Proxy advisory firm InGovern has warned that the reasoning behind the Delhi High Court’s order for a forensic audit of Fortis Healthcare could have wider consequences for listed companies if it is upheld. InGovern said the order could expose listed companies to enforcement proceedings linked to the personal liabilities of their promoters, even when the company itself was not a party to the original dispute.
The concern arises from proceedings related to the enforcement of a Singapore arbitration award that Daiichi Sankyo holds against the Singh brothers, the former promoters of Fortis, in their personal capacity. The forensic audit was ordered on August 31, 2026. The matter is next listed on April 1, 2027.
InGovern said the issue is not merely about Fortis, but about the precedent the order could set for corporate India.
"If the reasoning is upheld, any listed company in India could potentially be pulled into enforcement proceedings arising from the personal liabilities of its owners," the proxy advisory firm said in its note. It added that board members and compliance officers could then be expected to monitor and enforce personal undertakings and liabilities of promoter-shareholders, even though no existing Indian law or regulation imposes such a duty on them.
According to InGovern, Indian companies have long operated on the understanding that a company is not a guarantor of its promoter’s private affairs. The proxy adviser said the order threatens to rewrite that understanding overnight.
Company-promoter distinction in focus
InGovern said the case tests one of the basic principles of company law: that a company is legally separate from those who own or run it.
The proxy advisory firm argued that the order effectively treats Fortis and the Singh Brothers as one and the same, while also saying that it has not pierced the corporate veil. InGovern said this position sits uneasily with settled Supreme Court jurisprudence.
"If a court can collapse the distinction between a public company and its former promoters without a full trial or a finding of fraud, the foundational architecture of Indian corporate law could come into question," InGovern said.
The audit, however, has been described as a fact-finding exercise. InGovern also stressed that the audit does not by itself establish wrongdoing or liability, and that the matter remains sub judice.
Why listed firms may worry
The broader concern, according to InGovern, is whether listed companies can be drawn into disputes arising from the personal debts of promoters or former promoters. Such a reading, it said, could create uncertainty for boards and compliance teams. If companies are expected to keep track of private commitments made by promoters, the burden on listed entities could widen beyond what current company law, securities law and listing regulations require.
InGovern said the remedy should come from institutions rather than courts alone. It urged Sebi, the Ministry of Corporate Affairs and, if required, Parliament to frame clear thresholds for when a listed company that was not a party to a dispute may be drawn into execution proceedings against its former promoters.
The proxy advisory firm further noted that clarity is needed because the issue could affect not just Fortis but the larger listed-company framework in India.
Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclourses here.
