SEBI Issued Demand Notices Against Four Entities in Fortis Healthcare Fund Diversion Case

SEBI Issued Demand Notices Against Four Entities in Fortis Healthcare Fund Diversion Case

The Securities and Exchange Board of India (SEBI) has issued notices to four entities asking them to pay Rs. 4.56 crores within 15 days in Fortis Healthcare’s case of fund diversion and misrepresentations to conceal the fraud.

The four entities that received notices are- Fortis Global Healthcare, RHC Finance, Shimal Healthcare and ANR Securities.

Additionally, the regulator has warned of attachment of assets and accounts in the event the entities fail to make the payment within the stipulated time.

The matter dates back to 2018 when a media report revealed that the promoters of the listed FHL had allegedly taken massive funds out of the listed company. It also pointed out that Deloitte Haskins & Sells LLP, the statutory auditor of FHL, had refused to sign on the company's second-quarter results until the funds were accounted for.

Thereafter, in May 2022, SEBI had levied penalties totaling Rs. 38.75 crores on 32 entities, including these four entities in the case related to the diversion of funds of Fortis Healthcare Ltd (FHL) and misrepresentations to conceal the fraud.

It imposed a fine of Rs. 1 crore each on the four entities.

Subsequently, the regulator launched an investigation into the matter to examine possible violations of the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices).

Through its investigation, SEBI found that the erstwhile promoters of FHL devised a systematic scheme of fraud in order to funnel the resources of a listed company behind the facade of investment through Inter-Corporate Deposits (ICDs) or short-term loans to various intermediate entities for the benefit of RHC Holding, an entity controlled and indirectly owned by the erstwhile promoters through the use of inter-corporate deposits (ICDs) and short-term loans.

The funds aggregating to Rs. 397 crores were diverted from FHL to RHC Holding, through a wholly-owned subsidiary of FHL -- Fortis Hospitals Ltd. The funds were allegedly routed through a network of entities.

The demand notices came after the entities failed to pay the fine imposed on them. In the four fresh notices dated 9 June, SEBI ordered them to pay Rs. 4.56 crores, which includes interest and recovery cost, within 15 days.

In the event of non-payment of dues, the regulator was of the view that it will recover the amount by attaching and selling their moveable and immovable properties. Additionally, the entities will face attachment of their bank accounts.