Shares in Fortis Healthcare Ltd jumped as much as 24 per cent on Friday after main shareholders Malvinder Mohan Singh and Shivinder Mohan Singh resigned from the board saying it was in the interests of the company because of legal troubles they were facing.
In their resignation letter, the billionaire brothers cited a Delhi High Court verdict last week that upheld a 2016 order by a Singapore tribunal asking the brothers to pay damages worth Rs 2,563 cr to Japan's Daiichi Sankyo Co Ltd. The letter was released as an exchange filing by Fortis late on Thursday. The Singh brothers and their affiliates held an equity stake of 34.43 per cent in Fortis at the end of December, according to a company filing to exchanges.
The Delhi High Court had on January 31 upheld an international arbitral award of Rs 3,500 crore passed in favour of Japanese pharma major Daiichi Sankyo, which has alleged that the former promoters of India’s Ranbaxy Laboratories had concealed information about proceedings against them by American food and drug department.
A tribunal in Singapore had passed the verdict in favour of Daiichi holding that the former Ranbaxy promoters and brothers, Malvinder Singh and Shivinder Singh, had concealed information that the Indian company was facing probe by the US Food and Drug Administration and the Department of Justice, while selling its shares.
With the resignation of the promoters, the board will be “better enabled and empowered to guide the future direction of the organisation without anyway being hampered by the Daiichi Sankyo judgement and our association at the Board,” the letter said. “The members of the board are also requested to look into all inter-group transactions and distance the promoter group from Fortis Healthcare Ltd in a manner that enables continuity of the operations of the organisation and deliver on its mission of enriching and saving lives,” the Singh brothers wrote in the letter.
Daiichi bought control of Indian drugmaker Ranbaxy from a shareholder group led by the Singh brothers in 2008, and alleged in 2013 that former shareholders of Ranbaxy hid information about US regulatory probes into the company. Once India's largest drugmaker, Ranbaxy was eventually sold by Daiichi to Sun Pharmaceutical Industries Ltd in 2014.
Although the Ranbaxy case is unrelated to Fortis Healthcare, the legal troubles enveloping the Singh brothers have been hitting shares of the healthcare company, among India's largest hospital operators. Malvinder Mohan Singh served as Fortis Healthcare's Executive Chairman while Shivinder Mohan Singh served as non-executive vice chairman. The two brothers control a number of companies ranging from healthcare to finance.
“In light of the recent high court judgement, upholding the plea of Daiichi Sankyo to enforce the arbitration award, we believe this is in the interest of propriety and good governance,” the brothers wrote in a resignation letter addressed to the board. “It is intended to free the organisation from any encumbrances whatsoever that may be linked to the promoters.”
A spokesman for RHC Holding Private Ltd, a holding company owned by the Singh brothers, said the brothers had no comment beyond the resignation letter released by Fortis. A spokesman for Daiichi in Japan said the company would not comment on ongoing litigation.
A separate lawsuit filed by a New York-based investor at the Delhi high court in November accuses the Singh brothers of “diversion, siphoning and digression of assets” from financial firm Religare Enterprises Ltd. Religare, whose single biggest shareholder are the Singh brothers and affiliates, has denied the allegations.
On Friday, Fortis Healthcare shares gained 17.61% or Rs 22.20 to end at Rs 148.30 on the BSE.