Shivinder Mohan Singh, the erstwhile promoter of Religare Enterprises (REL) and the Fortis Healthcare hospital chain, was arrested by the Economic Offences Wing (EOW) of the Delhi Police on Thursday, along with three others. This followed a complaint of fund misappropriation at Religare Finvest Ltd (RFL), the lending arm of REL, to the tune of about Rs 2,400 crore.
The EOW is on the lookout for older brother Malvinder Mohan Singh, who was in Ludhiana for medical treatment, said people with knowledge of the matter.
Also arrested by the EOW on Thursday were former REL chairman and MD Sunil Godhwani, former RFL CEO Kavi Arora and former REL CFO Anil Saxena on charges of cheating, criminal conspiracy and breach of trust. All four will be produced in a Delhi court on Friday, said a police official.
“The four were arrested based on the complaint by Manpreet Singh Suri of Religare Finvest against Malvinder Mohan Singh and others in connection with a Rs 2,397-crore loss to RFL,” said additional commissioner of police, EOW, OP Mishra.
The plaint said the accused had absolute control of REL and its subsidiaries and pushed RFL into dire financial straits by disbursing loans to companies having no financial standing that were controlled by them.
Singh Bros Raided by ED in Aug
“These companies wilfully defaulted in repayments and caused wrongful loss to RFL to the tune of Rs 2,397 crore,” Delhi Police said in a statement.
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This had been flagged earlier in audits by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi). While Shivinder was the promoter of the listed REL, which holds an 85% stake in RFL, Arora and Saxena held key posts in REL and RFL during the period, the police added.
The Singh brothers had been raided by the Enforcement Directorate in August.
In December 2018, a criminal complaint was filed by RFL with the EOW against the Singh brothers, following which a case was filed against them in May this year. RFL alleged that money from its accounts had been siphoned off and diverted through a labyrinth of financial transactions.
The complaint, which formed the part of the first information report (FIR) filed in March, alleged that the Singh brothers, in collusion with the co-accused, had “orchestrated the financial scam in or around 2016”.
It accused the two brothers of hatching “a well thought out and organized criminal conspiracy by which a financial scam of huge magnitude has been effected”. The complainant also sought the tracing and restitution of properties. The Singh brothers were the promoters of REL till February 2018 and “exercised deep and pervasive control over the management of RFL, since it was a subsidiary company”.
The complaint, which is part of the FIR, further said that “REL is of the belief, also shared by RFL, that the Singh brothers and Godhwani colluded and siphoned off funds from REL and its subsidiaries which include RFL and committed corporate fraud”. The complainant had said that despite the red flags raised by the RBI, the Singh brothers deliberately did not take corrective action and continued with the “financial scam”.
The Singh brothers, in conspiracy with Godhwani, gave unsecured, high-value loans to shell companies and related/known entities of the Singh brothers, according to the complaint.
The fortunes of the Singh brothers have been transformed in a decade. They sold India’s then-largest drug maker Ranbaxy Laboratories for Rs 10,000 crore in 2008 to Daiichi Sankyo and announced ambitious plans to create a healthcare and financial services empire. But since then they have been hit by accusations of fraud, fund diversion, bad investments, legal troubles and mounting personal debt over the last few years. The failure to repay lenders resulted in them losing control of Fortis Healthcare and REL. Daiichi Sankyo’s purchase turned sour after admissions of wrongdoing at Ranbaxy, which was ultimately sold to Sun Pharmaceuticals. The Japanese company won an arbitration suit against the Singh brothers over allegations of fraud related to the deal. The Singh brothers owe $500 million to Daiichi Sankyo on account of this.
Much of the Singh brothers’ public shareholding has been seized by lenders. Irregularities in Fortis Healthcare are being probed by financial authorities, including the Serious Fraud Investigation Office (SFIO). In 2018, government agencies opened a probe against the brothers following an internal investigation by law firm Luthra & Luthra that found mismanagement of Fortis Healthcare’s funds.
Fortis has initiated legal action to recover its funds.
The Singapore arbitration tribunal had asked the Singh brothers to pay Rs 2,562 crore to Daiichi Sankyo in 2016 to settle a dispute that arose after the Japanese company’s acquisition of Ranbaxy more than a decade ago. Daiichi had blamed the Singh brothers for allegedly suppressing facts during the sale of Ranbaxy, helmed by Malvinder Singh, after the drug maker’s manufacturing plants faced regulatory challenges from the US Food and Drug Administration. Although the former Ranbaxy promoters challenged the tribunal’s decision before courts in India and Singapore, the Delhi High Court upheld the award in January 2018.