Malvinder Mohan Singh and his younger brother Shivinder Mohan Singh—former promoters of pharma company Ranbaxy, hospital chain Fortis and financial services entity Religare Enterprises—have been arrested by the Economic Offences Wing (EoW) of the Delhi Police for allegedly causing losses to the tune of Rs 2,397 crore to Religare Finvest Ltd, a subsidiary of Religare Enterprises.
Along with the Singh brothers, the police also arrested former Religare Finvest MD Kavi Arora, and former Religare Group CFO Anil Saxena and former Religare MD Sunil Godhwani. The charges against the arrested individuals include Section 409 (criminal breach of trust by a public servant, banker, merchant or agent) and Section 420 (cheating) of the Indian Penal Code.
What is the case?
A statement issued by the EOW said: “The alleged persons having absolute control on Religare Enterprises Limited (REL) and its subsidiaries put Religare Finvest Limited (RFL) in poor financial condition by way of distributing the loans to the companies having no financial standing and controlled by the alleged persons. These companies wilfully defaulted on repayments, causing a loss to RFL to the tune of Rs 2,397 crore.”
RFL had filed an FIR with the EoW of Delhi Police in September.
How was the alleged fraud carried out?
In late 2016 and early 2017, RFL had allegedly invested Rs 750 crore in fixed deposits in Lakshmi Vilas Bank (LVB). In July 2017, RFL claimed it had discovered that LVB had credited the proceeds of the deposits to RFL’s current account, and debited an amount of around Rs 724 crore without prior intimation to RFL.
Around December 2017, RFL claimed it had received a letter from LVB stating that some loans were extended to RHC Holding and Ranchem Pvt Ltdtwo companies controlled by the Singh brothers— after the deposits were factored in as collateral.
RFL claimed that LVB did not send any intimation on placing the FDs as security against the loans given to RHC and Ranchem. RFL subsequently filed the suit against LVB in Delhi High Court in September.
Other cases—Daiichi’s complaint
There could be more trouble in store for the two brothers. Japanese drugmaker Daiichi Sankyo had alleged in 2018 that the brothers had siphoned off funds through a complex “web of companies”.
Daiichi, in its application to the High Court last year, claimed that respondents ANR Securities, RHC Holding, Ranchem, and “Malvinder Singh, as trustee of Bhai Hospital Trust”, “hold and control” Prius Real Estate, in which they infused funds through debentures. According to the company, the book value of debentures held by these four entities in Prius Real Estate amounted to Rs 1,429.50 crore.
In a separate application, it alleged that the Singhs used their jointly-owned entity, Shimal Healthcare, to divert funds through preference shares and debentures and that the brothers, through “fraudulent conduct”, diverted an “enormous sum” of Rs 1,407.33 crore to entities in the Shimal group.
Shimal had been used to siphon “large amounts of monies” to various entities related to the Singhs, which further routed these funds to other entities, Daiichi alleged.
“It is an undeniable fact that a large sum of money to the tune of several thousand crores has been extended to various group entities. This is a clear act of fraudulent diversion and/or siphoning of funds,” Daiichi said, accusing the Singhs of operating “through a web of companies to shield their assets”.
The Fortis Healthcare case
There is also a case alleging siphoning of money to the tune of around Rs 472 crore from Fortis Healthcare, a company that the Singh brothers used to own. Fortis had written to market regulator Securities and Exchange Board of India (Sebi) earlier this year, seeking the initiation of legal proceedings against the Singh brothers, including arrest, to recover the dues.