MUMBAI: India’s Supreme Court has refused to lift the block on completion of the takeover of embattled hospital chain Fortis Healthcare Ltd by IHH Healthcare Bhd, the latest twist in one of the country’s most contentious and long drawn out corporate battles.
The court held Fortis’ founders – Malvinder Singh and Shivinder Singh – guilty of contempt of court and said it could start similar proceedings against the company, according to a judgment.
This effectively halts IHH’s open offer to Fortis shareholders that would have brought its holdings in India’s second-largest hospital company above 50%.
IHH is already Fortis’ largest shareholder with a 31% stake.
Fortis shares plunged as much as 17.4%, the biggest intraday drop since February 2018, after the verdict was read out.
Fortis and IHH didn’t immediately respond to e-mails seeking comments on the court ruling.
The detailed court order, that will explain why Fortis is facing contempt action, is expected later.
Also named in the contempt verdict was Indiabulls Housing Finance Ltd, the lender who accepted Singh brothers’ Fortis shares as collateral and then seized them when they failed to repay. This went against an earlier judicial order that had forbid the Singh brothers from selling or diluting their shareholding in Fortis.
Fortis, at its end, now will have to prove that it has not violated any court orders and request that the open offer be allowed to go through, in future hearings. It can also seek review of the verdict by the same court bench.
The block comes just as IHH’s efforts to turn around Fortis’ fortunes through cost-cutting was starting to show results. It will hobble the company’s attempt to move past a scandal in which it was allegedly defrauded of millions of dollars by its founders. The Singh brothers are no longer shareholders in Fortis.
IHH’s attempt to become Fortis’ majority shareholder was halted last year, when Japanese drugmaker Daiichi Sankyo Co contested the deal as part of its efforts to recover US$500mil from the Singh brothers.
Daiichi Sankyo said that it had been promised some Fortis shares by the Singhs in a decade-old fraud claim, before the shares were seized by the brothers’ creditors. — Bloomberg