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Cases that took Malvinder, Shivinder Singh from Forbes billionaires’ list to police custody

The Singh brothers are accused of multiple cases of siphoning money using a complex web of companies, including Ranbaxy, Religare & Fortis.

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New Delhi: Malvinder Mohan Singh and his younger brother Shivinder Mohan Singh, former promoters of pharmacy company Ranbaxy, hospital chain Fortis and financial services firm Religare, were this week arrested by the Economic Offences Wing (EOW) of the Delhi Police for allegedly cheating and causing a loss of Rs 2,397 crore to Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises.

The police also arrested former Religare Finvest MD Kavi Arora, as well as ex-group CFO Anil Saxena and MD Sunil Godhwani.

The Singh brothers were once successful businessmen who featured on Forbes’ list of billionaires, running India’s leading pharma company. But they’re now in police custody, with multiple cases of cheating and fraud, and allegations of siphoning money using a complex web of companies.

While their current arrest is for alleged fraud related to Religare Finvest, they have two more investigations pending against them. One is an allegation of siphoning around Rs 472 crore from Fortis Healthcare, while the other is about keeping Japanese drug major Daiichi Sankyo in the dark while selling Ranbaxy to it that a US drug regulator was probing the firm. A Singapore tribunal had passed a Rs 3,500 crore award in favour of Daiichi, which the Singh brothers are yet to pay.

Who are the Singh brothers?

Malvinder and Shivinder are grandsons of Bhai Mohan Singh, a businessman from Rawalpindi who settled in Delhi after Partition.

Bhai Mohan Singh took over the debt-ridden Ranbaxy from his cousins Ranbir and Gurbax Singh. Mohan Singh’s son Parvinder drove the firm to the top of the Indian pharmaceutical industry.

Parvinder’s sons Malvinder and Shivinder both graduated from Duke University’s Fuqua School of Business in the US, and formally took over the company after Parvinder’s death in 1999. They sold it to Daiichi Sankyo in 2008 for Rs 9,576 crore.

According to officials, with the money received from Ranbaxy’s sale, the brothers spent Rs 2,000 crore to pay off loans, invested Rs 1,750 crore in Religare, and put Rs 2,230 crore in Fortis.

The remaining Rs 2,700 crore was reportedly transferred to Gurinder Singh Dhillon, head of the spiritual sect Radha Soami Satsang Beas, and his family.

The Religare Finvest case

According to officers in the EOW, the Singh brothers, who were in “absolute control” of Religare Enterprises Limited (REL) and its subsidiaries, put Religare Finvest Limited (RFL) in poor financial condition by distributing loans to companies having no financial standing, which they themselves controlled.

“These companies then wilfully defaulted on repayments, causing a loss to RFL to the tune of Rs 2,397 crore,” an official explained.

In November 2016 and January 2017, RFL invested Rs 750 crore as fixed deposits in the Lakshmi Vilas Bank (LVB).

In July 2017, RFL reportedly discovered that LVB credited the proceeds of the deposits to RFL’s current account, and also debited an amount of Rs 724 crore without keeping RFL in the loop.

When RFL found out about the move, it immediately contacted the bank and also sent legal notices to the bank to re-institute the FDs, stating it had not given any go-ahead to dissolve them. Following a legal notice, the bank agreed to restore the FDs.

Five months later, in December 2017, RFL reportedly received a communication from the bank, stating that loans amounting to Rs 532 crore and Rs 174.8 crore were given to two companies held by the Singh brothers — RHC Holding and Ranchem Pvt Ltd respectively, factoring the FDs as collateral.

RFL then claimed that LVB did not send it any information before placing the FDs as security against the loans disbursed to the two companies.

RFL then filed a suit in the Delhi High Court against the bank for voluntarily putting the FDs as a guarantee against a loan that it was not aware of.

“RFL stated it had not executed any documentation for putting the FDs towards any loans that were wrongfully disbursed to the two companies controlled by Singh brothers,” an official explained.

RFL also made a formal complaint in this regard to EOW, and a case was registered. Following this, the Reserve Bank of India placed LVB under its prompt corrective action framework.

The Daiichi-Ranbaxy case

Malvinder and Shivinder have also been accused of siphoning funds through a complex “web of companies” by Daiichi Sankyo, which also alleged that the brothers hadn’t disclosed the US drug regulator’s probe against Ranbaxy at the time of sale.

Daiichi has also claimed that ANR Securities, RHC Holding, Ranchem and Malvinder hold Prius Real Estate, in which they put funds amounting to Rs 1,429.50 crore through debentures.

Daiichi also alleged that the brothers fraudulently diverted a sum of Rs 1,407.33 crore in Shimal Healthcare (which they own jointly) through debentures and preference shares, and that this company was also used to divert funds to other entities.

A debenture is a long-term bond or an unsecured loan issued by a company without pledging an asset, while preference share is a share which entitles the holder to a fixed dividend.

Daiichi is yet to recover the Rs 3,500 crore awarded to it by a Singapore tribunal, and has urged the Delhi High Court to attach the Singh brothers’ properties to recover the dues.

Case involving Fortis Healthcare

Another case involves Fortis Healthcare, which, in February this year, had written to market regulator Securities and Exchange Board of India to initiate legal proceedings against the brothers and recover Rs 472 crore, which were allegedly taken out of the company through inter-corporate deposits to firms linked to them.

An inter-corporate deposit is an unsecured borrowing by corporates from other corporate entities. A corporate firm having surplus funds can thus lend to another in need.

In October 2018, SEBI found the diversion of these funds to be “fraudulent” and directed Malvinder and Shivinder to repay this amount, including additional interest, to Fortis by January 2019. The brothers, however, failed to make those payments.

What the brothers have said in court

Malvinder’s lawyer Manu Sharma told a court Friday that it was ‘Baba’ Dhillon, not his client, who was the beneficiary of the transactions.

“They don’t go after that person to whose doorstep the money leads because he’s heading some great religious organisation,” Sharma said in court.

Sharma also said his client did not have a “single penny”.

However, Shivinder, who has not engaged a lawyer, has said he would “cooperate with the investigation and follow whatever order the court gives”.

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  1. People like Mallya, Nirav Modi, Singh Brothers were the darlings of Pink Newspapers, as also ICICI bank, which was said to have set itself a ‘scorching pace’ of growth. All these high profile billionaires have turned out to be frauds. Heads of couple of big private banks have also fallen in disgrace. Whom do ordinary people have to trust ? Banks, companies, mutual funds which invest in these? It is a despiring situation for an individual.. It seems that the moto of businessmen in India is as the old Sanskrit saying goes: Vyaparam droha chintanam – “Business means betrayal”.

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