A court’s search for assets and the cost to corporate certainty

On August 31, 2026, in the long-running enforcement proceedings between Daiichi Sankyo and the Singh brothers, the Delhi High Court allowed three applications. In doing so, it drastically rewrote how strangers to an arbitral award may be treated under Indian law.

By way of its order, the Court has appointed a forensic auditor to reconstruct the entire chain of dealings in the shares of Fortis Healthcare Limited (FHL) from May 24, 2016 onwards. Interestingly, FHL was not a party to the arbitration agreement, not a party to the award, not a judgment debtor and was not even a party to the assurances given to the Court by the judgement debtors - the Singh brothers and their holding companies. It is nevertheless the subject of the audit so directed, as are 17 banks and financial institutions.

How the Court justifies this is worth examining closely.

The direction for forensic audit, it holds, is "purely investigative in nature" and does not result "in the fastening of liability upon the entity whose affairs are directed to be examined". The characterisation is appealing: if the audit is only an enquiry, then no rights are affected and if no rights are affected, the stranger has nothing to complain about. That this enquiry may well pave the way for liability to be fastened later is a bridge the Court leaves for another day.

Except that the order does not quite confine itself to investigation. Because the brothers served as chairman and vice-chairman of FHL, the Court holds that they were “the heart, soul and brain” of the company and that their knowledge was the company’s knowledge. On this footing, the assurances given by the brothers to protect the decretal amount are sought to be read as extending beyond their personal shareholding to cover the entirety of the promoter group’s stake in FHL.

The Court’s predicament is not difficult to understand. A foreign award of considerable magnitude has remained substantially unsatisfied for close to a decade. Successive assurances given to the Court were breached by the brothers. The controlling stake in FHL was whittled down from over 70 per cent to less than 1 per cent while those assurances held. The Supreme Court has already found the brothers guilty of contempt. With no identifiable pool of assets in sight, the Court’s impulse to trace where the value has gone is entirely natural. The question is whether that impulse can, by itself, justify drawing a third party into execution proceedings.

The trouble lies in the reasoning that gets it there. The judgment reproduces, from Balwant Rai Saluja v. Air India Ltd, the six Ben Hashem principles, the first of which holds that ownership and control of a company are not enough to justify piercing. Yet, the nexus the Court relies upon to bring FHL within the ambit of the forensic audit is precisely ownership and control. Impropriety by FHL is not found; it is what the auditor is being asked to look for. The veil is pierced in order to justify the very enquiry that is meant to determine whether piercing is warranted. There is a circularity here that the order does not confront.

More unsettling still is what the Court leaves on the table. It records the doctrine of reverse corporate veil piercing - a doctrine under which the assets of a company may be treated as available for satisfaction of a decree against the individuals who controlled it. Whether the doctrine will ultimately be applied is left open, to be decided after the audit is in. But the mere articulation of the principle, in the context of a listed company that has since changed hands entirely, amounts to something close to a warning. It suggests that the assets of FHL, a company whose shares are now held by the investing public and whose management has no connection to the brothers, may one day be called upon to answer for a debt they had nothing to do with.

For India's arbitration landscape, which has spent years building the credibility of its enforcement regime, this is a step that deserves serious scrutiny. The proposition that a stranger to a decree can be drawn into execution proceedings on the basis of a "prima facie nexus" - without a prior finding of wrongdoing - and subjected to an intrusive forensic audit with undefined consequences, introduces a degree of uncertainty that parties transacting with Indian listed companies will have to price in. The corporate veil, in such a framework, offers no protection; it is merely scenery.

The creditor in this case deserved a remedy. Whether that remedy needed to come at the cost of a principle that underpins how businesses organise themselves is a different question; one that the order does not adequately answer.

Aanchal Basur is an advocate in independent practice before the Supreme Court of India and the Delhi High Court, specialising in international arbitration.

The views expressed are personal.