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How Singh brothers got into trouble - bit by bit

The trouble is related to the implementation of the $500 million arbitration award that Singh brothers were ordered to pay to to Daiichi Sankyo in 2016. Besides, the siblings are caught in a financial mismanagement case in entities owned by them, including FHL and Religare Enterprises (REL).

By BusinessToday.In  
Thursday, April 11, 2019

The Supreme Court will be hearing Daiichi Sankyo's contempt petition against erstwhile promoters of Ranbaxy, Malvinder Singh and Shivinder Singh on Thursday. The case relates to the implementation of the $500 million arbitration award that the siblings were ordered to pay to the Japanese pharmaceutical major in 2016. As the bench headed by Chief Justice Ranjan Gogoi has previously made abundantly clear, the Singh brothers may be looking at jail time, if found guilty of violating past court orders.

Also read: Singh brothers case: Shivinder drew Rs 9 crore salary during 'retirement'; misled SC about 'Sanyaas'

Also read: Why the Singh brothers could be going to jail

However, their troubles don't end there. The third generation scions of the once-booming business house are also on the dock with the Securities and Exchange Board of India (Sebi) and Serious Fraud Investigation Office (SFIO) probing for financial mismanagement at other entities owned by them, including FHL and Religare Enterprises (REL). These probes created a deep rift between the brothers, making for some headline-grabbing allegations.

Also read:SEBI directs RFL, REL to recall loans worth over Rs 2,300 cr from Singh brothers, others

Here's a timeline of the siblings' fall from grace:

June 2008

The Singh brothers sell their family firm, Ranbaxy Laboratories Ltd - at the time India's largest drugmaker - to Daiichi for $4.6 billion. The US Food and Drug Administration (FDA) cracks down on two of its plants just months later, a development that only snowballs into a bigger mess.

September 2008

Ahead of the final closure of the acquisition in November, the FDA bans the import of 30 drugs from two of Ranbaxy's factories in India over concerns about their manufacturing practices.

2009-2012

Nearly Rs 2,700 crore from the Ranbaxy proceeds are routed to entities owned by Gurinder Singh Dhillon's family and companies associated with senior Radha Soami Satsang Beas (RSSB) functionaries over three years. Dhillon, better known as 'Babaji', is RSSB's spiritual guru. Of that, Rs 2,000 crore is invested in two firms, Prius Real Estate and Prius Commercial Projects.

Also read: The audacious Singh brothers

Separately, Rs 1,750 crore is invested in Religare Enterprises (REL) and about Rs 2,230 crore in Fortis - again from the Ranbaxy proceeds - to fuel their growth. All these turn out to be fatal mistakes.

The money transferred to Dhillon and associates - estimated to be between Rs 4,000-6,000 crore, with interest, depending on who you ask - remains unpaid to the Singhs. The rapid and reckless expansion spree that REL and Fortis embark on lands them in a debt trap when the slowdown hits in 2009. That's the beginning of a vicious cycle of mortgaging assets and equity in group companies to raise loans to pay off their previous liabilities.

November 2012

Daiichi files a case against the Singh brothers at the Singapore International Arbitration Centre for fraud, alleging that the duo had concealed and misrepresented critical information relating to the FDA investigations while negotiating the deal.

May 2013

Ranbaxy pleads guilty to 'felony charges' for violating manufacturing norms and enters a settlement agreement with the US Department of Justice. The penalty imposed on it - $500 million - was the largest-ever with a generic drug-maker over drug safety, according to the US government.

April 2016

The arbitration panel, in a two-to-one majority, finds in favour of Daiichi and orders the Singh brothers to pay the Japanese firm a penalty of $500 million.

The former Ranbaxy promoters immediately challenge the tribunal's decision before the Singapore Court of Appeal and the Delhi High Court.

Meanwhile, between 2008 and 2016, Singhs' group holding companies RHC Holding and Oscar Investments end up pledging immovable properties and shares valued at up to Rs 15,276 crore to various banks and financial institutions to raise resources to clear the growing debt pile.

November 2016

Troubles mount at the Singhs' NBFC REL, under the helmsmanship of family confidante Sunil Naraindas Godhwani, who had come on board on Dhillon's recommendation. The promoters, who had not been on REL's board since April 2010, return this month after subsidiary firm Religare Finvest writes off Rs 794 crore due to non-receipt of dues from Strategic Credit Capital associated with ABG Shipyard. The loan and the write-off are under regulatory scrutiny.

Following disagreements with the Singh Brothers, Godhwani steps down as CMD in July 2016 and exits the company in September 2017.

November 2017

New York-based investor Siguler Guff & Co, boasting a 6 per cent stake in Religare Finvest, moves Delhi High Court alleging that the Singhs indulged in "diversion and siphoning" of funds to clear their personal debts of at least $1.3 billion.

Also read: Daiichi-Singh brothers feud: More about arbitration, than about compensation

The lawsuit reportedly cites a RBI inquiry into REL's 2016 fiscal books revealing that the siblings gave 21 loans worth millions to independent companies that rerouted at least $300 million to private firms linked them on the same day.

January 2018

The Delhi High Court upholds the decision by the Singapore arbitration tribunal (and subsequently the Supreme Court, too).

February 2018

Malvinder and Shivinder resign as directors from Fortis Healthcare's (FHL) board, following the Delhi High Court order. The month also sees them exit the REL board.

Also read: Days after Delhi HC ruling on Daiichi arbitration, Singh brothers resign from Fortis board

The same month, FHL initiates an independent investigation through an external legal firm, Luthra & Luthra, following allegations of siphoning of Rs 500 crore of funds by the founding family to certain corporate bodies. The report finds "systemic lapses and override of controls" in the transaction. SEBI, too, institutes an investigation into the matter.

Subsequently, the Serious Fraud Investigation Office (SFIO) under the Ministry of Corporate Affairs says it will initiate a probe into alleged financial irregularities at FHL and REL.

Also read: Lessons for India Inc from the Singh brothers

June 2018

FHL announces the annulment of the September 2016 appointment of former executive chairman Malvinder Singh as 'Lead: Strategic Initiatives', reportedly at an annual salary of Rs 12 crore per annum. The company also initiates legal action for the recovery of the above mentioned amount.

July 2018

Soon after FHL approves the binding investment proposal submitted by Malaysia's IHH Healthcare Berhad, Daiichi moves Delhi High Court to block the deal claiming that it would "contravene" court orders "as well as significantly defeat the execution of the award in India". Daiichi further argues in its application that the value of the unencumbered assets previously disclosed to court by RHC Holding and Oscar Investments had to be maintained.

August 2018

The Delhi High Court directs the erstwhile promoters of FHL, the Singh brothers, to appear in person in court on August 10 for the next hearing of above case. This reportedly is the first time that Malvinder and Shivinder Singh are summoned in connection to the Daichii Sankyo-Ranbaxy tussle.

Also read: Singh brothers say Sunil Godhwani 'orchestrated' transactions, left them with 'debt load'

September 2018

First comes a joint petition from the Singh brothers accusing Godhwani of orchestrating transactions that left them with a "debt load". The company's debt burden indeed shot up nearly 16 times from Rs 1,272 crore in 2008-09 after the Ranbaxy deal to over Rs 20,222 crore by end-March 2016.

Also read: Delhi High Court summons Singh brothers for first time in Daiichi case

A week later, Shivinder Singh, in his petition before the National Company Law Tribunal, accuses elder brother Malvinder and Godhwani of moving a thriving company towards "disintegration and ruin" after he took public retirement in 2015.

Also read: From Shivinder's eyes: How Singh brothers lost control of Fortis and Religare

The same month, Daiichi Sankyo moves the National Company Law Tribunal (NCLT) to stay the insolvency proceedings against RHC Holdings Pvt. Ltd, initiated by HDFC. The company argues that it has a decree to recover money against RHC Holdings, the company through which the Singh brothers had made the sale to Daiichi. The NCLT in December dismisses the insolvency plea against the holding company.

October 2018

The Delhi High Court reportedly orders seven companies owing money to Malvinder and Shivinder Singh not to part with any assets like property so that there are sufficient funds to pay Daiichi's arbitral award.

December 2018

Daiichi files contempt plea against the Singh brothers in Supreme Court, alleging that the duo and Indiabulls created fresh encumbrances on FHL shares despite the top court's previous orders against it.  A few days later the court also puts the FHL-IHH Healthcare Berhad deal on hold while issuing notices to the now feuding siblings asking them to explain why contempt proceedings should not be initiated against them for flouting court orders.

The same month, the High Court of Singapore dismisses the Singh brothers' plea to stay the arbitration award in favour of Daiichi.

Also read: Singh brothers lose $500 million case against Daiichi in Singapore court

Meanwhile, Religare Finvest lodges a criminal complaint with the Economic Offences Wing of the Delhi Police against the Singh brothers. The complaint also names REL ex-CMD Sunil Godhwani, among other directors, for cheating, fraud and misappropriation of funds to the tune of Rs 740 crore.

February 2019

On February 5, Malvinder Singh files a criminal complaint against Shivinder, the Dhillon family as well as the Godhwani kin - Sunil and Sanjay (who headed loss-making REL subsidiary Ligare Aviation). In the complaint filed before the Economic Offences Wing he seeks Rs 8,742 crore owed to him by the alleged accused.

Also read: Singh brothers case: Who are Sunil and Sanjay Godhwani?

Weeks later, India's apex court summons the Singh brothers to personally appear in court on March 14 in connection with the contempt plea filed by Daiichi.

Meanwhile, FHL Chairman Ravi Rajagopal asks SEBI to order the arrest of the Singh brothers for non-compliance with its interim order. Two months previously, the watchdog in its interim order had directed the company along with Fortis Hospitals to take necessary steps to recover Rs 403 crore that the Singh brothers, among others, diverted for the ultimate benefit of parent company, RHC Holding, and Religare Finvest.

Also read: Fortis asks SEBI to order arrest of Singh brothers for failure to return diverted money

March 2019

The top court on March 14 asks the Singh brothers to come up with plans to pay the $500 million arbitration award to Daiichi within two weeks.

Also read: SC take note! Singh brothers can pay off $500 million to Daiichi, provided the money is recovered

The next day, SEBI orders Religare Finvest and its parent REL to recall loans worth over Rs 2,315 crore that were diverted to the Singh siblings - who were among the promoters of REL at the end of December - and 21 other entities. Less than a week later, SEBI confirms its interim order directing FHL and Fortis Hospitals to recover Rs 403 crore.

Also read: SEBI directs RFL, REL to recall loans worth over Rs 2,300 cr from Singh brothers, others

Towards the end of the month, the Economic Offences Wing (EOW) of Delhi Police books the Singh brothers on the charges of cheating, criminal conspiracy and breach of trust two weeks ago. The FIR was filed on the complaint of Religare Finvest, which has already filed bankruptcy proceedings.

April 2019

Miffed at their less-than-satisfactory responses, the bench on April 5 announces that it will straightaway hear Daiichi's contempt petition on the date of the next hearing, April 11, and will send the brothers to jail if found guilty. The court wants the duo to be present for the hearing scheduled for today.

Also read: SEBI directs RFL, REL to recall loans worth over Rs 2,300 cr from Singh brothers, others

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