NEW DELHI: In a potential blow to former Fortis Healthcare promoters Malvinder and Shivinder Singh, the Securities and Exchange Board of India (SEBI) has directed the brothers and eight entities related to them to repay the hospital group over Rs400 crore that were earlier transferred as inter-corporate deposits. SEBI's order on Wednesday, which came following a preliminary investigation into alleged diversion of funds from Fortis by the Singhs, has found these transactions to be "fraudulent" in nature.
The regulator has sought a detailed investigation into the modus operandi of the entire fraud by way of which funds were allegedly diverted from Fortis to its promoters and also said that other third parties such as banks and auditors would also come under the purview of such investigation.
SEBI, in its interim order, has issued directions to Fortis to "take all necessary steps" to recover Rs403 crore along with due interest within three months from the Singhs and entities controlled by them, including RHC Holding Pvt Ltd, Religare Finvest Ltd, Shivi Holdings Pvt Ltd and Malav Holdings Pvt Ltd. The regulator has also clarified that the Singhs and these entities will jointly and severally repay this amount to Fortis within the stipulated time.
Pending completion of SEBI's investigation and till further order, the Singhs and these eight entities shall not dispose of or alienate any of their assets or divert any funds, except to repay Fortis and for meeting expenses of day-to-day business operations, without SEBI's prior permission. The Singhs have also been directed not to associate themselves with the affairs of Fortis "in any manner whatsoever, till further directions," stated the order.
SEBI began investigating the transactions in February following a news report that stated that the brothers had withdrawn close to Rs 500 crore from Fortis without the board's prior approval.
According to its order, the regulator found that Fortis, through a subsidiary, had made ICDs of over Rs470 crore to three companies.
SEBI's order noted that the ICD transactions entered into by Fortis with the three entities – Best Healthcare, Fern Healthcare and Modland Wears – between 30 June 2016 to 30 June 2017 were "prime facie fictitious and fraudulent in nature".
The order also noted that the three entities that received the ICDs were purportedly shown to be unrelated but were found to transfer funds to promoter firms such as RHC Holding and Religare Finvest.
The order also noted that RHC Holdings and Religare Finvest were also subsequently found to transfer funds to Shivinder Holdings and Malav Holdings–promoter companies–and ultimately to Shivinder and Malvinder Singh. It also noted that all entities had acted in a 'fraudulent' manner to facilitate the diversion of these funds.
Further, when the ICDs became unrecoverable, the funds were found to have been routed through the three firms using a multiple web of other entities to eventually repay debts of RHC Holdings to financial creditors such as HDFC and Indiabulls mutual fund.
SEBI noted in its order that it had used the services of an independent forensic auditor, MSA Probe Consulting, to examine the allegations of fund diversion against Fortis's promoters.
A separate investigation into these transactions by law firm Luthra & Luthra, appointed by Fortis, had also found these transactions were not above board and were carried out under the instructions of the promoters despite resistance from Fortis' management.
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