Delhi HC notice to Rajan Nanda on Fortis IPO issue

The Delhi High Court has issued notices to Escorts Ltd and chairman Rajan Nanda on a contempt petition filed by his estranged brother Anil Nanda, seeking a direction to delete the name of Escorts Heart Institute and Research Centre (EHIRC) from Fortis Healthcare's proposed IPO.

In his application, Anil Nanda also sought to restrain market regulator Securities and Exchange Board of India (SEBI) to proceed on the draft red herring prospectus that contains reference of EHIRC.

Justice Reva Khetrapal directed all the defendants to file their replies by February 6, the next date of hearing.

In September last year, Fortis had acquired 90 per cent equity in EHIRC for Rs 650 crore, but the sale was later challenged by Anil Nanda. However, the court had directed the parties to maintain status quo with regard to sale and the money lying in the escrow account of EHIRC.

Anil Nanda's counsel PK Bhansal in the contempt petition said the defendants (Escorts and Rajan Nanda) were trying to raise substantial funds by exploiting the name, goodwill and the income of the charitable institute.

After transfer of the charitable asset of the hospital and its shares to Fortis, shareholders and directors were now trying to defraud the public at large, the counsel alleged.

"They are trying to raise approximately Rs 500 crore from the public issue in contravention of the status quo order," he added.

The petition further said that the scheme was formulated by the Rajan Nanda group just 'to defraud charity, hijack a charitable asset and make huge personal unlawful gains.'

Escorts Ltd on Tuesday had also filed a contempt petition in the court seeking to restrain income tax authorities from recovering the institute's Rs 64.99 crore tax liabilities from the money lying in its escrow account with HDFC Bank.

The petition filed through counsel Simran Mehta had alleged that the tax department issued a notice dated November 11 to HDFC Bank, asking it to release EHIRC's tax liability of around Rs 64.99 crore from its escrow account.

The petition said HDFC Bank was bound by the status quo order of the court and it also extended to Rs 149 crore kept in the escrow account.

The authorities had threatened to attach the account of the bank with the Reserve Bank of India knowing fully that the same would paralyse the bank operations, it added.

According to Mehta, the money lying in the escrow account does not belong to EHIRC and the department has no right to recover unpaid tax demands of the institute from the account.