U.S. Equity Firm Accuses Embattled Indian Healthcare Tycoons of Siphoning Cash

New York-based private equity firm Siguler Guff & Co. has accused Malvinder and Shivinder Singh, former owners of Ranbaxy Laboratories Ltd., of “diversion, siphoning and digression of assets” in a lawsuit filed in the Delhi High Court. The plaintiff has a 6 per cent stake in the financial services firm Religare Finvest Ltd (RFL).

The Singh brothers, who are already involved in another lawsuit against Daiichi Sankyo, allegedly routed money to privately held firms by them through their small-business lending unit, RFL. They are said to have used the publicly traded company, RFL, to lend out 21 loans to companies owned by them or “known” to them worth $300 million. The money was allegedly sent to their privately held firms on the same day.

According to the lawsuit, they were using the money to pay their $1.6 billion personal debts, because of which part of Religare and Fortis Healthcare Ltd. is being sold. RFL has been under investigation by the Reserve Bank of India since 2015, according to the lawsuit.

The allegations “are completely baseless and we categorically deny them,” Religare said in an email response to Bloomberg. “As the matter is sub-judice we cannot offer more comments. However we will comment further at an appropriate time.”

Through the lawsuit, the private equity firm wants RFL to stop lending to Singh brothers and stop the parent company from selling its assets to pay for a potential liability to be pursued by the investor in arbitration, the suit says.

The Singh brothers “have been camouflaging the diversion of funds from RFL to meet their personal liabilities under the guise of legitimate business operations,” the lawsuit alleges. The Singhs “are engaged in systematically plundering” Finvest, diminishing the ability of the parent company to honor its obligations, the suit alleges, according to Bloomberg.

Siguler Guff and Co., a $12.6 billion private equity firm, is an investor in the Resurgence PE Investments fund through which it owns a 6 per cent stake in RFL. They are suing Finvest to force the corporate parent to honor a provision in its original investment agreement to buy out its stake for about $43.5 million.

The Singh brothers are already facing a lawsuit from Daiichi Sankyo for allegedly concealing information of wrongdoing at Ranbaxy when they sold their shares in 2008. The brothers are challenging an arbitration tribunal award granting Daiichi Rs. 2,500 crore in damages in April last year.