M/s. Daiichi Sankyo Company Limited v. Oscar Investments Limited and others

6. The observations in paragraphs 34 to 38 of the Order indicate that the number of unencumbered shares held by FHHPL steadily declined and that ‘the contemnors knowingly and willingly lost control of Fortis Healthcare Limited (FHL)’.

7. Mr. Kailash Vasdev, learned Senior Advocate, appearing for one of the contemnors had invited our attention to the affidavit filed on behalf of Respondent No. 14 in compliance of order dated 14.05.2018 (Volume 55). The tabular chart given in paragraph 7 of said affidavit and assertions in paragraph 8 thereof were to the following effect: “7. The details of the number of shares held by FHHL in FHL are as follows: Date Encumbered Shares Unencumbered Shares Total Number of shares 28.02.2017 26,81,66,020 3,84,25,509 30,65,91,529 (59.23%) 31.03.2017 23,18,01,440 3,84,40,089 27,02,41,529 31.07.2017 18,64,94,060 84,89,948 19,49,84,008 31.08.2017 17,53,94,820 26,31,777 17,80,26,597 31.01.2018 17,53,83,320 (pursuant to a release of 11,500 pledged shares) 26,43,277 17,80,26,597 28.02.2018 7,65,584 26,54,867 34,20,451 31.03.2018 6,89,084 27,31,367 34,20,451 16.05.2018 6,31,484 27,31,367 33,62,851 (0.65%)

8. Neither Respondent no.14 nor Respondent No.19 sold and/or further encumbered any shares after 06.03.2017. However, pursuant to the existing loan/pledge agreements, various banks themselves exercised the right of pledge/topup of the pledge shares without any reference or any action from Respondent Nos.14 & 19 and/or FHHL, described in greater detail hereinbelow. Further, the Hon’ble Supreme Court, vide its orders dated 11.08.2017 and 31.08.2017 injuncted FHHL and all financial institutions from selling/alienating encumbered as well as unencumbered shares held by FHHL in FHL. This order was modified by the Hon’ble Supreme Court on 15.0-2.2018, whereby the encumbered shares were permitted to be sold by the respective lenders. Due to all above, there were sale/fresh encumbrances from the period 06.03.2017 till 31.08.2017 but thereafter 5ill 15.02.2018 there was no change in the said encumbrance/sale and once again there were further sales after 15.02.2018. The unencumbered shares held by FHHL in FHL are protected by the order dated 23.02.2018 passed by the Hon’ble Supreme and cannot be encumbered/alienated by FHHL. Copies of the orders dated 11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018 passed by the Hon’ble Supreme Court are annexed herewith and marked as Annexure A (colly).”

8. This reply, thus, clearly shows that though allegedly neither Respondent No. 14 nor Respondent No. 19 sold or further encumbered any shares after 06.03.2017, various banks/financial institutions themselves exercised the right of pledge/top-up of pledged shares without any reference to or action from either Respondent No. 14 or Respondent No. 19.

9. In the circumstances, notices were issued to various banks/financial institutions as detailed in the order dated 11.02.2021.

10. Appearing for some of the banks/financial institutions, Mr. Shyam Diwan and Mr. Ramji Srinivasan, learned Senior Advocates; and Mr. Jayant Mehta, Mr. Sanjay Gupta and Mr. Sharma, learned Advocates, submitted inter alia that the issue was already gone into by this Court and that there were no pleadings to which any response could be filed by the concerned banks/financial institutions.

11. In reply, Mr. Rakesh Dwivedi, learned Senior Advocate invited our attention to the chart set out in paragraph 23 of the Order, to submit that first three entries of the chart disclose that the total number of shares remained constant at 32,50,91,529; and that after the assurance was given on 23.01.2017 by the concerned respondents before the High Court of Delhi (marked as second assurance in paragraph 5 of the Order), not only the total number of shares started dwindling but the number of unencumbered shares went down from 7,31,68,281 to 6,01,607, as stated in the chart. Mr. Dwivedi, then, referred to the affidavit dated 08.02.2017 filed on behalf of all the respondents in the High Court of Delhi which held out that the value of unencumbered shares was more than Rs.4,000/- crores and that the value of the unencumbered security was sufficient in the event the award was to be enforced. The relevant paragraphs of said affidavit were as under:-

12. It was, therefore, submitted that it was not just a case of creating encumbrance or pledge but, there were instances of sale of shares and the purpose was definitely to reduce the extent of control of FHHPL. He further submitted that at the stage when the applications for modification/clarification were preferred by the banks and financial institutions, on the basis of which the order dated 25.02.2018 was passed by this Court, none of the banks had told this Court what the consequences of said order would be; and that in a matter of a yearand-half, the shareholding of FHHPL stood reduced to negligible level.

13. Mr. Arvind P. Datar, learned Senior Advocate, added that there would normally be a basic arrangement or loan agreement, in terms of which various kinds of securities including charge over properties, corporate and personal guarantees would be offered; and that a pledge of shares would only be by way of an additional security. None of the banks/financial institutions had indicated why the unencumbered shares were sought to be put under encumbrance or the shares were sold when other forms of securities were available. He further submitted that the arrangements under which the shares were pledged must be disclosed so that the purpose for which the basic accommodation or loan was obtained would also be clear. For example, according to him, in November, 2016 a loan agreement was entered into between India Bulls and RHC Holding Private Limited for an amount of Rs.350 crores purportedly for ‘construction/development of residential projects’. He submitted that no such project had come up and the amount of Rs.350/- crores through successive transactions, was siphoned away. What kind of due diligence was undertaken by the banks/financial institutions while extending the loan facility must therefore be brought on record.

14. Both the learned Senior Counsel submitted that with various orders passed by the High Court and this Court, the concerned individuals and corporate entities could not sell the shares held by FHHPL directly and, therefore, a device was employed and the arrangement was so structured that the shares were proceeded against by the banks and financial institutions. It was submitted that the banks/financial institutions had intervened in the matters pending before this Court, that they were definitely aware of the Award granted in favour of M/s. Daiichi Sankyo Company Limited; and that the role of banks and financial institutions would, therefore, require closer scrutiny.

15. In the premises, for the present, we direct all the noticee banks and financial institutions:- (a) to place on record the basic documents pertaining to loans advanced or financial accommodations extended in respect of which the shares of FHL were pledged with them; (b) to place on record the nature of securities offered in connection with such loan arrangements;

(c) to place on record the details of the encumbered and unencumbered shares of FHL standing in the name of FHHPL, held by them in September, 2016;

(d) to place on record the details of encumbered and unencumbered shares of FHL standing in the name of FHHPL, held by them on 11.08.2017; (e) to give details of shares of FHL standing in the name of FHHPL, which were put by them under encumbrance after 11.08.2017; (f) to give details of shares of FHL standing in the name of FHHPL, sold by banks/financial institutions from January, 2017; (g) to disclose whether such encumbrance created after 11.08.2017 was in pursuance of any fresh arrangement or agreement and, if so, the details of such agreement/arrangement; (h) to disclose whether under such agreement/arrangement any other security was given by the pledgors; and

(i) to give the value of the encumbered shares as they stood in September, 2016, on 11.08.2017 and on subsequent dates.

16. The appropriate responses shall be filed by all the noticee banks and financial institutions on or before 22.02.2021.

17. List these matters for further consideration on 24.02.2021. ………………………….J. [Uday Umesh Lalit] [Indira Banerjee] [K.M. Joseph] New Delhi; February 18, 2021.