The Abu Dhabi Global Market (ADGM) Court of First Instance has held NMC Healthcare founder BR Shetty and former CEO Prasanth Manghat liable for fraudulent and wrongful trading that led to the healthcare group's collapse in 2020. The court identified $5.397 billion as the starting point for assessing their financial contributions towards NMC's assets.
In its November 5 judgment, the ADGM Court found that both Shetty and Manghat knowingly participated in a complex scheme involving company funds, undisclosed borrowings, and the manipulation of financial statements. This ruling follows extensive investigations into the financial irregularities that plagued the FTSE 100 company.
Details of the Fraudulent Scheme
Investigations revealed that NMC had accumulated approximately $3.88 billion in undisclosed borrowings by December 2018, while publicly reporting only $1.99 billion in debt. To conceal these massive liabilities, the group resorted to sham supplier transactions.
- Sham Transactions: Suppliers issued invoices for goods or services that were never actually provided.
- Bank Financing: Banks then financed these fraudulent invoices.
- Funds Channeling: The money obtained from the banks was subsequently channeled back into the NMC group, effectively hiding the true extent of its debt.
Furthermore, the Court uncovered more than 500 transfers into BR Shetty's personal bank accounts, totaling AED 4.18 billion. After accounting for funds returned to the group, net payments amounted to around AED 2.6 billion. These funds were reportedly used for private aircraft, properties in Dubai Hills, and investments in a Wyoming oil field.
Court Rejects Defenses
Justice Sir Andrew Smith, overseeing the case, firmly rejected the defenses put forward by both individuals:
- Shetty's Defense: BR Shetty claimed he was a victim of fraud perpetrated by senior executives. The Court dismissed this, concluding he was actively involved.
- Manghat's Defense: Prasanth Manghat asserted he lacked control over the company's finances. Justice Smith found this claim "unlikely" for the CEO of a FTSE 100 company and "inconsistent with the evidence."
The Court concluded that both men knowingly engaged in fraudulent trading activities from April 30, 2012. A subsequent hearing will determine the final monetary awards, interest, and costs.
Bank of Baroda Claims Discontinued
Bank of Baroda had also been named as a defendant, accused of assisting in concealing NMC's borrowings. However, the bank reached a settlement with the administrators towards the end of the trial. Consequently, Justice Smith declined to make a finding against the bank or its personnel, stating it would be "unfair." The claims against Bank of Baroda were subsequently discontinued.