The Supreme Court has directed businessman and the companies to jointly and severally furnish an additional security of ₹200 crore while proceedings for the enforcement of a UAE court decree remain pending before commercial courts in Telangana.
The Bench of Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana held that the principles of comity of nations require Indian courts to give due weight to a decree passed by a superior court of a reciprocating territory.
The bench observed that the decree-holder’s interests must be adequately protected so that a foreign judgment capable of execution in India is not ultimately reduced to a mere “paper decree”.
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The dispute traces its origin to a government-to-government memorandum entered into between the Government of Andhra Pradesh and the Government of Ras Al Khaimah for developing the Vadarevu Port, Nizampatnam Port, an industrial corridor and an airport in Andhra Pradesh. The venture was referred to as the VANPIC Project.
RAKIA alleged that funds entrusted to Nimmagadda Prasad for investment in the project were misappropriated. It consequently initiated civil and criminal proceedings before courts in the UAE.
In February 2022, the Ras Al Khaimah Court of First Instance found RAKIA to be the victim of a fraudulent scheme and directed Prasad to pay AED 267,941,374, stated to be approximately ₹543.92 crore, together with interest at six per cent per annum from October 5, 2021 until payment. The decree was subsequently affirmed by the UAE Court of Cassation on December 27, 2022.
According to RAKIA, the value of the decree, inclusive of interest up to July 23, 2026, had increased to approximately ₹949.96 crore.
RAKIA approached the Commercial Court at Hyderabad and the Commercial Court at Ranga Reddy for execution of the UAE decree under Section 44A of the Code of Civil Procedure.
Section 44A permits a decree passed by a superior court of a notified reciprocating territory to be executed in India as if it had been passed by an Indian district court, subject to the conditions contained in the CPC.
During the execution proceedings, movable and immovable properties belonging to Prasad were attached. RAKIA claimed that assets with an estimated value of approximately ₹212 crore had been secured through these attachment orders.
RAKIA also sought to implead IQuest Enterprises Private Limited and bring its assets within the scope of the execution proceedings. It alleged that Prasad directly or indirectly controlled a network of companies operating as a unified structure and that the separate corporate identities of these entities were being used to shield assets from execution.
Those impleadment, asset-disclosure and injunction applications remain pending before the commercial courts.
A major issue before the Supreme Court concerned a statement made by IQuest in a counter-affidavit before the Commercial Court at Hyderabad.
IQuest had stated that it was initially interested in acquiring Viatris’ business but had subsequently decided not to proceed with the proposed acquisition. Based on this statement, the Commercial Court closed an application seeking an injunction against IQuest’s assets.
RAKIA later alleged that the transaction was re-routed through Matrix Pharmacorp and that Matrix’s acquisition and subsequent amalgamation with Tianish Laboratories effectively circumvented IQuest’s statement. It treated the statement as an undertaking to the court and initiated contempt proceedings before the Telangana High Court.
The High Court dismissed the contempt case, holding that IQuest’s statement was merely clarificatory and did not constitute a clear and binding undertaking. It also declined to apply the alter ego doctrine or pierce the corporate veil in contempt jurisdiction, observing that contempt proceedings are summary in nature and are not the appropriate forum for examining complex questions concerning corporate control, shareholding and financial independence.
The Supreme Court upheld the High Court’s conclusion that IQuest’s statement did not amount to an unconditional undertaking capable of attracting contempt proceedings.
Referring to its earlier decisions in Babu Ram Gupta v. Sudhir Bhasin and Patanjali Ayurved Ltd., In re v. Union of India, the Court explained that an undertaking must be clear, unambiguous and intended to bind the person making it.
An undertaking may be contained in an application or affidavit, given orally and incorporated in a judicial order, or given by an advocate on behalf of a client. However, the words used and the surrounding circumstances must convey a firm conviction that an undertaking is being furnished to the court.
The Court emphasised that judges cannot assume the existence of an implied undertaking when none is evident from the record. The contempt power must be exercised carefully and only where disobedience of an order or breach of a binding undertaking is established.
Applying these principles, the Bench held that IQuest had only stated that, at that point in time, it had decided not to proceed with the Viatris acquisition. The statement was therefore clarificatory and could not be treated as a firm and unconditional promise regarding all future transactions.
Since no qualifying undertaking had been given by IQuest, the Court held that no contempt could be made out against Matrix, Tianish, Viatris or Moschip Technologies either. It accordingly declined to interfere with the Telangana High Court’s dismissal of the contempt proceedings.
Although it rejected the contempt allegations, the Supreme Court found substance in RAKIA’s apprehension that the decree might be frustrated through corporate and asset-level transactions.
The Court took note of the series of changes involving Prasad, his family holdings and associated business entities. It prima facie found that Prasad and his immediate family members appeared to exercise pervasive control over several business entities.
The timing of the transactions, restructuring of corporate holdings and formation of new companies gave rise to a genuine apprehension that the decree-holder could ultimately be left with an unenforceable paper decree, the Court said.
The Bench clarified that its observations were only prima facie and would not determine whether the assets of family-controlled companies could ultimately be attached to satisfy Prasad’s liability.
It nevertheless observed that the transaction involving Matrix’s acquisition of Tianish, in which IQuest acted as a “back-stop” in relation to the termination fee, justified concern even if it did not amount to contempt.
The Supreme Court recorded that there was no dispute that the decree had been passed by a superior court of a reciprocating territory and was, therefore, prima facie executable in India.
“The principles of comity of nations demand us to respect the order of RAK Foreign Decree and due weightage has to be given to such order even while passing an interlocutory order,” the Court observed.
It added that failing to impose protective conditions could render the decree incapable of execution, undermine the reciprocal enforcement framework and breach the principle of comity between courts.
The Court further recorded a prima facie finding that Prasad appeared to be attempting to camouflage or dissipate assets with a view to defeating execution. Vacating the existing status quo protection without requiring appropriate security could therefore obstruct the administration of justice, it said.
During the Supreme Court proceedings, Prasad deposited ₹225 crore in cash and furnished title deeds relating to approximately 37 acres of land at Devarayamjal village in Telangana’s Medchal region.
Prasad and the respondents valued the land at nearly ₹400 crore, while RAKIA maintained that marketability issues reduced its value to approximately ₹150 crore. For the limited purpose of the proceedings, the Supreme Court made a rough estimate of ₹250 crore, subject to a proper valuation by the executing court.
The Court noted that security of approximately ₹231.70 crore had been furnished apart from the land, while assets worth approximately ₹212 crore were under attachment in the execution proceedings.
Considering the current value of the decree, the assets already secured and the competing valuations of the land, the Court concluded that additional protection remained necessary.
The Supreme Court directed Prasad and the respondent entities to jointly and severally furnish an additional security of ₹200 crore with its Registry within two weeks.
The additional security is to be furnished over and above the cash, land and other assets already deposited or attached. Any encashment or appropriation of the security will remain subject to the outcome of the execution proceedings before the Commercial Courts at Hyderabad and Ranga Reddy.
The Court disposed of the appeals arising from the NCLAT proceedings on the same terms.
The dispute also involved the merger of Tianish Laboratories with Matrix Pharmacorp.
The National Company Law Tribunal had sanctioned the amalgamation but imposed protective conditions requiring the post-merger company not to alienate its assets without prior intimation to and approval from the Telangana High Court. It had also required the company to inform the High Court before creating any charge over its assets.
The National Company Law Appellate Tribunal subsequently removed those protections.
The Supreme Court held that, considering the transactions undertaken during the pendency of the execution proceedings and the decree-holder’s genuine apprehensions, the interim protection granted by the NCLT ought not to have been disturbed by the NCLAT.
The Supreme Court did not finally decide whether Prasad’s family-controlled companies formed a unified corporate structure or whether their assets could be used to satisfy the UAE decree.
It left the questions concerning the alter ego doctrine and lifting of the corporate veil open for determination by the Commercial Courts at Hyderabad and Ranga Reddy after examining the pleadings and evidence.
The Court clarified that the commercial courts would not be bound by observations made in the orders of the High Court, NCLT or NCLAT on these questions. Its own prima facie observations would also not prevent either side from raising all available legal and factual contentions.
Noting that the execution proceedings had remained pending for nearly three years and that several interlocutory applications were yet to be decided, the Supreme Court directed both commercial courts to take up the main execution petitions along with all pending applications expeditiously.
The commercial courts have been ordered to decide the matters at the earliest and, in any event, within four months.
Thus, while the Supreme Court upheld the finding that IQuest’s statement did not constitute an undertaking and that contempt was not established, it granted substantial interim protection to RAKIA by ordering an additional ₹200 crore security and directing time-bound adjudication of the foreign decree’s execution.
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