BR Shetty’s NMC empire ended up in a $5.4 billion fraud case: Here's what we know so far

NMC Healthcare founder BR Shetty and former CEO Prasanth Manghat have been held liable for fraudulent and wrongful trading linked to the collapse of the healthcare group in 2020, the Abu Dhabi Global Market (ADGM) Court has ruled, accoding to a report by The Bar & Bench on Saturday.

In its November 5 judgment, the ADGM Court of First Instance found that Shetty and Manghat knowingly took part in a scheme involving company funds, hidden borrowings and manipulation of financial statements. The Court identified $5.397 billion as the starting point for assessing the financial contributions the two would have to make towards NMC's assets.

The Court found that more than 500 transfers were made into Shetty's personal bank accounts. These totalled AED 4.18 billion, with net payments of around AED 2.6 billion after accounting for money returned to the group.

The transactions also included spending on private aircraft, properties in Dubai Hills and investments in a Wyoming oil field.

Shetty founded NMC Health in Abu Dhabi in 1975. The company was listed on the London Stock Exchange in 2012 and later became part of the FTSE 100 index.

NMC hid billions in borrowings

By December 2018, NMC had accumulated around $3.88 billion in undisclosed borrowings, while reporting debt of only $1.99 billion.

The Court said the group used sham supplier transactions to hide borrowings. Suppliers raised invoices for goods or services that were not actually meant to be supplied. Banks financed the invoices and the money was then channelled back into the group.

The Court rejected Shetty's defence that he was a victim of fraud by senior executives. It also rejected Manghat's claim that he lacked control over the company's finances.

Justice Sir Andrew Smith called Manghat's submission “unlikely” for someone who was “the CEO of a FTSE 100 company”. He said it was “inconsistent with the evidence” and rejected it.

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The Court concluded that both men knowingly took part in fraudulent trading from April 30, 2012.

“I have concluded that Dr Shetty and Mr Manghat were both party to the business being carried on fraudulently.”

A further hearing will decide the final monetary awards, interest and costs.

Bank of Baroda claims discontinued

Bank of Baroda was also named as a defendant over allegations that it helped conceal NMC's borrowings. However, the bank settled with the administrators towards the end of the trial.

Justice Smith declined to make a finding against the bank, saying, “It would be unfair to Baroda and to Mr Jayakumar personally to make a finding about that.”

The claims against Bank of Baroda were subsequently discontinued.