Control over Medicity at core of Escorts spat

Managing director, Fortis Healthcare claims Trehan had a conflict of interest over setting up his dream project, Medicity, in Gurgaon, reports Arun Kumar.

The dust from the ongoing battle between Shivinder Mohan Singh, managing director, Fortis Healthcare, which owns a 90 per cent stake in Escorts Heart Institute and Research Centre (EHIRC), and celebrated cardiac surgeon Naresh Trehan does not appear to be settling down soon.

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Singh claimed Trehan, former executive director of EHIRC, had a conflict of interest over setting up his dream project, Medicity, in Gurgaon. "Since the time we acquired EHIRC, we had given three options to Trehan. Either allow Fortis to become a partner in Medicity, or Trehan should disengage from Medicity, or if both these options fail, he should disengage from Escorts," Singh said. Medicity is a Rs 1,000 crore 1,500-bed hospital project spread over 42 acres.

Discussions among senior teams from both sides continued for over a year without any headway till November 2006, when Singh and Trehan decided discuss the issue at the promoter’s level and settle it. Both parties had agreed to arrive at a settlement on May 18. With a solution still elusive, Singh decided to exercise the third option: asking Trehan to disengage from Escorts.

Trehan agreed that there were negotiations that failed. "But there are ways of parting," he added. It could have been done more amicably so that patients need not have suffered, he contended.

Fortis acquired the EHIRC stake in September 2005 from the original promoter, Rajan Nanda, who converted a charitable trust into a company, before selling out for Rs 585 crore. The 10 per cent residual stake is still held by Trehan. However, Rajan Nanda’s younger brother, Anil, moved court challenging the conversion and, hence, the stake sale. The case is on.

Singh asserted that despite Trehan’s "vandalism", the management and doctors had not allowed patient care to suffer. "Patient care is the priority and we cannot allow anyone to disturb that. One of the key reasons for such a sharp and swift action is to take over all the critical operations so that patients should not suffer," he added.

"There were opportunities and I offered him (Singh) equity in Medicity, but he declined and other investors had bought in. Now he cannot blame me for that," Trehan pointed out. Trehan is learnt to have sought a valuation of Rs 1,200 crore for Medicity.

Singh, on the other hand, apprehended that Trehan was buying time to build Medicity. "I got the feedback that after Medicity became operational, he would move lock, stock and barrel with key staff of EHIRC."

Trehan, however, said EHIRC was his "first baby". "How could I sacrifice the interests of the first after the second baby arrives," he said. "If he can do this (vandalism), what will stop him from ruining the fate of Escorts once Medicity start functioning," Singh countered.