Markets regulator Securities and Exchange Board of India (SEBI) has imposed a fine of ₹24 crore on nine entities, including businessman brothers Malavinder Singh and Shivinder Singh, on charges of diverting funds in the Fortis Healthcare case.

SEBI noted that funds to the tune of ₹397.12 crore were diverted from Fortis Hospitals for the benefit of RHC Holdings Pvt. Ltd, and ultimately the Singh brothers.

In its final order in the Fortis Healthcare case, the market watchdog imposed a fine of ₹5 crore each on the Singh brothers, and a ₹2.5 crore penalty on RHC Holdings. Apart from this, Malav Holdings Pvt Ltd, Shivi Holdings Pvt. Ltd., Gagandeep Singh Bedi and Bhavdeep Singh have been fined ₹2.5 crore each. SEBI has also imposed a fine of ₹1 crore on Fortis Healthcare and ₹50 lakh on Fortis Hospitals.

SEBI ordered Fortis Healthcare and Fortis Hospitals to continue their measures to recover ₹397.12 crore diverted to ultimately benefit RHC Holdings, along with interest. The audit committee of the company has been directed to regularly monitor the progress of such measures and report the same to the board of directors.

SEBI has also barred the Singh brothers from accessing the securities market, buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market as a key managerial person or director for a period of three years, or till the diverted funds are recovered.

Meanwhile, the RHC Holdings, Malav Holdings, Shivi Holdings, Gagandeep Singh Bedi and Bhavdeep Singh have been prohibited from accessing the securities market for two years.

According to shareholding details shared by SEBI, at the beginning of the investigation period, RHC Holdings was entirely held by Malavinder Singh and Shivinder Singh through Malav Holdings Pvt. Ltd. and Shivi Holdings Pvt. Ltd., respectively. This made the Singh brothers controlling shareholders and promoters of Fortis Healthcare.

Gagandeep Singh Bedi, was the former chief financial officer of Fortis Healthcare from September 2014 till September 30, 2018. Bhavdeep Singh was the CEO of Fortis Healthcare for three and a half years, before resigning in November 2018.

SEBI noted that the Singh brothers, RHC Holdings, Malav Holdings, Shivi Holdings played a key role in diverting funds from Fortis Healthcare and Fortis Hospitals. The funds were siphoned in the garb of investment through ICDs through various conduit entities, routed in a structured manner to benefit the promoters.

Meanwhile, Gagandeep Singh Bedi and Bhavdeep Singh played a role in the approval of grant of loans/ ICDs to the borrower companies – Best, Fern and Modland – wherein they deliberately failed to carry out adequate due diligence and exercise independent judgement, thereby aiding in misuse and diversion of public shareholders’ funds, the regulator further noted.

SEBI further noted that Fortis Healthcare and Fortis Hospitals have initiated steps to recover the diverted amount.

fund siphoning

Fortis Healthcare case: Singh brothers, others fined ₹24 cr on fund siphoning charges