A court in Abu Dhabi has held Indian-born businessman Bavaguthu Raghuram Shetty, the founder of NMC Healthcare, liable for fraudulent and wrongful trading in connection with one of the largest corporate frauds in the history of the Gulf region.
The Abu Dhabi Global Market Court found that Shetty and the company's former chief executive, Prasanth Manghat, knowingly participated in a scheme that brought down the healthcare group in 2020, and set 5.397 billion dollars as the starting point for the contributions the two men must make to the company's assets.
The judgment, delivered on November 5 by Justice Sir Andrew Smith of the ADGM Court of First Instance, is a significant moment in a case that has run for years across courts in Abu Dhabi and London. It rejects Shetty's defence that he was himself a victim of fraud perpetrated by senior executives, and holds instead that he was a knowing participant in the wrongdoing.
The court found that the businesses of NMC Healthcare and 34 other companies in the NMC Group were carried on fraudulently during the relevant period, and that both Shetty and Manghat were party to the business being carried on fraudulently. The fraud involved the misappropriation of the group's assets, the concealment of vast borrowings, and the manipulation of financial statements through the overstating of net assets and turnover.
The court held that the two men had knowingly engaged in fraudulent trading from April 30, 2012, attracting liability under the ADGM Insolvency Regulations of 2022.
In his judgment, Justice Smith said the starting point for assessing the contributions that Shetty and Manghat should be ordered to pay was 5.397 billion dollars, roughly 50,800 crore rupees. The court will determine the final amounts payable by each man after hearing further submissions, and a further hearing has been scheduled to consider consequential matters, including statutory interest, legal costs and claims by Shetty and Bank of Baroda against other defendants.
The judge found that Shetty had knowingly received substantial sums that were improperly transferred from the NMC Group, had acquired assets using those funds, had failed to disclose securities that supported personal borrowing facilities, had allowed misleading financial statements to be published, and had assisted in concealing the group's borrowings from Ernst and Young, the company's former external auditor.
The administrators of the group had separately reached a confidential settlement with Ernst and Young in a two-billion-pound claim in the High Court in London in February, after a trial.
The proceedings comprised two actions. In the first, NMC Healthcare, NMC Holding and their joint administrators brought civil claims under UAE law and insolvency claims under the ADGM Insolvency Regulations against Shetty and Manghat. The administrators, Alvarez and Marsal, had brought the claim, and the trial began in March. The case arose from a large-scale fraud allegedly perpetrated within the NMC Group between April 2, 2012 and April 9, 2020.
NMC Healthcare was once the largest private healthcare provider in the United Arab Emirates, operating a network of hospitals, speciality clinics and day surgery centres across Abu Dhabi, Dubai, Sharjah and Al Ain. Its parent company, NMC Health plc, was listed on the London Stock Exchange and was a member of the FTSE 100 index, the group of the largest companies traded in London.
The fraud surfaced in late 2019, when questions were raised about the group's debts and its financial reporting, and the group collapsed in 2020.
NMC Health plc was placed under administration by the English High Court in April 2020. NMC Healthcare, NMC Holding and 34 other group companies were subsequently placed under administration by the ADGM Court in September 2020. The collapse left lenders, investors and suppliers facing losses running into billions of dollars, and it became one of the most closely watched corporate scandals in the Gulf.
Bank of Baroda, one of India's largest banks, was also a defendant in the fraud trial. In July, the bank said it had reached an out-of-court settlement with NMC Health plc, NMC Healthcare and NMC Holding, with 600 million dollars, about 5,700 crore rupees, paid through its Abu Dhabi branch. Following that settlement, the court declined to rule on the allegations against the bank.
Shetty, who built NMC from a small clinic in Abu Dhabi into a healthcare empire, had long maintained that he was the victim of a fraud carried out by senior executives without his knowledge. That defence was at the heart of his case before the ADGM Court. The court's rejection of it is the most damaging finding against him since the collapse. The judge concluded that he had not merely failed to notice wrongdoing by others but had himself participated in it knowingly.
The judgment does not end the litigation. The final contributions to be paid by Shetty and Manghat have yet to be fixed, and the court must still hear submissions on how the 5.397-billion-dollar starting point should be divided between them. Questions of interest and costs also remain to be decided. Either side may also seek to appeal, and further orders are expected as the process continues.
For the administrators, the judgment is a major step towards recovering money for the creditors of the collapsed group. The 5.397-billion-dollar figure represents the scale of the losses attributed to the fraudulent trading, and the administrators will now press for the contributions to be fixed at the highest possible level. The settlement with Bank of Baroda earlier this year had already brought 600 million dollars into the estate.
The case has been followed closely in India, where Shetty is a well-known businessman from Karnataka who built his fortune in the Gulf. His rise from a pharmacist who moved to Abu Dhabi in the 1970s to the founder of the region's largest private hospital group was once held up as a success story of the Indian diaspora.
The collapse of NMC and the findings now made against him have turned that story into a cautionary tale about corporate governance, debt and the limits of rapid expansion.
The findings also carry implications for the wider debate about the oversight of listed companies. NMC was a FTSE 100 company audited by a major international firm, yet the court found that its borrowings were concealed and its financial statements manipulated over a period of years.
The settlement with the former auditor and the findings against the founder and the former chief executive together raise questions about how the fraud went undetected for so long and what reforms might prevent a repeat.
In the Gulf, the case has been a test of the ADGM Courts, the English-language courts established in Abu Dhabi's financial free zone. The trial, which began in March, heard evidence over many months and produced a detailed judgment running to hundreds of pages. The court's willingness to hold a prominent founder personally liable for billions of dollars in contributions is likely to be studied by lawyers and regulators across the region.
Shetty has not yet commented publicly on the judgment, and it is not clear whether he intends to appeal. His lawyers appeared for him at the trial, and the court has allowed further submissions before the final amounts are fixed. The administrators, for their part, have welcomed the ruling as a vindication of their claim that the collapse of NMC was not an accident of business but the result of deliberate fraud.
The judgment is the latest chapter in a saga that began with the unravelling of a healthcare empire in 2019 and has since wound through courts in London and Abu Dhabi. With the liability of the founder and the former chief executive now established, the focus shifts to the question of how much each will be ordered to pay, and whether the money can actually be recovered. For the creditors who lost billions when NMC collapsed, that question is the one that matters most.
(Reporting based on Bar and Bench, LiveLaw and The Times.)