The Supreme Court on September 1 directed the respondents in a dispute involving Ras Al Khaimah Investment Authority (RAKIA) and Matrix Pharmacorp Private Limited to furnish an additional security of ₹200 crore while execution proceedings over a UAE court decree remain pending.
A three-judge Bench comprising Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana also upheld the Telangana High Court’s finding that a statement made by IQuest before the Commercial Court could not be treated as an unconditional undertaking capable of giving rise to contempt proceedings.
Background of the Case
RAKIA had obtained a decree from the Ras Al Khaimah Court of First Instance directing Nimmagadda Prasad to pay AED 267.94 million, along with 6% annual interest. The decree was subsequently upheld by the appellate court in the UAE. RAKIA then initiated execution proceedings in India, relying on Section 44A of the Code of Civil Procedure, which allows decrees from reciprocating foreign territories to be executed in India.
During the Indian proceedings, RAKIA raised objections concerning transactions involving IQuest, Matrix and Tianish. It alleged that a series of corporate transactions could affect its ability to recover the decretal amount.
The Telangana High Court had earlier dismissed contempt proceedings, holding that IQuest’s statement that it was not proceeding with an acquisition was merely clarificatory and did not amount to a binding undertaking.
Supreme Court’s Observation
The Supreme Court agreed that the statement could not be treated as an undertaking for contempt purposes.
“The Statement made by IQuest before the Commercial Court, Hyderabad in its Counter Affidavit as recorded in the order dated 01.05.2024, cannot be treated as a firm conviction to qualify as an undertaking.”
The Court, however, distinguished the contempt issue from the question of protecting the foreign decree. It observed that the sequence of corporate transactions gave rise to an apprehension regarding the protection of RAKIA’s interests during execution.
The Bench noted that the UAE decree was prima facie executable in India and said that the principle of comity between courts required due weight to be given to it.
The Court further observed that the question of whether family-controlled companies formed a unified structure, and whether their assets could ultimately be reached for satisfying the decree, would have to be decided by the Commercial Courts.
Decision
The Supreme Court directed the respondents to furnish an additional security of ₹200 crore within two weeks, over and above the security and assets already deposited. The deposits will remain subject to the outcome of the execution proceedings before the Commercial Courts at Hyderabad and Ranga Reddy.
The Court also directed both Commercial Courts to take up the main execution petitions and pending applications expeditiously and decide them within four months.
With these directions, all the appeals were disposed of.
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