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The Abu Dhabi Global Market (ADGM) Court of First Instance, in its November 5 judgment, found that both executives knowingly participated in fraudulent activities involving company funds, concealed borrowings and manipulated financial statements before NMC Healthcare collapsed in 2020.
The court identified approximately ₹50,683 crore as the starting point for assessing their financial contributions towards the company’s assets.
What Did the Court Find Against Shetty and Manghat?
The court concluded that Shetty and Manghat had knowingly participated in fraudulent trading from April 30, 2012. Justice Sir Andrew Smith rejected Shetty’s argument that he had been defrauded by senior executives and Manghat’s claim that he lacked control over the company’s finances.
The judge described Manghat’s defence as inconsistent with the evidence, particularly given his position as chief executive of a FTSE 100 company. A further hearing will determine the final monetary awards, including interest and legal costs.
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How Much Money Was Transferred to Shetty’s Accounts?
The judgment identified more than 500 transfers into Shetty’s personal bank accounts, totalling approximately ₹10,704 crore. After accounting for funds returned to the company, the net payments amounted to around ₹6,658 crore.
The transactions included expenditure on private aircraft, properties in Dubai Hills and investments in a Wyoming oil field. Shetty established NMC Health in Abu Dhabi in 1975. The company was listed on the London Stock Exchange in 2012 and subsequently entered the FTSE 100 index.
How Did NMC Conceal Its Borrowings?
By December 2018, NMC had accumulated approximately ₹36,437 crore in undisclosed borrowings while reporting debt of only around ₹18,688 crore. According to the court, the company concealed these liabilities through sham supplier transactions.
Suppliers allegedly issued invoices for goods and services that were never intended to be delivered. Banks financed these invoices, and the resulting funds were channelled back into the company. The arrangements allowed substantial borrowings to remain concealed from the financial statements.
What Happened to the Claims Against Bank of Baroda?
Bank of Baroda was also named as a defendant over allegations that it had helped conceal NMC’s borrowings. However, the bank reached a settlement with the administrators towards the end of the trial.
Justice Smith declined to make findings against the bank, stating that doing so would be unfair to Bank of Baroda and Mr Jayakumar personally. The claims against the bank were subsequently discontinued.
The ruling establishes the liability of Shetty and Manghat for fraudulent trading, while the final financial consequences remain subject to a further court hearing.
