What is Bank of Baroda and NMC Health Litigation? Why Bank of Baroda settled this case for $600 Million?
India’s one of the largest public sector bank – Bank of Baroda (BoB) has reached an out-of-court settlement in the long-running NMC Health litigation. The bank has agreed to pay US$600 million (around ₹5,700 crore) through its Abu Dhabi branch to settle all claims made by NMC Health PLC, NMC Healthcare Ltd, NMC Holding Ltd, and their Joint Administrators. The bank clarified that the settlement does not amount to an admission of liability or wrongdoing.
This amount is almost the profit of one quarter of Bank of Baroda. This settlement has also led to decrease of share price of Bank of Baroda. After the settlement was announced, Bank of Baroda’s shares fell by more than 4%. This case needs a detailed investigation.
The case was ongoing before the Abu Dhabi Global Market (ADGM) Court and the High Court of Justice of England and Wales.
What is the NMC Health Case?
NMC Health was one of the largest private healthcare companies in the United Arab Emirates (UAE). It operated hospitals, clinics, and pharmacies across the country and was listed on the London Stock Exchange.
In 2020, the company collapsed after investigators discovered billions of dollars of undisclosed debt and financial irregularities. The company entered insolvency, leading to one of the biggest corporate failures in the Middle East.
NMC Health was once a large healthcare company in the United Arab Emirates (UAE). In 2020, auditors discovered that the company had hidden over $4 billion in secret debt. This triggered a massive corporate scandal.
Bank of Baroda’s Abu Dhabi branch had provided banking facilities and loans to companies within the NMC Group. After the collapse of NMC Health, the Joint Administrators filed legal proceedings against several parties, including Bank of Baroda, in connection with the company’s insolvency and related financial transactions.
The case involved proceedings under ADGM and UK insolvency laws as well as UAE civil law. Bank of Baroda consistently denied the allegations and maintained that it had not committed any wrongdoing.
But US$600 million is a very big amount and Bank has not yet disclosed the actual reason of settlement.
How Did NMC Health Have Undisclosed Debt?
When a company takes a loan, it is normally recorded in its financial statements so that investors, auditors, shareholders, and regulators know how much debt the company has. However, in the case of NMC Health, investigations after its collapse in 2020 found that the company had billions of dollars of debt that had not been properly disclosed in its published financial statements.
Reports alleged that some loans were obtained through complex financing arrangements involving different group companies, making it difficult to identify the company’s actual liabilities. As a result, NMC Health appeared to be financially stronger than it actually was, and investors and lenders were unaware of its true debt burden.
Why Did Bank of Baroda Pay a Settlement if It Was Not Wrong?
Bank of Baroda has clearly stated that the US$600 million settlement does not amount to an admission of liability or wrongdoing. The bank said it agreed to settle the case to avoid prolonged litigation, legal uncertainty, and the high cost of continuing court proceedings in multiple countries.
In large commercial disputes, companies often choose to settle even when they deny the allegations because court cases can continue for many years, involve significant legal expenses, and have uncertain outcomes. By settling the case, Bank of Baroda has brought an end to the long-running legal dispute while maintaining that it did not admit any fault or legal liability.
If a company did not properly disclose its loans in its balance sheet, then how can a bank be held responsible for it? Some experts believe there may be more to the case and have called for a proper investigation. Bank of Baroda is a public sector bank, and such a large settlement amount has been paid without the bank publicly providing a detailed explanation for the settlement. In India, many court cases continue for years or even decades, and banks do not usually settle them solely for the reason cited by Bank of Baroda in this case.
