Delhi High Court Allows Yes Bank To Auction Singh Brothers’ Property With Riders

The court allowed Yes Bank to auction a property the Singh brothers offered as a collateral against loans they later defaulted on.

Shivinder Singh and his brother Malvinder Singh. (Source: Bloomberg)
Shivinder Singh and his brother Malvinder Singh. (Source: Bloomberg)

The Delhi High Court has allowed Yes Bank Ltd. to auction a property that the Singh brothers offered as a collateral against loans they later defaulted on.

The auction, however, will be conducted under the supervision of a court-appointed commissioner, the court said in its order.

Yes Bank had sanctioned two loans of Rs 500 crore and Rs 565 crore between 2015 and 2017 to companies controlled by the Singh brothers. The loans were declared non-performing assets after a default in July 2019.

Yes Bank moved to sell the collateral to recover the amount. But Japan’s Daiichi Sankyo opposed the auction plea, citing that the high court had ordered a status quo on the assets. Daiichi aims to recover more than Rs 3,500 crore from the former billionaires by enforcing a 2016 Singapore arbitral award in India.

Daiichi alleged that Yes Bank’s attempt to auction the property, despite the court's status quo, reflected that it was colluding with the debtors.

Separately, Fortis Healthcare Ltd. claimed that it had rights over the property as it was a creditor to the various group entities of Singh brothers.

A Delhi High Court bench comprising Justice Rekha Palli modified the court’s February 2018 order, allowing Yes Bank to auction the property. However, observing that it's a matter of public record that Yes Bank’s past management was mired in allegations of financial irregularities, the court directed the lender to deposit the sale proceeds in an escrow account.

The proceeds, the court said, can only be utilised after disposal of  Daiichi's plea challenging the role of various lenders, including Yes Bank, in the dilution of shareholding by the Singh brothers in Fortis Healthcare.

Yes Bank’s Arguments

  • The bank had an exclusive charge over the property which became effective in 2015.

  • Being a charge-holder, it was a secured creditor under the Sarfaesi Act, and hence, obtained a prior statutory right over the asset.

  • As the court only had directed a status quo in its February 2018 order on “unencumbered assets”, the charged property, being a secured asset, wasn’t covered under the order.

Daiichi’s Counter

  • It has filed a separate application alleging that certain banks and financial institutions colluded with the Singh brothers to dilute the shareholding in Fortis Healthcare Ltd.

  • It has also challenged Yes Bank’s decision to extend loans to the group entities by creating pledge over the 3.5 crore shares held by Fortis Healthcare Holdings in Fortis Healthcare Ltd.

  • Some of these allegations are like the Vinay Prakash case where the Supreme Court found that the same group entities were guilty of colluding with a financial institution to purposefully dispose of assets.

  • The property was identified by the Singh brothers in the list of assets on which a status quo order was granted by the high court.

The Delhi High Court also refused to entertain Fortis Healthcare’s plea over the assets, citing that its claim cannot have a precedence over the claims made by Yes Bank or Daiichi Sankyo as no decree was passed in its favour.