Delhi High Court Orders Forensic Audit Into Fortis Share Dissipation

Ordering a sweeping forensic audit to unearth how over 5 crore shares were systematically dissipated in breach of judicial undertakings, the High Court of Delhi has declared that corporate facades cannot shield shadow controllers from execution proceedings.

A single judge bench of Justice Subramonium Prasad directed a comprehensive forensic accounting into the affairs of Fortis Healthcare Limited, promoter entities, and financial institutions to investigate the erosion of assets meant to satisfy a multi-thousand crore foreign arbitral award.

Summarizing the core concern of post-award enforcement, the Court highlighted the persistent frustration faced by decree holders in India. The Court, in its reasoning, observed: "...the difficulties of a litigant in India begin when he has obtained a Decree... Generational pass but decrees are not executed as the Judgment Debtor has several arrows up in his quiver to defeat the rights of a Decree Holder and a Decree Holder is unable to reap the fruits of the decree even after winning two to three legal battles."

The Court issued the following directions:
"S Ramanand Aiyar & Co., Chartered Accountants... is appointed as the Forensic Auditor to conduct the forensic audit. The purpose of the forensic audit is to identify and re-construct the entire chain of events so as to enable the court to identify the persons and the companies involved in the dissipation of shares.

The Forensic Auditor appointed by this Court would, therefore, be required to:
i. Examine and reconstruct the complete evolution of the shareholding of FHHPL in FHL after 24.05.2016 (date of first assurance), including the reduction in its shareholding over time, the movement of encumbered and unencumbered shares, creation of fresh pledges, invocation of existing pledges, operation of contractual top-up mechanisms, transfer of shares pursuant thereto, release of securities, sale of pledged shares, and all consequential transactions affecting the shareholding pattern.
ii. Prepare a comprehensive transaction-wise chronology of all dealings in FHL shares by FHHPL and other Judgment Debtors from the date of the first undertaking furnished before this Court till the present, specifying, inter alia, the date of each transaction, the number of shares involved, the nature of the transaction, the transferor and transferee, the approving authority, the consideration (if any), the underlying documents, and the judicial orders subsisting on the relevant date.
iii. Examine whether any pledge, fresh encumbrance, top-up, invocation, release, transfer or sale of FHL shares held by FHHPL and other Judgment Debtors was undertaken after the orders were passed by this Court and the Apex Court, including but not limited to the Orders dated 11.08.2017, 31.08.2017, 15.02.2018, 23.02.2018 and 14.12.2018, and identify all such transactions together with the relevant records.
iv. Examine the role of FHL, its officers, directors, key managerial personnel, Company Secretary, Compliance Officer, Registrar and Transfer Agent, depositories and any other intermediary involved in processing, approving, recording or giving effect to the aforesaid transactions, including the statutory filings, corporate approvals and regulatory compliances pertaining thereto.
v. Examine the role of banks, and identify the loan facilities secured by FHL shares, the creation and variation of security, maintenance of security margins, operation of contractual top-up obligations, invocation and sale of pledged shares, release of security, and the outstanding liability corresponding to each transaction.
vi. Prepare a comparative bank-wise statement setting out, inter alia, the date of each facility, value of the facility, shares pledged, fresh securities created, top-up transfers, invocation, sale, release of securities, outstanding exposure and the judicial orders subsisting on the date of each transaction.
vii. Examine the complete trail of the consideration received from the transfer or sale of FHL shares and trace the destination and utilisation of such funds.
viii. Examine the complete transaction relating to the acquisition of the controlling stake in FHL by IHH Healthcare Berhad through Northern TK Venture Pte. Ltd., including the approvals obtained, regulatory filings made, the flow of consideration, the role of the concerned parties and intermediaries, and all consequential transactions affecting the shareholding of FHHPL in FHL.
ix. Identify every company, partnership, trust or other entity, directly or indirectly owned, controlled or beneficially held by the Judgment Debtors, which received the benefit of loans secured by FHL shares, and examine the purpose for which such borrowings were availed and utilised after the decree.
x. Examine the books of account, bank statements, demat statements, board and committee minutes, shareholder's resolutions, statutory registers, internal correspondence, emails, legal opinions, compliance memoranda, depository instructions, Registrar and Transfer Agent records, SEBI and stock exchange filings, and such other records as may be necessary to determine the knowledge of the concerned persons regarding the undertakings furnished before this Court and the orders passed by this Court and the Apex Court at the time of each transaction.
xi. Identify all persons who proposed, negotiated, approved, authorised, implemented, facilitated, certified or recorded each of the aforesaid transactions, together with the nature and extent of their respective involvement.
xiii. Preserve, wherever necessary, electronic records, metadata, depository instructions and digital communications relied upon during the audit, and annex to the report the relevant transaction matrices, chronological charts, fund-flow statements and shareholding evolution charts forming the basis of the Auditor's conclusions."

Background

The dispute stems from a foreign arbitral award passed in Singapore on April 29, 2016, directing the judgment debtors to pay a principal sum of Rs. 2,562 crore along with interest, totaling over Rs. 5,200 crore. Execution proceedings were initiated under Section 47 and Section 49 of the Arbitration & Conciliation Act, 1996. Over the years, despite multiple assurances and undertakings given before the High Court and status quo orders passed by the Supreme Court in decisions such as Vinay Prakash Singh v. Sameer Gehlaut & Ors. ( "(2021) 16 SCC 319": 2019 CaseBase(SC) 3657) and Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors. ( "(2023) 7 SCC 641": 2021 CaseBase(SC) 660), the unencumbered promoter shareholding in Fortis Healthcare Limited (FHL) held via Fortis Healthcare Holding Private Limited (FHHPL) plummeted from over 5.29 crore shares to a fraction of a percent.

While the decree holder alleged active complicity and collusion between the promoters, FHL, and financial lenders in violation of the Code of Civil Procedure, 1908 and Sebi (Substantial Acquisition Of Shares And Takeovers) Regulations, 2011, FHL contended that as a public listed company, its shares were freely transferable under Section 58(2) of the Companies Act, 2013, and that it operated as an independent legal entity separate from its shareholders, relying on principles laid down in Noorali Babul Thanewala vs. K.M.M. Shetty and Ors. and Madvai Ahluwalia vs. Vimal Kumar Gupta and Ors..

Rejecting FHL's arguments of separate corporate personality, the High Court relied on State of U.P. v. Renusagar Power Co. and ArcelorMittal India Private Limited v. Satish Kumar Gupta ( "(2019) 2 SCC 1": 2018 CaseBase(SC) 641) to hold that corporate veils must be lifted to prevent fraud and defeat of judicial processes. Citing precedents on third-party liability for aiding and abetting breach of court orders, such as Seaward v Paterson, Sita Ram vs. Balbir, Israr Ahmad Khan v. Amarnath Prasad ( "2026 SCC OnLine SC 322": 2026 CaseBase(SC) 239), and Pallav Sheth v. Custodian & Ors. ( "(2001) 7 SCC 549": 2001 CaseBase(SC) 2165), the High Court ordered the forensic audit to establish the factual foundation before determining legal consequences.

Case Details:
Case No.: O.M.P.(EFA)(COMM.) 6/2016
Case Title: DAIICHI SANKYO COMPANY, LIMITED v. MALVINDER MOHAN SINGH AND ORS.
Appearances:
For the Petitioner(s): Mr. Arvind Nigam, Senior Advocate with Mr. Giriraj Subramanium, Mr. Nabik Syam, Ms. Anindita Barman, Ms. Shyra Hoon, Mr. Tanmay Arora, Mr. Chirag Gupta, Advs.
For the Respondent(s): Mr. Amit Sibal, Sr. Advocate with Mr. Ashish Mohan, Sr. Advocate along with Mr. Varun Garg, Mr. Gaurav Modwil and Mr. Shreyansh Jain, Advocates for JD-1; Mr. Rajiv Nayar, Sr. Adv., Mr. Abhinav Vashisht, Sr. Adv., for Fortis Healthcare Limited; Mr Dayan Krishnan, Sr. Adv., Mr. Vivek Kohli, Sr. Adv., Mr. Jayant Mehta, Sr. Adv., for Respondent No. 28 (Indiabulls); Mr. Ritin Rai, Senior Advocate for R-21 (Yes Bank); Mr Balbir Singh, Senior Advocate for JD 6 & 8.

Source: 2026 CaseBase(DEL) 4798