Capital markets regulator, the Securities and Exchange Board of India (Sebi), has taken action against four entities involved in the Fortis Healthcare fund diversion case. Last week, Sebi issued notices to these entities, urging them to pay a sum of Rs 4.56 crore within a 15-day timeframe. The case involves allegations of fund diversion and misrepresentations made to cover up the fraudulent activities.

Sebi has warned that failure to make the payment within the stipulated time will result in the attachment of assets and bank accounts belonging to the entities involved. The four entities that received the demand notices are Fortis Global Healthcare, RHC Finance, Shimal Healthcare, and ANR Securities.

This recent development comes after the entities failed to pay the fines imposed on them by Sebi back in May 2020. In the fresh notices dated June 9, Sebi has specifically directed them to pay a total amount of Rs 4.56 crore, including interest and recovery costs, within 15 days. If they fail to comply, Sebi will initiate the process of recovering the dues by attaching and selling their movable and immovable properties, as well as freezing their bank accounts.

Sebi has made it clear that it can resort to further measures, including arrest and detention, to ensure the recovery of the amount. In May 2022, Sebi had imposed penalties amounting to Rs 38.75 crore on a total of 32 entities, including the four entities mentioned above, in connection with the diversion of funds from Fortis Healthcare Ltd (FHL) and the subsequent attempts to conceal the fraud. Each of the four entities was fined Rs 1 crore.

The case dates back to 2018 when a media report alleged that the promoters of FHL had siphoned off substantial funds from the listed company. The report also highlighted that Deloitte Haskins & Sells LLP, the statutory auditor of FHL, had refused to sign off on the company’s second-quarter results until the funds were accounted for.

Following these revelations, Sebi launched an investigation to examine potential violations of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) provisions. Through its probe, Sebi uncovered a systematic fraudulent scheme devised by the former promoters of FHL. This scheme involved diverting funds amounting to Rs 397 crore from FHL to RHC Holding, an entity indirectly owned and directly controlled by the former promoters. The funds were allegedly routed through a network of intermediate entities.

Sebi’s actions against the four entities serve as a strong reminder of the regulator’s commitment to safeguarding the integrity of the capital markets and holding accountable those involved in fraudulent activities.