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The Securities and Exchange Board of India (SEBI) has ordered Fortis Healthcare to recover an amount of Rs 403 crore along with interest from around 10 entities including the company's former promoters, Malvinder Singh and Shivinder Singh within three months.
SEBI has directed the Singh brothers to not associate themselves with the affairs of Fortis Healthcare (FHL) in any manner till further directions.
The SEBI order follows a regulatory probe that, among other things, found that the Singh brothers were the ultimate beneficiaries when funds were moved from the listed entity to a subsidiary and thereafter to three borrower entities.
“... though the funds have moved from FHL through FHsL (Fortis Hospitals) to three unrelated borrower entities... and in turn to two promoter related entities... the ultimate beneficiaries of such fund diversion prima facie are Shri Shivinder Mohan Singh and Shri Malvinder Mohan Singh,” mentioned the 21-page SEBI order.
The SEBI probe was initiated in February after reports that the promoters of Fortis Healthcare took out Rs 500 crore from the company and that the auditors – Deloitte Haskins & Sells LLP – refused to sign off the accounts for the second quarter of the financial year 2017-18.
According to the SEBI probe, Fortis Hospitals gave loans to three borrower entities – Best Healthcare, Fern Healthcare and Modland Wears – by way of inter-corporate deposits (ICDs). The ultimate beneficiaries of the three entities were RHC Holding and Religare Finvest with the former being controlled by the Singh brothers.
“The prime facie role of FHL and Fortis Hospitals in the alleged diversion of funds through the conduit entities... for the ultimate benefit of... Shri Shivinder Mohan Singh and Shri Malvinder Mohan Singh have already been established,” said SEBI order.
“Thus, all these entities have prima facie acted in a fraudulent manner in the said diversion of funds... to the tune of Rs.403 crore (approx.) from a listed company... for the ultimate benefit of its parent company,” it added.
“In reality, the ICDs were not squared off but were fictitiously and fraudulently shown to have been repaid through a structured movement of funds between Fortis Hospitals and the borrower companies at the end of each quarter to give rise to an accounting fiction that the payment due for all the ICDs has been received,” said the order.
SEBI investigation will not constrain only promoters, even banks and auditors are under the scanner in this investigation.
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