Calcutta High Court
Uphealth Holdings Inc vs Glocal Healthcare Systems on 23 December, 2022
CD-1
AP/809/2022
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
UPHEALTH HOLDINGS INC
Vs
GLOCAL HEALTHCARE SYSTEMS
PRIVATE LIMITED AND ORS
BEFORE:
The Hon'ble JUSTICE RAVI KRISHAN KAPUR
Date : 23rd December, 2022.
Appearance:
Mr. S.N. Mukherjee, Sr. Adv.
Mr. Ratnanko Banerjee, Sr. Adv.
Mr. Anand S. Pathak, Adv.
Mr. Amit K. Mishra, Adv.
Mr. Vijay Purohit, Adv.
Mr. Shivam Pandey, Adv.
Mr. Anujit Mookherji, Adv.
Mr. Anirudhya Dutta, Adv.
Ms. Didon Misri, Adv.
Ms. Shyra Hoon, Adv.
. . .for the petitioner.
Mr. Jishnu Saha, Sr. Adv.
Mr. Dipendra Nath Chander, Adv.
. . .for the respondent no.1.
Mr. Joy Saha, Sr. Adv.
Mr. Debashri Karmakar, Adv.
Mr. Ishan Saha, Adv.
Mr. Satyam Ojha, Adv.
. . .for the respondent nos.2 to 4.
The Court: This is an application under Section 9 of the Arbitration and
Conciliation Act, 1996 (the Act).
The disputes between the parties arise out of a Share Purchaser Agreement
dated 30 October 2020 (SPA).
Briefly the petitioner, Uphealth Holdings Inc, is incorporated under the
laws of Delaware, USA. Uphealth Holdings (UPH) is also a wholly owned direct
subsidiary of Uphealth Inc. UPH is a public listed company and is also subject to
the Security and Exchange Commission (SEC), USA. UPH is inter-alia engaged in
providing global digital health services essential to personalize, affordable and
effective global health care.
The respondent no.1, Glocal Healthcare Systems Private Limited is a
private limited company incorporated under the Companies Act, 1956, engaged
in the business of providing technology enabled healthcare services. The
respondent nos. 2 and 3 are the promoter directors of the respondent no.1. The
respondent no. 3 is a shareholder and a director of the respondent no. 1.
In or about, October 2020 the parties entered into a SPA with the ultimate
aim that the petitioner would acquire the majority stake in the respondent no.1.
The present disputes relate to the breach of obligations by the respondents under
the SPA.
It is alleged that the petitioner has paid approximately Rs.2100 crores to
the respondents in terms of the SPA. Such amounts have been paid both in cash
and stocks of UPH. In consideration, the petitioner has acquired 94.81% of
shares in the respondent no. 1. The fact that the petitioner is the single largest
majority shareholder of the respondent no. 1 is also evident from a number of
documents filed by the respondent no. 1 before different statutory authorities in
compliance with extant laws. It is also alleged that portion of the aforesaid
amount had been paid by the petitioner to repay the debts of the respondents
including the corporate debts where the respondent no. 2 was a personal
guarantor.
The petitioner complains of breach of diverse obligations by the respondent
under the SPA. In particular, the petitioner contends that the respondent is in
breach of its obligations under Clause 5.2.1 of the SPA which inter alia include
non- transfer of shares of the respondent no. 1, non filing of statutory
compliances with different authorities, failure to provide financial results of the
respondent no.1 and refusal to furnish duly stamped transfers forms in favour of
the petitioner.
On behalf of the respondents, it is contended that present disputes are not
arbitral in nature. It is also submitted that the order passed by the Emergency
Arbitrator is not an award and cannot be enforced under the Act. In this
connection, reliance is placed on the decision in Raffles Design International India
Private Limited & Anr. Vs. Educomp Professional Education Limited & Ors. 2016
SCC OnLine Del 5521. Reliance is also placed on Rakesh Malhotra Vs. Rajinder
Kumar Malhotra and Others reported in 2014 SCC OnLine Bombay 1146 on the
aspect of maintainability.
Clause 14 of SPA provides as follows:
14. GOVERNING LAW, JURISDICTION AND DISPUTE RESOLUTION
14.1 Notwithstanding any conflicts of laws doctrines or provisions to the
contrary, the Agreement will be governed by and construed and enforced in
accordance with the laws of the Republic of India. Nothing contained in
Clause 14 shall prejudice a party's right to approach and seek remedies
from any court having jurisdiction for the purpose of interim or interlocutory
orders. The Parties hereby expressly agree and confirm that, subject to the
provisions of the (Indian) Arbitration and Conciliation Act, 1996, Section 9,
27, 37(1)(a) and 37(3) of the (Indian) Arbitration and Conciliation Act, 1996,
shall be applicable in relation to any Arbitrable Disputes under this
Agreement and the enforcement of any awards provided for under Clause
14.2 (Arbitration).
14.2 Arbitration
14.2.1 Except as expressly provided elsewhere in this Agreement, any
dispute, controversy, or claim arising under or relating to this Agreement or
any breach or threatened breach hereof ("Arbitrable dispute") shall be
resolved by final and binding arbitration administered by the International
Court of Arbitration of the International Chamber of Commerce (the "ICA");
provided that nothing in this Clause 14.2.1 shall prohibit a party from
instituting litigation to enforce any Final Determination.
14.2.2 In the event that any party asserts that there exists an
Arbitrable Dispute, such party shall deliver a written notice to each other
party involved therein specifying the nature of the asserted Arbitrable
Dispute and requesting a meeting to attempt to resolve the same. If no such
resolution is reached within thirty (30) days after such delivery of such
notice, the party delivering such notice of Arbitrable Dispute (the "Disputing
Person") may, within forty-five (45) days after delivery of such notice,
commence arbitration hereunder by delivering to each other party involved
therein a notice of arbitration ("Notice of Arbitration") and by filing a copy of
such Notice of Arbitration with the ICA. Such Notice of Arbitration shall
specify the matters as to which arbitration is should, the nature of any
Arbitrable Dispute and the claims of each party to the arbitration and any
other matters required by the rules and procedures of ICA as in effect from
time to time to be included therein, if any.
14.2.3 Within twenty (20) days after receipt of the Notice of
Arbitration, each of the two Disputing Persons shall appoint/nominate one
arbitrator, and the two arbitrators so appointed, shall appoint/nominate the
third arbitrator (together, the "Arbitral Tribunal").
14.2.4 The arbitration shall be conducted under the rules and
procedures of ICA as in effect from time to time, except as otherwise set
forth herein or as modified by the agreement of all of the parties. The venue
and seat of the arbitration shall be Chicago, Illionis. The Arbitral Tribunal
shall conduct the arbitration so that a final result, determination, finding
judgment and/or award (the "Final Determination") is made or rendered as
soon as practicable, but in no event later than sixty (60) days after the
delivery of the Notice of Arbitration nor later than ten (10) days following
completion of the arbitration. The final Determination must be agreed upon
and signed by the Arbitral Tribunal. The Final Determination shall be final
and binding on all parties hereto and there shall be no appeal from or
reexamination of the Final Determination, except as permissible under
Applicable law.
Prior to the filing of this application, the petitioner had invoked the
emergency powers under the Rules and Regulations of the International
Chambers of Commerce (ICC). For the sake of convenience, the relevant Rules
and Regulations relating to emergency powers are set out hereinbelow;
Article 29: Emergency Arbitrator
1) A party that needs urgent interim or conservatory measures that cannot
await the constitution of an arbitral tribunal ("Emergency Measures") may
make an application for such measures pursuant to the Emergency Arbitrator
Rules in Appendix V. Any such application shall be accepted only if it is
received by the Secretariat prior to the transmission of the file to the arbitral
tribunal pursuant to Article 16 and irrespective of whether the party making
the application has already submitted its Request for Arbitration.
2) The Emergency Arbitrator's decision shall take the form of an order. The
parties undertake to comply with any order made by the emergency
arbitrator.
3) The Emergency Arbitrator's order shall not bind the arbitral tribunal with
respect to any question, issue or dispute determined in the order. The arbitral
tribunal may modify, terminate or annul the order or any modification thereto
made by the emergency arbitrator.
4) The arbitral tribunal shall decide upon any party's requests or claims
related to the emergency arbitrator proceedings, including the reallocation of
the costs of such proceedings and any claims arising out of or in connection
with the compliance or non-compliance with the order.
5) Articles 29(1)-29(4) and the Emergency Arbitrator Rules set forth in
Appendix V (collectively the "Emergency Arbitrator Provisions") shall apply
only to parties that are either signatories of the arbitration agreement under
the Rules that is relied upon for the application or successors to
Such signatories.
6) The Emergency Arbitrator Provisions shall not apply if:
a) the arbitration agreement under the Rules was concluded before 1
January,2012
b) the parties have agreed to opt out of the Emergency Arbitrator
Provisions;
or
c) the arbitration agreement upon which the application is based arises
from a treaty.
7) The Emergency Arbitrator provisions are not intended to prevent any party
from seeking urgent interim or conservatory measures from a competent
judicial authority at any time prior to making an application for such
measures, and in appropriate circumstances even thereafter, pursuant to the
Rules. Any application for such measures from a competent judicial authority
shall not be deemed to be an infringement or a waiver of the arbitration
agreement. Any such application and any measures taken by the judicial
authority must be notified without delay to the Secretariat.
ICC ARBITRATION RULES, Appendix -V
1. A party wishing to have recourse to an emergency arbitrator pursuant
to Article 29 of the Rules of Arbitration of the ICC (the "Rules") shall submit
its Application for Emergency Measures (the "Application") to the Secretariat
at any of the offices specified in the Internal Rules of the Court in Appendix
II to the Rules.
2. The Application shall be supplied in a number of copies sufficient to
provide one copy for each party, plus one for the emergency arbitrator, and
one for the Secretariat.
3. The Application shall contain the following information:
a) the name in full, description, address and other contact details of
each of the parties;
b) the name in full, address and other contact details of any person(s)
representing the applicant;
c) a description of the circumstances giving rise to the Application and of
the underlying dispute referred or to be referred to arbitration;
d) a statement of the Emergency Measures sought;
e) the reasons why the applicant needs urgent interim or conservatory
measures that cannot await the constitution of an arbitral tribunal;
f) any relevant agreements and, in particular, the arbitration agreement;
g) any agreement as to the place of the arbitration, the applicable rules
of law or the language of the arbitration;
h) proof of payment of the amount referred to in Article 7(1) of this
Appendix; and
i) any Request for Arbitration and any other submissions in connection
with the underlying dispute, which have been filed with the Secretariat
by any of the parties to the emergency arbitrator proceedings prior to
the making of the Application.
The Application may contain such other documents or information as the
applicant considers appropriate or as may contribute to the efficient
examination of the Application.
4. The Application shall be drawn up in the language of the arbitration if
agreed upon by the parties or, in the absence of any such agreement, in the
language of the arbitration agreement.
5. If and to the extent that the President of the Court (the "President")
considers, on the basis of the information contained in the Application, that
the Emergency Arbitrator Provisions apply with reference to Article 29(5)
and Article 29(6) of the Rules, the Secretariat shall transmit a copy of the
Application and the documents annexed thereto to the responding party. If
and to the extent that the President considers otherwise, the Secretariat
shall inform the parties that the emergency arbitrator proceedings shall not
take place with respect to some or all of the parties and shall transmit a
copy of the Application to them for information.
6. The President shall terminate the emergency arbitrator proceedings if
a Request for Arbitration has not been received by the Secretariat from the
applicant within 10 days of the Secretariat's receipt of the Application,
unless the emergency arbitrator determines that a longer period of time is
necessary.
The petitioner has also made a request for arbitration dated 4th November,
2022 before the ICC.
Pursuant to the request for an Emergency Arbitrator, hearings had taken
place in Case no. 27329/PDP/(EA) on 9th November, 2022. The emergency
proceedings concluded on 16th November, 2022 wherein the Emergency
Arbitrator published two orders dated 10th November, 2022 and 16th November,
2022 respectively. The order dated 10th November, 2022 directed as follows:
a. Declares that the Emergency Arbitrator has jurisdiction to
render a temporary standstill order pending issuance of the Decision.
b. Orders the Respondents jointly and individually to refrain from taking
any steps to access the funds in the Share Account pending issuance of the
Decision whether on the basis of the 15 August, 2022 board resolution or
otherwise (the Temporary Order).
c. Orders the Claimant to refrain from taking any steps to access the
funds in the share Account pending issuance of the Decision.
d. The Temporary Order may be shown to representatives of ICICI Bank
for the purpose of ensuring compliance with its terms. e. Issues of costs will
be dealt with in the Decision."
The operative portion of the order dated 16th November, 2022 is as follows:
a. Declares that the Emergency Arbitrator has jurisdiction to rule on
Application.
b. Declares that the requests made in the Application are admissible.
c. Directs the Respondents, both individually and jointly, to immediately
provide to Applicant, and to any PCAOB-registered accounting firm
identified by Applicant, access to all unaudited financial statement(s), data,
documents, books and records necessary to be consolidated into UPH's 10-
Q for 2022, in the from and manner requested (the Financial Statements
request);
d. Orders the Applicant to refrain from causing the unaudited financial
statements to enter the public domain;
e. Directs the Respondents, both jointly and individually, to cooperate
with any PCAOB-registered accounting firm identified by Applicant in their
review of the information provided pursuant to paragraph (a) above,
including responding to any questions, making any company employees or
officers available to respond to questions, and complying with any requests
for further information or clarifications (the Cooperation request);
f. Orders the Respondents jointly and individually to refrain from taking
any steps to access the funds in the Share Account whether on the basis of
the 15 August, 2022 board resolution or otherwise;
g. Orders the Applicant to refrain from taking any steps to access the
funds in the Share Account;
h. Dismisses the Remaining requests for relief;
i. Reserves to the Tribunal once constituted all issues of costs.
The reliefs which the petitioner prays at the ad interim stage are restricted
to prayers (b) and (d) of the Notice of Motion which are set out hereinbelow;
b) Directing Respondents, both individually and jointly, to immediately
provide to Petitioner, and to any PCAOB-registered accounting firm identified
by Petitioner, access to all financial statement(s), data, documents, books
and records necessary to be consolidated into UPH's Q3 10-Q for 2022, in
the form and manner requested.
d) Restraining Respondents, both jointly and individually, from making, or
causing to be made, any changes to the authorized signatory to access
Glocal Healthcare ICICI Bank account(s).
Prima facie, two crucial facts which are unassailable are that (a) The
petitioner in terms of the SHA has invested a substantial sum of money
aggregating to approximately to Rs. 2100 crores and (b) The petitioner is the
single largest majority shareholder of the respondent no.1 holding approximately
94.5% shares in the respondent no. 1, whereas, the respondent nos. 2 to 4 being
the erstwhile promoters of the respondent no. 1 hold a miniscule shareholding in
the company. The petitioner having infused substantial funds in terms of the
SHA is now being made to run from pillar to post. The respondents have filed
proceedings before the National Company Law Tribunal, Commercial Court at
Rajarhat and also a criminal complaint.
I find no merit in the argument of the respondent that the proceeding
before the National Company Law Tribunal is a bar to the arbitration process.
The arbitration clause between the parties is wide and explicit. The disputes
raised are capable of adjudication and settlement by arbitration. There is no
question of non-arbitrability of any of the disputes raised in this proceeding. The
decision cited by the respondent in Rakesh Malhotra vs. Rajinder Kumar Malhotra
& Ors. (2015) 192 Comp Cas 516 is distinguishable and inapposite.
Insofar as the orders of the Emergency Arbitrator are concerned, the Act
does not provide for enforcement of orders passed by an Emergency Arbitrator in
cases of a foreign seated arbitration. There is no pari materia provision under
Part II of the Act similar to section 17(2) of the Act [Raffles Design
International India Private Limited & Anr. Vs Educomp Professional
Education Limited & Ors. (2016) 6 ArbLR 426]. However, it cannot be ignored
that both the parties had participated in the proceeding before the Emergency
Arbitrator. The parties also agreed to be bound by the orders of the Emergency
Arbitrator. The orders of the Emergency Arbitrator has not been interfered with
or set aside. I also find that the order of the Emergency Arbitrator is elaborate,
detailed and reasoned. There appears to be no illegality nor perversity nor
contravention of any law shown in the order of the Emergency Arbitrator. Thus,
in my view, the order of the Emergency Arbitrator is an additional factor which
can be taken into account at this stage of the proceeding. This approach is also
in conformity with the principle of autonomy of parties which is fundamental to
the Act. (Amazon.Com NV Investment Holdings LLC vs. Future Retail Limited
& Ors. (2022) 1 SCC 209).
In respect of the prayer (b), it is alleged that since the petitioner company
has to comply with certain regulatory filings in the USA, hence, the information
sought for by the petitioner from the respondent no. 1 is necessary. The
consequences which are triggered by the delay in filing of the aforesaid
documents by the petitioner may culminate in a waterfall effect insofar as the
petitioner is concerned. The petitioner is a majority shareholder of the
respondent no.1 and is lawfully entitled to the information, books on accounts
and records which they seek. There are statutory consequences which follow
from withholding such information under US laws. On the other hand, there can
be no prejudice to the respondents in providing such information. This is also in
compliance with the contractual obligations of the respondents under the SHA.
Insofar as prayer (d) is concerned, it is submitted that a nominee and
authorized signatory of the petitioner is already having access to the ICICI bank
of the respondent no.1. In view of the aforesaid, there can be no prejudice which
can be caused to the respondents if prayer (d) is allowed.
Both the aforementioned reliefs are in aid of protecting the subject matter
of the arbitration and preserving the rights of the parties under the SHA.
In view of the aforesaid, the petitioner has a prima facie case on merits.
The balance of convenience is also in favour of orders being passed as prayed for
herein. I am also satisfied that the petitioner will suffer irreparable prejudice if
orders as prayed for herein are not passed.
Accordingly, there shall be an order in terms of prayers (b) and (d) of the
Notice of Motion. The parties are is directed to exchange affidavits.
Affidavit in Opposition be filed within one week from date. Reply, thereto,
be filed one week thereafter.
Let this matter appear on 10th January, 2023 under the heading
'Adjourned Motion'.
(RAVI KRISHAN KAPUR, J.)
J.Das/S.Bag/S.K./D.Ghosh
