April 5, 2007
Fortis Asked to Disclose Escorts Ownership Dispute in its Public
Issue
New Delhi
The Delhi High Court has allowed Fortis Healthcare Ltd (FHL) to
launch its Initial Public Offer to raise money but not without
disclosing the ownership dispute of the Escorts heart hospital in
its offer document and the publicity material for the offer.
Justice Gita Mittal Wednesday said FHL should 'disclose the order of
injunction' in respect of the Escorts Heart Institute and Research
Centre (EHIRC) in all advertisements issued by it in respect of
public issue and invitation for subscription in the interest of
justice.
She also directed the Fortis to mention about the status of EHIRC in
respect of its ownership in the red herring prospects.
The court impleaded FHL as a party to the litigation, and issued
notices to the respondents Escorts Chairman Rajan Nanda, his wife
Ritu Nanda and EHIRC, asking them to file their replies by next date
of hearing on May 1.
Nanda's estranged brother Anil Nanda had filed a petition in the
high court seeking direction to restrain FHL from raising money by
issuing initial public offer(IPO) claiming the company had purchased
the EHIRC.
Anil also sought direction to the FHL to delete the name of EHIRC
from Fortis Healtcare's proposed IPO.
In a complaint filed with the Securities and Exchange Board of India
(SEBI), Anil had alleged that Fortis proposed to raise money from
the market to retire debt incurred for acquiring EHIRC - whose
status as a company has been challenged before the Delhi High Court.
"The high court had prima facie held that conversion of the
charitable trust to a company was not bona fide," said the petition.
Anil contended if the high court were to restore the charitable
trust status of EHIRC, then FHL would not be able to recover its
money as the hospital would not be open for commercial exploitation.
The counsel appearing for Anil argued that FHL had not disclosed the
true contents of the Delhi High Court order in the prospectus of
information filed before the SEBI for the public issue.
Hence, the public investments in the proposed IPO stands at a huge
risk of being lost, the complaint said. FHL would not be entitled to
use the funds received from the proposed public offer by diluting
EHIRC's assets, as that would form the part of the corpus of the
charitable society, it added.
In Sept 2005, FHL had acquired 90 per cent equity in EHIRC for Rs
650 crore, but the sale was later challenged by Anil Nanda in the
high court. Anil said that the heart institute is a charitable
organisation set up by their father S.P. Nanda and could not be sold
as a commercial venture.
The court had directed both the parties to maintain status quo with
regard to sale and the money lying in the escrow account of EHIRC.
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