M/S Daiichi Sankyo Company … vs Oscar Investments Limited on 18 February, 2021


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Supreme Court of India

M/S Daiichi Sankyo Company … vs Oscar Investments Limited on 18 February, 2021

Author: Uday Umesh Lalit

          SLP(C)No.20417 of 2017 etc.
          M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
                                                                                               1

                                         IN THE SUPREME COURT OF INDIA

                                    CIVIL APPELLATE/INHERENT JURISDICTION

                                SPECIAL LEAVE PETITION (CIVIL)NO.20417 OF 2017

                          M/S. DAIICHI SANKYO COMPANY LIMITED                        …Petitioner
                                                            Versus
                          OSCAR INVESTMENTS LIMITED & ORS.                           …Respondents


                                                            WITH
                                SUO MOTU CONTEMPT PETITION (CIVIL)NO.4 OF 2019
                                      (In Re: Malvinder Mohan Singh and others)

                                                            AND

                                     CONTEMPT PETITION(CIVIL)No.2120 OF 2018
                                                             IN
                                  SPECIAL LEAVE PETITION (CIVIL)NO.20417 OF 2017
                                   (Mr. Vinay Prakash Singh vs. Sameer Gehlaut and others)


                                                         O R D E R

1. While issuing notice on 11.08.2017 in Special Leave Petition

(Civil)No. 20417 of 2017, this Court directed that status quo as on the

Signature Not Verified
day with regard to the shareholding of Fortis Healthcare Holding
Digitally signed by Dr.
Mukesh Nasa
Date: 2021.02.18
13:55:46 IST

Private Limited (‘FHHPL’, for short) in Fortis Healthcare Limited
Reason:

(‘FHL’, for short) be maintained. By next order dated 31.08.2017, it
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
2

was clarified that the earlier order dated 11.08.2017 was intended to be

in respect of ‘both the encumbered and unencumbered shares of Fortis

Healthcare Limited held by Fortis Healthcare Holding Private

Limited’.

2. Soon thereafter, various banks/financial institutions filed

applications seeking modification/clarification submitting inter alia

that certain shares of FHL held by FHHPL were already pledged with

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. For example, I.A. No. 89755 of 2017 (Volume No. 16) was

filed by Axis Bank Limited stating in para 2 of the application that

1,83,75,000 shares were pledged with it since 2014. Similarly, I.A. No.

90247 of 2017 (Volume No. 18) was filed by Yes Bank Limited.

3. By order dated 15.02.2018, the earlier orders dated 11.08.2017

and 31.08.2017 were clarified by this Court to mean that the status quo

granted would not apply to shares of FHL held by FHHPL which had

been encumbered before the interim orders dated 11.08.2017 and

31.08.2017 were passed.

SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
3

4. Later, the order dated 15.11.2019 passed by this Court in

Contempt Petition (Civil) No.2120 of 2018 (“the Order”, for short)

dealt with five assurances given to the High Court of Delhi, while the

matter was pending in the High Court and the effect of interim orders

passed by this Court. In paragraph 41 of the Order, this Court found

that there was significant decline in the number of shares held by

FHHPL from September, 2016 to December, 2018. It was observed:-

“41. The order passed by this Court on 11.08.2017 with a
clarification on 31.08.2017, and modification made on
15.02.2018, is not to be read in isolation but along with the
solemn undertakings and assurances given by the
contemnors on as many as five occasions before the Delhi
High Court, the last one being as late as on 21.06.2017.

These assurances were to the effect that even if the Court
permits sale of encumbered shares for payment of debt, it
would not have any impact on the (potential) creditors and
availability of the funds would only pare down the debt and
increase the value of the shares. Contrary to the aforesaid
solemn assurances and undertakings, which were repeatedly
reiterated to procure orders, the shareholding went into a
downward spiral, as is apparent from the table in paragraph

23. There was a significant decline in the total number of
shares held by FHHPL, both encumbered and
unencumbered, which fell down from 27,21,59,955 and
5,29,31,574 in September 2016 to 5,51,484 and 6,01,607 in
December 2018. The aforesaid fact with the impact on
valuation was never brought to the notice of the Court and
was concealed with the knowledge that these facts, if
brought to the notice, would have substantial bearing on the
orders that would be passed to protect the interest of the
petitioner.”
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
4

5. As a matter of fact, the concerned figures showing shareholding

patterns including the division between encumbered and

unencumbered shares in various quarters were set out in a tabular chart

in paragraph 23 of the Order. Said paragraph 23 was as under:-

“23. FHL is a public company and being a listed
company, it has to disclose its shareholding patterns to
the stock exchange. A chart showing share holding
pattern of FHHPL in FHL will show the position of
holdings at various stages:

           S.      Quarter       Total Shares    Encumbered        Unencumbered
                   Ending                        Shares            shareholding of
           No.                                                     FHHPL in
                                                                   FHL
           1.      September     32,50,91,529       27,21,59,955    5,29,31,574
                   2016
            2.     December      32,50,91,529       25,22,63,248    7,28,28,281
                   2016
            3.     28th Jan      32,50,91,529       25,19,23,248    7,31,68,281
                   2017
            4.     March         27,02,41,529       23,18,01,440     3,84,40,089
                   2017
            5.     June 2017     22,22,11,701       18,38,96,484    3,83,15,217

            6.     September     17,80,26,597       17,53,94,820     26,31,777
                   2017
            7.     December      17,80,26,597       17,53,94,820     26,31,777
                   2017
            8.     March          34,20,451           6,89,084       27,31,367
                   2018
            9.     June 2018      32,82,851          5,51,484        27,31,367
SLP(C)No.20417 of 2017 etc.

M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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10. September 11,53,091 5,51,484 6,01,607
2018

11. December 11,53,091 5,51,484 6,01,607
2018

It is true that we have to decide whether there is any
disobedience of the orders of this Court, but while doing
so we will make reference to the proceedings before the
Delhi High Court and the above chart to show how both
sets of respondents have violated the orders of the
courts. As pointed above, on 19.06.2017 learned counsel
for OIL and RHC had made a statement before the
Delhi High Court that the status of unencumbered
assets as disclosed to the court would not be changed
and the shareholding as disclosed in terms of order dated
06.03.2017 shall not be affected. When the petitioner felt
that this order is not being complied with, it filed
contempt petition in the Delhi High Court. Within two
days another order was passed by the Delhi High Court
on the basis of the undertaking given to it.”

6. The observations in paragraphs 34 to 38 of the Order indicate that

the number of unencumbered shares held by FHHPL steadily declined

and that ‘the contemnors knowingly and willingly lost control of Fortis

Healthcare Limited (FHL)’.

7. Mr. Kailash Vasdev, learned Senior Advocate, appearing for one

of the contemnors had invited our attention to the affidavit filed on

behalf of Respondent No. 14 in compliance of order dated 14.05.2018

(Volume 55). The tabular chart given in paragraph 7 of said affidavit
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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and assertions in paragraph 8 thereof were to the following effect:

“7. The details of the number of shares held by FHHL
in FHL are as follows:


           Date       Encumbered       Unencumbered      Total Number
                      Shares           Shares            of shares
        28.02.2017    26,81,66,020     3,84,25,509       30,65,91,529
                                                         (59.23%)
        31.03.2017    23,18,01,440     3,84,40,089       27,02,41,529
        31.07.2017    18,64,94,060     84,89,948         19,49,84,008
        31.08.2017    17,53,94,820     26,31,777         17,80,26,597
        31.01.2018    17,53,83,320    26,43,277          17,80,26,597
                      (pursuant to a
                      release      of
                      11,500 pledged
                      shares)
        28.02.2018    7,65,584         26,54,867         34,20,451
        31.03.2018    6,89,084         27,31,367         34,20,451
        16.05.2018    6,31,484         27,31,367         33,62,851
                                                         (0.65%)




8. Neither Respondent no.14 nor Respondent No.19 sold
and/or further encumbered any shares after 06.03.2017.
However, pursuant to the existing loan/pledge agreements,
various banks themselves exercised the right of pledge/top-

up of the pledge shares without any reference or any action
from Respondent Nos.14 & 19 and/or FHHL, described in
greater detail hereinbelow. Further, the Hon’ble Supreme
Court, vide its orders dated 11.08.2017 and 31.08.2017
injuncted FHHL and all financial institutions from
selling/alienating encumbered as well as unencumbered
shares held by FHHL in FHL. This order was modified by
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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the Hon’ble Supreme Court on 15.0-2.2018, whereby the
encumbered shares were permitted to be sold by the
respective lenders. Due to all above, there were sale/fresh
encumbrances from the period 06.03.2017 till 31.08.2017 but
thereafter 5ill 15.02.2018 there was no change in the said
encumbrance/sale and once again there were further sales
after 15.02.2018. The unencumbered shares held by FHHL
in FHL are protected by the order dated 23.02.2018 passed
by the Hon’ble Supreme and cannot be
encumbered/alienated by FHHL. Copies of the orders dated
11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018 passed
by the Hon’ble Supreme Court are annexed herewith and
marked as Annexure A (colly).”

8. This reply, thus, clearly shows that though allegedly neither

Respondent No. 14 nor Respondent No. 19 sold or further encumbered

any shares after 06.03.2017, various banks/financial institutions

themselves exercised the right of pledge/top-up of pledged shares

without any reference to or action from either Respondent No. 14 or

Respondent No. 19.

9. In the circumstances, notices were issued to various

banks/financial institutions as detailed in the order dated 11.02.2021.

10. Appearing for some of the banks/financial institutions, Mr.

Shyam Diwan and Mr. Ramji Srinivasan, learned Senior Advocates;

and Mr. Jayant Mehta, Mr. Sanjay Gupta and Mr. Sharma, learned

Advocates, submitted inter alia that the issue was already gone into by
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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this Court and that there were no pleadings to which any response

could be filed by the concerned banks/financial institutions.

11. In reply, Mr. Rakesh Dwivedi, learned Senior Advocate invited

our attention to the chart set out in paragraph 23 of the Order, to

submit that first three entries of the chart disclose that the total number

of shares remained constant at 32,50,91,529; and that after the

assurance was given on 23.01.2017 by the concerned respondents

before the High Court of Delhi (marked as second assurance in

paragraph 5 of the Order), not only the total number of shares started

dwindling but the number of unencumbered shares went down from

7,31,68,281 to 6,01,607, as stated in the chart. Mr. Dwivedi, then,

referred to the affidavit dated 08.02.2017 filed on behalf of all the

respondents in the High Court of Delhi which held out that the value

of unencumbered shares was more than Rs.4,000/- crores and that the

value of the unencumbered security was sufficient in the event the

award was to be enforced. The relevant paragraphs of said affidavit

were as under:-

SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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“2. That vide order dated 23.1.2017, this Hon’ble Court had
directed an affidavit to be filed by anyone of the Respondents
on behalf of all the Respondents in respect of the
unencumbered assets held by the Respondents in support of
the assurance given to the Court as recorded in the letter dated
24.5.2016.

3. Therefore, in furtherance of the Order dated 23.1.2017,
I am filing the present affidavit on behalf of Respondent No.
19 and all other Respondents.

4. All the Respondents had submitted their respective
affidavits disclosing their assets on 6.12.2016 to this Hon’ble
Court. The aggregate book value of investments held by all
the Respondents (excluding investments inter se amongst the
Respondents) as per the said Affidavits is Rs.10,217.10
Crores out of which investments to the tune of Rs.1,409.93
crores are encumbered leaving the residual investments to the
tune of Rs.8,807.18 Crore as unencumbered. Further, as on
31.12.2016, the book value of investments held only by RHC
Holding Private Limited (Respondent No.19) as on
31.12.2016 is Rs.6,510.54 Crores out of which investments to
the tune of Rs.1,513.86 Crores are encumbered leaving the
residual investments to the tune of Rs.4,996.68 Crores as
unencumbered.

5. Respondent No.19 has also undertaken an internal
valuation of its unencumbered investments as on 31.12.2016
mentioned in para (4) above and based on such internal
valuations, the estimated (on a conservative basis] fair value
of its unencumbered investments as on 31.12.2016 is
approximately Rs.3,453 Crores.

6. Apart from the aforesaid investments, Respondent
No.19 has also extended loans and advances (other than loans
and advances to other Respondent entities) and after netting
off the loans raised on current assets, the amount of loans and
advances recoverable is Rs.252.59 Crores as on 31.12.2016
which is over and above the aforesaid investments.
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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7. There is no intention of selling any of the
unencumbered investments by way of shares held by
Respondent No.19. A proposal which is under discussion
may involve the sale of 29,00,000 equity shares of SRL
Limited held by Respondent No.19 and 7.05,000 equity
shares of SRL Limited held by Malav Holding Private
Limited (Respondent No.15) to external investors in the near
future. These shares of SRL Limited are encumbered and
thus not included in the value of unencumbered assets
mentioned at paras (4) & (5) above. Obviously this will have
to be after obtaining the consents of the security holders. The
proceeds of such sale will have to be utilized to pare down the
debt – the net assets of the Respondents will thus remain
unchanged. The shares being sold [36,00,000] which are
below 5% of the share capital of SRL will be sold to an
external investor. The further proposal under consideration is
to merge SRL with another listed group company at a later
point of time. Even if this does take place, this will have no
implications on the next assets of the Respondents.

8. There are proposals to issue further capital in the
downstream companies [below Respondent No.19]. The net
result of issue of shares will be accretion in the value of the
shares of the upstream company. The promoters would
continue to remain the single largest shareholders in the
companies where fresh capital is being issued to minority
investors, and that will create value going forward. The
induction of a Private Equity fund or some such investor –
were it to take place – will improve the finances of the
downstream companies and thus add to the fair value of the
unencumbered and encumbered shares.

9. The value of the unencumbered assets declared is
sufficient security for the Award in the event it is enforced.
This fair value of the unencumbered assets as mentioned in
para (5) does not include value of 5 crore equity shares of
Fortis Healthcare Limited held by the underlying subsidiary
of the Respondents which have been kept aside from the
aforesaid valuation for the sake of flexibility and debt
repayments of various group entities.”
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
11

12. It was, therefore, submitted that it was not just a case of creating

encumbrance or pledge but, there were instances of sale of shares and

the purpose was definitely to reduce the extent of control of FHHPL.

He further submitted that at the stage when the applications for

modification/clarification were preferred by the banks and financial

institutions, on the basis of which the order dated 25.02.2018 was

passed by this Court, none of the banks had told this Court what the

consequences of said order would be; and that in a matter of a year-

and-half, the shareholding of FHHPL stood reduced to negligible level.

13. Mr. Arvind P. Datar, learned Senior Advocate, added that there

would normally be a basic arrangement or loan agreement, in terms of

which various kinds of securities including charge over properties,

corporate and personal guarantees would be offered; and that a pledge

of shares would only be by way of an additional security. None of the

banks/financial institutions had indicated why the unencumbered

shares were sought to be put under encumbrance or the shares were

sold when other forms of securities were available. He further

submitted that the arrangements under which the shares were pledged
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
12

must be disclosed so that the purpose for which the basic

accommodation or loan was obtained would also be clear. For

example, according to him, in November, 2016 a loan agreement was

entered into between India Bulls and RHC Holding Private Limited for

an amount of Rs.350 crores purportedly for ‘construction/development

of residential projects’. He submitted that no such project had come

up and the amount of Rs.350/- crores through successive transactions,

was siphoned away. What kind of due diligence was undertaken by

the banks/financial institutions while extending the loan facility must

therefore be brought on record.

14. Both the learned Senior Counsel submitted that with various

orders passed by the High Court and this Court, the concerned

individuals and corporate entities could not sell the shares held by

FHHPL directly and, therefore, a device was employed and the

arrangement was so structured that the shares were proceeded against

by the banks and financial institutions. It was submitted that the

banks/financial institutions had intervened in the matters pending

before this Court, that they were definitely aware of the Award granted
SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
13

in favour of M/s. Daiichi Sankyo Company Limited; and that the role

of banks and financial institutions would, therefore, require closer

scrutiny.

15. In the premises, for the present, we direct all the noticee banks

and financial institutions :-

(a) to place on record the basic documents pertaining to

loans advanced or financial accommodations extended

in respect of which the shares of FHL were pledged

with them;

(b) to place on record the nature of securities offered in

connection with such loan arrangements;

(c) to place on record the details of the encumbered and

unencumbered shares of FHL standing in the name of

FHHPL, held by them in September, 2016;

(d) to place on record the details of encumbered and

unencumbered shares of FHL standing in the name of

FHHPL, held by them on 11.08.2017;

SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
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(e) to give details of shares of FHL standing in the name of

FHHPL, which were put by them under encumbrance

after 11.08.2017;

(f) to give details of shares of FHL standing in the name of

FHHPL, sold by banks/financial institutions from

January, 2017;

(g) 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;

(h) to disclose whether under such agreement/arrangement

any other security was given by the pledgors; and

(i) to give the value of the encumbered shares as they

stood in September, 2016, on 11.08.2017 and on

subsequent dates.

SLP(C)No.20417 of 2017 etc.
M/s. Daiichi Sankyo Company Limited vs. Oscar Investments Limited and others
15

16. The appropriate responses shall be filed by all the noticee banks

and financial institutions on or before 22.02.2021.

17. List these matters for further consideration on 24.02.2021.

………………………….J.

[Uday Umesh Lalit]

………………………….J.

[Indira Banerjee]

………………………….J.

[K.M. Joseph]
New Delhi;

February 18, 2021.



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