Rs 24 cr penalties slap on former Fortis founders, 7 other entities

New Delhi: Markets regulator Sebi on Tuesday imposed penalties totaling Rs 24 crore on nine entities, including businessmen Malvinder Mohan Singh and Shivinder Mohan Singh, in connection with violations in the Fortis Healthcare matter. 

In addition, the regulator has barred Singh brothers and others from the capital markets.

The case relates to Singh brothers along with other entities diverting funds from Fortis Healthcare for the ultimate benefit of -- RHC Holding Pvt Ltd -- an entity indirectly owned and directly controlled by the erstwhile promoters.

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In its order, Sebi noted that Singh brothers, RHC Holding, Malav Holdings and Shivi Holdings played a key role in the diversion of funds in the garb of investment through ICDs from Fortis Hospitals/ Fortis Healthcare, as the funds from the listed company moved through various conduit entities.

the funds were routed in a structured manner to benefit the promoters.

Further, it said that these five entities, Fortis Hospitals/ Fortis Healthcare, acted in a fraudulent and deceptive manner which led to misuse and/or diversion of funds to the tune of Rs 397.12 crore for the ultimate benefit of RHC Holding.

It was also alleged that Gagandeep Singh Bedi and Bhavdeep Singh played a role in the approval of grant of loans to the borrower companies wherein they deliberately failed to carry out adequate due diligence and exercise independent judgement, thereby aiding in misuse and diversion of public shareholders' funds through the borrower companies for the benefit of RHC Holding.

Passing a 109-page final order on Tuesday, the watchdog slapped a fine of Rs 5 crore each on the two Singh brothers besides Rs 2.5 crore on RHC Holding Pvt Ltd.

A penalty of Rs 1 crore has been imposed on Fortis Healthcare and Rs 50 lakh on Fortis Hospitals. Others who have been penalized are Malav Holdings Pvt Ltd (Rs 2.5 crore), Shivi Holdings Pvt Ltd (Rs 2.5 crore), Gagandeep Singh Bedi (Rs 2.5 crore), and Bhavdeep Singh (Rs 2.5 crore).

In October 2018, Sebi had directed Fortis Healthcare Ltd (FHL) to take necessary steps to recover Rs 403 crore along with interest from the Singh brothers and various promoter companies.

Sebi on Tuesday barred the Singh brothers from the securities market for a period of three years. They have also been restrained from being associated as a director or key managerial personnel in a listed company or an intermediary registered with Sebi of any market infrastructure Institution.

Besides, RHC Holding Pvt Ltd, Malav Holdings Pvt Ltd, Shivi Holdings Pvt Ltd, Gagandeep Singh Bedi and Bhavdeep Singh have been banned for a two-year period.

In its order, Sebi noted that in February, 2018, the Singh brothers resigned from the board of Directors of FHL.

Further, by February 2018, the cumulative shareholding of the erstwhile promoters in FHL, held through their shareholding in Fortis Healthcare Holdings Pvt Ltd, had reduced below one percent.

They were also de-classified as 'promoters' of FHL from June 2019. Moreover, Singh brothers are now not associated with Fortis Hospitals and FHL.

Sebi said that Fortis Hospitals and FHL will continue to pursue the measures, which have already been put into motion, to recover the amount of Rs 397.12 crore alongwith the interest Singh brothers and others.

''The audit committee of FHL is directed to regularly monitor the progress of such measures being taken by FHL and report the same to the board of directors of FHL at regular intervals,'' Sebi said.