Fortis Funds Diversion Case: SEBI Imposes Penalty on Singh Brothers; Bars Them from Markets for 3 Years
Moneylife Digital Team 20 April 2022
Market regulator Securities and Exchange Board of India (SEBI) has imposed a monetary penalty of Rs5 crore each on brothers Malvinder Singh and Shivinder Singh in the Fortis Healthcare matter while also barring the Singh brothers from the securities market for a period of three years. In a 109-pages order issued on Tuesday, SEBI also barred the duo from from being associated as a director or key managerial personnel in a listed company or an intermediary  under the purview of SEBI of any market infrastructure institution. 
Further, a total of nine entities have been penalised a cumulative amount of Rs24 crore. A penalty of Rs1 crore has been imposed on Fortis Healthcare and Rs50 lakh on Fortis Hospitals. Others who have been penalised are Malav Holdings Pvt Ltd (Rs2.5 crore), Shivi Holdings Pvt Ltd (Rs2.5 crore), Gagandeep Singh Bedi (Rs2.5 crore), Bhavdeep Singh (Rs2.5 crore) and RHC Holding Pvt Ltd (Rs2.5 crore). 
The matter goes back to 2018 when SEBI initiated a probe based on a report that alleged Fortis Healthcare took Rs500 crore out of the company and that the then auditor of the listed firm – Deloitte Haskins & Sells LLP – refused to sign the second quarter results of FY17-18 until the funds were returned or accounted for. 
Thereafter, a preliminary probe by SEBI allegedly found that Fortis Healthcare through Fortis Health Management had initially advanced loans in the form of inter-corporate deposits (ICDs) to three Indian companies—Best Healthcare, Fern Healthcare and Modland Wears—totalling Rs 576 crore in December 2011. 
Further, verification of bank accounts of the three firms showed that the money was transferred to promoters/promoter-connected entities of Fortis Healthcare. Incidentally, several other transactions were also found between the three borrower companies and   the promoters/promoter connected entities. 
SEBI appointed a forensic auditor to probe further and it was found that the ICDs were issued for the transfer of a land parcel to RHC Holding, which is a promoter entity firm of Fortis Healthcare and Fortis Hospitals. 
Meanwhile, Deloitte told SEBI that Fortis Healthcare, through its subsidiary, gave ICDs to three Indian companies totalling Rs473 crore from FY13-14 onwards and the transactions were not classified as related-party transactions.
It further told SEBI that these loans were given in the beginning of each quarter and the companies returned by the end of the quarter and, hence, were never reported in the balance sheet and the outstanding amount at the end of the quarter was nil. 
However, for the quarter ended September 2017, the amount was not returned by the borrower companies and even as the auditors raised the issue with the company, they did not receive any response. 
An independent examination of filings of the three borrower companies with ministry of corporate affairs (MCA) showed that these companies did not have enough cash-flows to repay the amount, said Deloitte during its meeting with SEBI. 
In its interim order passed on 17 October 2018, SEBI had directed Fortis Healthcare to recover Rs403 crore along with interest from 10 entities including the Singh brothers, who were also ordered to not associate in any manner with Fortis Healthcare.
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