for recovery and directions against the entities," Rajagopal told Mint.
The markets regulator had asked FHL to recover the amount through an order passed in October last year. It said that Fortis Hospitals and FHL diverted funds through Best Healthcare, Fern Healthcare and Modland Wears to the parent companies, RHC Holding and Religare Finvest, for the ultimate benefit of Shivi Holdings, Malav holdings, and the Singh brothers.
But after a representation subsequently made by the company along with its wholly-owned subsidiary Fortis Hospitals, that the latter should carry out the recovery to ensure that the sums are recovered and reflected in its balance sheet, SEBI in December agreed to modify the directions issued through the interim order. Hence, in its February 13 petition, Fortis reportedly asked SEBI to invoke Section 28A related to recover of amounts. Under this section, non-compliance can lead to the attachment and sale of the offender's movable and immovable property as well as his/her bank accounts. The Recovery Officer can also arrest the accused.
Reacting to the development, Shivinder Singh told the daily that he was not in a position of decision-making and authority when these loans and advances were made. "I have cooperated in all my interactions with SEBI and made my position clear. These decisions on ICDs [inter-corporate deposits] were taken after my retirement [in September 2015] and I have no role to play in its planning or execution. Even Fortis is well aware of the facts and my position on this matter. I reiterate, I will never do harm to the institution that I've built from the first brick," he said, adding, "People with vested interests are diverting the attention, misleading the regulators to deflect the heat from themselves as they have done in the past. I'm confident the truth will prevail and the regulators will carefully examine the role of all decision makers individually and do justice."
Meanwhile, FHL has filed another application with Sebi to "de-promoterise the erstwhile promoters", as Rajagopal said during a post-earnings call earlier this month. He added that FHL had severed all links with the Singh brothers following the Luthra & Luthra report that pointed out systemic lapses and override of control within the company.
Sushmita Choudhury Agarwal with PTI inputs