Supreme Court orders Nimmagadda Prasad and related entities to furnish ₹200 crore additional security in RAKIA’s ₹950-crore foreign decree case

Ras Al Khaimah Investment Authority (“RAKIA”), an entity affiliated with the Government of Ras Al Khaimah, alleged that Nimmagadda Prasad (“NP”) misappropriated funds entrusted for the VANPIC Project in Andhra Pradesh.

The Ras Al Khaimah courts passed a decree directing NP to pay AED 267,941,374 with interest; the decree was affirmed in cassation and was sought to be enforced in India as a decree of a superior court of a reciprocating territory under Section 44A of the Code of Civil Procedure, 1908 (“CPC”).

RAKIA initiated execution proceedings before the Commercial Courts at Hyderabad and Ranga Reddy and obtained attachment of NP’s assets.

During execution, RAKIA sought impleadment of IQuest Enterprises Pvt. Ltd. (“IQuest”) and restraint over its assets.

The Hyderabad Commercial Court recorded IQuest’s statement that it had decided not to proceed with the proposed acquisition of Viatris, and closed the injunction application.

RAKIA later alleged that the transaction was routed through Matrix Pharmacorp Pvt. Ltd. (“Matrix”), which acquired Tianish Laboratories Pvt. Ltd. (“Tianish”), and that the subsequent amalgamation of Tianish with Matrix was designed to defeat execution.

The Telangana High Court dismissed RAKIA’s contempt proceedings, holding that IQuest’s statement was clarificatory rather than an undertaking and that contempt proceedings were unsuitable for determining complex questions of corporate control and lifting the corporate veil.

The NCLT sanctioned the amalgamation but imposed protective conditions concerning alienation and creation of charges over the assets; the NCLAT later expunged those protections.

Whether IQuest’s statement, recorded in the Hyderabad Commercial Court’s order dated 1 May 2024, constituted a clear and enforceable undertaking, breach of which could attract contempt jurisdiction.

Whether contempt proceedings could be maintained against Matrix, Tianish, Viatris, Moschip Technologies Ltd. (“Moschip”), NP and other connected persons on the basis of the alleged undertaking and the alter-ego or corporate-veil-piercing theory.

Whether, pending determination in the execution proceedings, the status quo and protective conditions over the assets of NP and the respondent entities ought to be continued or modified subject to furnishing additional security.

Whether the question of treating NP’s family-controlled entities as a unified structure, and reaching their assets in execution of the foreign decree, should be finally determined in the present appeals or left to the executing courts.

The Court applied Section 44A CPC, under which a decree of a superior court of a reciprocating territory may be executed in India as if it had been passed by the relevant Indian district court, subject to the objections under Sections 13 and 47 CPC.

The Court also considered Section 60 CPC concerning attachment of property liable to execution, while leaving the question of whether the respondent entities’ assets were legally reachable for determination by the executing courts.

Under Section 2(b) of the Contempt of Courts Act, 1971, civil contempt requires wilful disobedience of a judgment, decree, direction, order, writ or other process of a court, or wilful breach of an undertaking given to a court.

Relying on Babu Ram Gupta v. Sudhir Bhasin, (1980) 3 SCC 47, the Court held that an undertaking must be construed strictly and that no implied undertaking may be assumed.

It further relied on Patanjali Ayurved Ltd., In re v. Union of India, (2024) 19 SCC 193, which recognises that a clear and express oral or written statement conveying a firm commitment to the court may have the force of an undertaking, even if the word “undertaking” is not used.

The principles of comity of nations and reciprocal enforcement require Indian courts to give due weight to an apparently executable foreign decree and to prevent interlocutory arrangements from frustrating its enforcement.

The doctrine of separate corporate personality and the question of lifting the corporate veil were not finally decided and were left for determination in the execution proceedings on the basis of pleadings and evidence.

The Court held that IQuest’s statement that it had decided not to proceed with the Viatris acquisition was merely a statement of its position at that time and did not convey the firm, solemn and unconditional commitment required for an undertaking enforceable through contempt jurisdiction.

Since no qualifying undertaking existed, the alleged subsequent transaction could not constitute contempt, and contempt could not be extended to entities such as Matrix, Tianish, Viatris or Moschip, particularly when they had not been parties to the relevant order or had not themselves given any undertaking.

Nevertheless, the Court found that the sequence and timing of corporate restructurings, changes in control and transactions involving NP and his immediate family created a genuine apprehension that the decree might be rendered ineffective through asset dissipation or concealment.

Given that the RAK decree was prima facie executable under Section 44A CPC and remained substantially unsatisfied, vacating all protection without adequate security could obstruct execution and undermine comity between courts.

The Court therefore restored the substance of the protective approach adopted by the NCLT, but avoided deciding conclusively whether the respondent companies were NP’s alter egos or whether their assets could be attached.

Those issues required adjudication by the Commercial Courts in the pending execution proceedings, where all parties could present evidence and contentions.

It directed NP and the respondent entities to furnish additional security of ₹200 crores with the Registry within two weeks, over and above the security and assets already deposited; the security would remain subject to the outcome of the execution proceedings.

The status quo and protective arrangements were accordingly continued or modified subject to such security.

The questions concerning the unified structure of NP’s family-controlled entities, lifting of the corporate veil and reachability of their assets were expressly left open for determination by the Commercial Courts at Hyderabad and Ranga Reddy.

The NCLAT appeals were disposed of on these terms, and the Commercial Courts were directed to decide the execution petitions and connected applications expeditiously, preferably within four months.