Delhi High Court orders criminal complaint over forged term sheet in Fortis-Walmark arbitration

The Delhi High Court on Thursday directed the Registrar General to lodge a criminal complaint against two officials of Walmark Holdings Limited for allegedly filing false affidavits and relying on a forged term sheet to obtain interim reliefs against Fortis Healthcare Limited in arbitration proceedings. [Walmark Holdings v. Fortis Healthcare]

Justice Amit Bansal invoked the Court’s powers under Section 340 of the Code of Criminal Procedure (now Section 379 of the Bharatiya Nagarik Suraksha Sanhita, 2023), holding that a prima facie case of deliberate falsehood and fabrication of documents had been made out.

“The non-applicants could not have been unmindful of the consequences of making statements and/or falsely swearing affidavit before this Court, which prima facie appear to be false to their knowledge,” the Court observed.

The controversy arose out of a petition filed by Walmark under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim protection against Fortis on the strength of a purported term sheet and side letters dated December 6, 2017.

Fortis consistently disputed the authenticity and execution of these documents, maintaining that the term sheet was never signed by its then CEO Bhavdeep Singh and that it had never come into force.

The Court noted that an earlier non-binding term sheet dated September 26, 2017 had lapsed and that while a draft term sheet was circulated in December 2017, it was never executed by Fortis.

Justice Bansal recorded that when Fortis first received a copy of the term sheet in May 2018, it did not bear Singh’s signature. The same unsigned version was relied upon by Walmark in impleadment proceedings before a Delhi district court in July 2018.

However, a term sheet bearing the allegedly forged signature surfaced for the first time in complaints filed by Walmark before SEBI, NSE and BSE in October 2018, even though Walmark admitted that Singh was not present when the document was purportedly executed.

Despite this, Walmark proceeded to file the Section 9 petition, seeking interim relief including security of ₹490 crore, based on the disputed documents.

After Walmark withdrew its Section 9 petition in February 2020, the High Court granted liberty to Fortis to initiate proceedings under Section 340 CrPC.

Notices were issued to four Walmark officials. Two of them - German lawyers Ulrich Wandschneider and Georg Ehrmann - filed replies stating that the term sheet was never signed by Fortis and never came into force, following which proceedings against them were dropped.

However, the remaining two officials - David Baxi and Rajesh Singh - failed to file replies or appear despite service.

Justice Bansal reiterated that prosecution under Section 340 CrPC requires deliberate falsehood on a matter of substance and must not be invoked lightly.

Applying that test, the Court held that the record clearly established that the signed term sheet did not exist at the relevant time and that Walmark was fully aware of this while approaching the Court.

“There have been sufficient admissions on behalf of Walmark and its officials that the term sheet was not executed by Mr Bhavdeep Singh,” the judgment noted.

The Court also took note of a separate commercial suit in which the same term sheet was declared void and the suit was decreed in Fortis’ favour.

Concluding that a prima facie case had been made out against the two defaulting officials, Justice Bansal directed the Registrar General to file a criminal complaint before the jurisdictional magistrate within four weeks.

Fortis was represented by Advocates HS Chandoke and Saleem Hasan.

[Read Judgment]