Ex-Ranbaxy Promoters Guilty for Contempt: SC
The Supreme Court has found the Ex-Ranbaxy Promoters guilty of contempt of court.
WHAT WAS THAT CONTEMPT THEY WERE BEING GUILTY OF?
The two brothers Malvinder Singh and Shivinder Singh were held guilty of violating SC’s order directing them not to divest shares in Fortis Healthcare Ltd, in relief to Japanese drug maker Daiichi Sankyo, which had filed a contempt petition as part of seeking to recover Rs 3,500 crore in dues from the Singh brothers.
WHY THE BROTHERS HAVE TO COMPENSATE TO THE JAPANESE COMPANY?
The Japanese firm had filed a contempt petition against the former Ranbaxy promoters alleging that the performance of their arbitral award had been in obstacle as the Singh brothers disposed of their governing stakes in Fortis Group.
WHAT WAS THE ARBITRAL AWARD?
The arbitration award is an amount of money to compensate in a process of mediation.
A Singapore arbitration tribunal had asked the Singh brothers to pay Rs 2,562 crore to Daiichi Sankyo in 2016 to settle a dispute that arose after the Japanese company’s acquisition of Ranbaxy more than a decade ago. Daiichi had accused the Singh brothers in the case of suppression of fact during the sale of Ranbaxy because the drug maker’s manufacturing plants faced hazardous regulatory issues with the US Food and Drug Administration. Although the former Ranbaxy promoters questioned the tribunal’s decision Indian courts and also in Singapore, the Delhi HC upheld the arbitral award in January.
HOW THE SINGH BROTHER PLANNED TO PAY.
A 30-day period was given to the brothers to deposit the capital to the court’s registrar accordingly as the decree dated 27 September. Any party disputing the claim should file an affidavit to place their statement on record, Justice JR Mi held in the decree, which ET reviewed. The entities cannot “dispose of, alienate, encumber directly or indirectly, part with the possession of any assets, except in the ordinary course of business, like payment of salary and statutory dues, till the next date of hearing.”
According to an affidavit filed by RHC Holding in April, entities including those controlled by the RSSB chief, his family, and close subordinates, owed over Rs 6,000 crore to the company and other group entities of the Singh brothers.
In his resignation, Malvinder Singh, the elder of the Singh brothers, contended that he can pay to Daiichi provided he can reclaim the money owed to him. A considerable part of the proceeds from Ranbaxy sale had been transferred to entities owned by RSSB chief Dhillon and his family and associates. The money has not been returned yet.
CURRENT ISSUE (Ex-Ranbaxy Promoters Guilty for Contempt: SC)
A bench constituting chief justice Ranjan Gogoi and Justice Deepak Gupta proclaimed the Singh brothers guilty of their contempt and held that they had infringed the order made earlier in the sale of a stake in Fortis group.
The apex court said that they would hear the Singh’s on the quantum of sentence.
WHAT IS FRAUD AND WHAT IS THE LAW IN INDIA FOR INDIA IN CONTRACT LAW?
Fraud is defined as “any behaviour by which one person intends to gain a dishonest advantage over another”. and wrongful loss to the other, either by way of concealment of facts or otherwise. Fraud is defined u/s 421 of as the Indian Penal Code and u/s 17 of the Indian Contract Act.
CORPORATE FRAUD IN INDIA
A corporate fraud occurs when a company or an entity intentionally changes and conceals susceptible information which then seemingly makes it look healthier. Companies adopt various modus-operandi to commit such corporate frauds, which may include miss-information in the prospectus, manipulation of accounting records, debt hiding, etc. The aspect of falsification of financial information includes false accounting entries, false trades for inflation of profits, disclosure of price-sensitive which comes under the ambit of insider trading and showing false transactions which result in attracting more investors.
PUNISHMENT FOR FRAUD (S.447)
Any person who is found guilty of fraud shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. Where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.
PUNISHMENT FOR FALSE STATEMENT (S.448)
If in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement —
- which is false in any material particulars, knowing it to be false; or
- which omits any material fact, knowing it to be material