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Daiichi-Fortis Ruling Raises Concerns Over India’s Foreign Investment Climate
The Singh brothers once controlled part of Fortis.
They later faced a large payment claim from Daiichi Sankyo over the sale of Ranbaxy.
Daiichi is trying to recover that money, including by examining assets connected to the brothers’ Fortis shares.
In 2018, IHH Healthcare bought control of Fortis through a regulated process.
IHH says it was not involved in the Singh brothers’ alleged wrongdoing.
The Delhi High Court has ordered an investigation to understand whether later transactions were genuine.
This investigation is not the same as deciding that IHH did anything wrong.
Some people worry that such cases could make foreign investors less confident about investing in India.
The Delhi High Court ordered a forensic audit into Fortis-related transactions and the dissipation of the Singh brothers’ assets.
IHH Healthcare acquired control of Fortis in 2018 after a competitive process, regulatory approvals, and a mandatory open offer.
The underlying arbitration award concerns alleged misrepresentations by the Singh brothers in the sale of Ranbaxy to Daiichi Sankyo, not Fortis’s conduct.
The court is examining whether later transactions were bona fide or intended to keep assets beyond Daiichi’s reach, without yet finding liability against IHH or Fortis.
The case has raised concerns that uncertain litigation risks could discourage foreign investors and affect public shareholders.
- Who
- Daiichi Sankyo, the Singh brothers, IHH Healthcare, Fortis, and the Delhi High Court are central to the proceedings.
- What
- The court ordered a forensic audit into the dissipation of the Singh brothers’ Fortis shareholding, subsequent changes in control, and related transactions.
- Where
- The proceedings are before the Delhi High Court, while the underlying arbitration award was issued in Singapore.
- When
- The IHH acquisition occurred in 2018; the Delhi High Court ordered the forensic audit on August 31.
- Why
- The investigation is intended to determine whether assets were dissipated or transactions were structured to frustrate enforcement of Daiichi Sankyo’s arbitration award.
Investor-certainty concerns
Enforcement and investigation needs
Impact on foreign investment
Investor-certainty concerns
Examining a regulated acquisition years later could make investors price in unknown litigation risks and reduce confidence in India.
Enforcement and investigation needs
Investigating potentially improper asset transfers is necessary to determine whether transactions were used to frustrate enforcement of a valid award.
IHH’s role
Investor-certainty concerns
IHH entered through a competitive, regulated transaction after the former promoters had left management and substantially reduced their stake; the article says no liability has been imposed on IHH or Fortis.
Enforcement and investigation needs
The court is entitled to examine whether the IHH and NTK transactions were bona fide or represented attempts to keep assets beyond Daiichi Sankyo’s reach.
Balancing legal remedies
Investor-certainty concerns
Enforcement proceedings should not create uncertainty for innocent subsequent investors or public shareholders who were not involved in the original alleged wrongdoing.
Enforcement and investigation needs
Daiichi Sankyo has a legitimate objective in enforcing its foreign award, and the court can investigate alleged wrongdoing before reaching conclusions.
Key facts
- IHH investment
- IHH Healthcare acquired control of Fortis through a primary infusion of Rs 4,000 crore.
- Acquisition year
- The transaction was completed in 2018.
- Arbitration award
- A Singapore arbitration award dated April 29, 2016 directed the judgment debtors to pay Rs 2,562 crore plus interest.
- Amount claimed
- The Delhi High Court records Daiichi Sankyo’s position that approximately Rs 5,300 crore was due.
- Former promoters’ stake
- A submission recorded by the court said the Singh brothers’ combined holding had fallen to 0.66% by the time the IHH transaction concluded.
- Regulatory process
- The IHH transaction proceeded through corporate approvals, Competition Commission of India approval, the Securities and Exchange Board of India takeover process, and a mandatory open offer.
- Court position
- The court distinguished ordering a forensic audit from adjudicating civil liability.
Sources
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