New Delhi: An investigation into the accounts of Fortis Healthcare Ltd by law firm Luthra and Luthra has concluded that former promoters Malvinder Singh and Shivinder Singh are to blame for mismanagement of the company’s finances.
The newly constituted Fortis board under the chairmanship of Ravi Rajagopal released the findings of the report on Wednesday.
The investigation found that a Fortis unit had granted unsecured loans worth ₹ 445 crore to three companies affiliated to the Singh brothers without board approval and despite objections from the management.
Fortis said that “systematic lapses" and “override of controls" were also found in certain inter-corporate deposits (ICDs) that were used by the borrowers to grant or repay loans to entities whose directors are connected to the Singh brothers.
Fortis has initiated legal action to recover these outstanding ICDs and other advances, the company said in a statement to the exchanges. The findings of the investigations have been submitted to the Securities and Exchange Board of India (Sebi) and Serious Fraud Investigation Office (SFIO).
“No diligence was undertaken in relation to assignment, it was not approved by the Treasury Committee and was ante-dated," Fortis said in the filing.
Malvinder Singh, however, denied any wrongdoing.
“While we await the Luthra and Luthra report from Fortis Healthcare, I would like to mention that there has been no mismanagement or misuse of funds & position," Singh said.
“Treasury operations (have) been a profitable part of the Fortis business for the past many years. All decisions on ICDs, which were part of the treasury operations, were collectively taken by the respective decision making bodies at Fortis after deliberations."
Simultaneously, the cash-strapped company, currently in the process of finding a buyer, will extend the deadline for submission of binding bids, chairman Rajagopal said in a conference call with analysts.
According to the investigation, relevant documents, information and interviews indicated that the management’s objections were “overruled".
“Objections on record indicate that management personnel and other persons involved were forced into undertaking the ICD transactions under the repeated assurance of due repayment and it could not be said that the management was in collusion with the promoters to give ICDs to the borrower companies," the board stated.
The company, which had initiated an independent investigation in February this year, said that it will appoint an “external agency of repute" to undertake a scrutiny of the internal controls and compliance framework in order to strengthen processes and build a robust governance framework. It will also investigate the role of employees.
On Wednesday, shares of Fortis rose 0.93% to ₹ 135.75 after the company reported a consolidated loss to ₹ 914.32 crore for the March quarter on account of impairment of goodwill of around ₹ 326crore and one-time expenses of ₹ 580 crore, which includes ₹ 445 crore of ICDs.
The results for the January-March period were reported after a marathon board meeting that stretched over two days.