The regulator also ordered Singh brothers or their companies not dispose of or alienate any of their assets or divert any funds pending completion of the investigation and till further orders.
In yet another blow to Singh brothers, stock market regulator Securities and Exchange Board of India (SEBI) in its order on March 19, asked Fortis Healthcare to take all necessary steps to recover Rs 403 crore along with accrued interest from the brothers and their holding companies.
The SEBI order directed Singh brothers to pay Fortis within three months from the date of the interim order.
The regulator also ordered Singh brothers and their companies not to dispose of or alienate any assets or divert any funds pending completion of the investigation and until further orders.
Along with Malvinder and Shivinder Singh, referred to as the Singh brothers, the SEBI order included RHC, Shivi Holdings, Malav Holdings, Religare Finvest, Best, Fern and Modland in the order.
Failure to comply with the order may even possibly land the Singh brothers in prison.
The SEBI began its preliminary enquiry following a media report about Rs 500 crore diverted from the company through inter-corporate deposits (ICDs), and external auditor Deloitte's refusal to sign second quarter FY18 results. SEBI also appointed a forensic auditor MSA Probe Consulting to get to the bottom of the allegations.
The SEBI found diversion of funds and fudging of account.
The order said there was a circular movement of Rs 600 crore between three borrower companies in form of ICDs giving an impression that they were paying-off Fortis, but these funds landed with RHC, the holding company of Singh brothers.
SEBI noted that besides the ICDs, Fortis has given numerous short term loans to unrelated entities viz. Best, Fern and Modland that landed in the accounts of Singh brothers and their companies on the very same day.
“It emerged that the loans given by FHsL to 3 borrower companies were for the sole purpose of making available funds to the promoter and related entities. Though it was portrayed that the loans were given to Best, Fern and Modland which were apparently not connected to FHsL or its directors/promoters at the time of giving the loans, the ultimate beneficiaries of such loans were RHC Holding and other promoter related entities,” SEBI order said.
SEBI also found that Fortis had misrepresented financial statements through structured movement of funds.
“FHsL had entered into multiple structured transactions over a period starting from June 30, 2016, till June 30, 2017, which were prima facie fictitious and fraudulent in nature,” the order said.
“These pertained to various ICDs granted by FHsL to Best, Fern and Modland, which were shown to had been squared off at the end of each quarter. However, 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 FHsL 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,” the order added.
Singh brothers, the erstwhile promoters of Fortis Healthcare, lost control of the company in February 2018, after lenders invoked the pledged shares with the approval of Supreme Court. Fortis was bought by Malaysia’s IHH Healthcare for $1.1 billion in a bidding process in August 2018.The brothers are also facing allegations diverting Rs 740 crore from Religare Enterprises, in which too, they lost control. They were also chased by Japanese drugmaker Daiichi Sankyo, that is trying to enforce Rs 3,500 crore arbitration award it got from Singapore tribunal. Supreme Court has summoned the Singh brothers on March 28, to hear whether they will pay up the amount or not.