Emqore Evensecure Private Capital Trust, a US fund, has dragged Lakshmi Vilas Bank (LVB), Religare Enterprises, Fortis Health Care Holdings, Malaysia’s IIH Healthcare Berhad and sovereign wealth fund Khazanah Nasional Berhad to court for allegedly covering-up a fraud by former corporate honchos, Malvinder and Shivinder Singh.

The fund has levelled charges of racketeering and complicity in fraud against nearly 30 entities that also includes global private equity major East Bridge Capital and India’s Bay Capital. Other names facing the law suite are New York Life Investment Management, International Finance Corporation, Northern TK Venture PTE, SSG Capital Management and SRL Ltd.

According to court filings seen by BusinessLine , Emqore has claimed that in 2017 the Singh brothers entered into a discussion with two companies – Loancore and Walmark – to take over Religare and Fortis, respectively. Loancore and Walmark were subsequently taken over by Emqore.

Financial gaps unearthed

Based on JP Morgan Reports, on October 10, 2017, Loancore entered into a binding agreement for takeover of management and control of REL. Loancore’s nominee Francis Lee was appointed to the board of directors of REL. Lee discovered “huge financial holes within REL, and an instance where LVB Bank, substantially assisted the Singh Brothers in siphoning approximately $100 million from RFL,” Emqore alleged. Once Lee started uncovering financial gaps in the company. “REL unlawfully transferred the shares pledged to Loancore to IHF, Bay Capital and RIGF,” it said. On February 10, 2018, REL issued a letter to Francis Lee, terminating his employment. Loancore then issued a demand notice to REL based on the Penalty Fee Agreement, demanding payment of $16.5 million. On December 10, 2018, REL denied the existence of the Penalty Fee Agreement.

Similarly, on December 6, 2017, Walmark and Fortis entered into a binding term sheet, under which Fortis agreed to sell 108,333,333 equity shares to Walmark for ₹180 per share.

Emqore has told the New Jersey District Magistrate Court that against the backdrop of the takeover negotiations by Loancore and Walmark, the defendants separately and in concert were running a very public campaign against both REL and Fortis and commenced numerous litigations alleging fraud. All of these acts had forced the share price of these entities to be depressed by at least 30 per cent. With the share price depressed, defendants consolidated their shareholding in REL and Fortis. “Defendants drove the Fortis price down so that East Bridge was able to acquire it at a lower price. Once East Bridge acquired its threshold percentage ownership, it illegally changed the deal with Walmark,” Emqore alleged.

Email queries sent to LVB, IIH Healthcare, Religare and Fortis did not receive a response at the time of going to the press.

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