This was a contempt petition against the promoters of FHHPL who did not adhere to the orders of the Court to maintain the status quo of the shares of the FHL held by FHHPL.
Brief facts of the case
A notice was issued on 11.08.2017 in Special Leave Petition, the Court directed that the status quo as on the day regarding the shareholding of Fortis Healthcare Holding Private Limited (FHHPL) in Fortis Healthcare Limited (FHL). By another order dated 31.08.2017, it was clarified that the previous order dated 11.08.2017 was concerning both the encumbered and unencumbered shares of FHL held by FHHPL.
After that, various banks/financial institutions filed applications seeking clarifications submitting inter alia that some of the shares of FHL held by FHHPL were already pledged with the said banks/financial institutions and that it be directed that the orders dated 11.08.2017 and 31.08.2017 would not apply to such encumbered shares.
By order dated 15.02.2018, it was clarified by the Supreme Court that the status quo granted by orders dated 11.08.2017 and 31.08.2017, would not apply to shares of FHL held by FHHPL, which had been encumbered before the aforesaid mentioned interim orders were passed.
Later, the order dated 15.11.2019 passed by the Court in the Contempt petition dealt with five assurances given Delhi High Court, while the matter was pending before the High Court and the effect of interim orders passed by the Supreme Court. It was found that there was a significant decline in the number of shares held by FHHPL from Sept. 2016 to Dec. 2018.
The order signifies that the number of unencumbered shares held by FHHPL steadily declined and that ‘the contemnors knowingly and willingly lost control of FHL’.
FHHPL’s argument
It was submitted that the FHHPL did not sell or further encumbered any shares after 06.03.2017, however, various banks/financial institutions themselves exercised the right of pledge/ top-up of pledged shares without any reference to the actions of the promoters of FHHPL, who were representing FHHPL.
In these circumstances, notices were issued by order dated 11.02.2021 to the banks/financial institutions.
Respondent’s arguments
It was submitted that as the issue was already gone into by the Supreme Court and that there were no pleadings to which any reply to be filed by the said banks/ financial institutions.
Appellant’s argument
It was submitted that the total number of shares remained constant at 32,50,91,529 and that after that assurance was given on 23.01.2017 before the Delhi High Court, not only the total number of shares declined but the number of unencumbered shares went down from 7,31,68,281 to 6,01,607.
Further, it was not just the case of creating encumbrance or pledges but, there were instances of sale of shares and the intent was definitely to decrease the extent of control of FHHPL. After the order dated 25.02.2018, none of the banks had told the Supreme Court that what the consequences of the said order would be, and that within a year-and-half, the shareholding of FHHPL stood reduced to a negligible level.
It was also argued that none of the banks/financial institutions had not indicated why the unencumbered shares were sought to be put under encumbrance or the shares were sold when other forms of securities were available. The arrangements under which shares were pledged must be disclosed so that the intention of obtaining the loan would be clear.
The concerned individuals and corporate entities could not sell the shares held by FHHPL directly, therefore an arrangement was employed and was so structures that the shares were proceeded against by the banks and financial institutions.
The Banks/financial institutions interfered in the matters pending before the Supreme Court, that they were certainly aware of the Award granted in favour of M/s. Daiichi Sankyo Company Limited (Appellant) against the promoters of FHHPL, and thus, the role of banks/financial institutions would require closer scrutiny.
Observation by the Court
The Court directed the Banks and financial institutions:
- To place on record the basic documents concerning loans advanced against which the shares of FHL were pledged with them
- To place on record the nature of securities provided about the loan arrangements
- To place on record the details of the encumbered and unencumbered shares of FHL held by FHHPL in September 2016 and on 11.08.2017
- To provide details of the shares of FHL held by FHHPL, which were put under encumbrance after 11.08.2017
- To provide details of shares of FHL held by FHHPL, sold by banks/financial institutions from Jan 2017
- 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
- To disclose whether under such agreement/arrangement any other security was given by the pledgors
- To give the value of the encumbered shares as they stood in September 2016, on 11.08.2017, and subsequent dates.
The decision of the Court
The appropriate responses were ordered to be filed by all the notice banks and financial institutions on or before 22.02.2021. The matter will further be considered on 24.02.2021.
Case: DAIICHI SANKYO COMPANY LIMITED vs. OSCAR INVESTMENTS LIMITED & ORS
Click here to read the judgement.
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