Uphealth Holdings Inc. vs Glocal Healthcare Systems Pvt. Ltd., Dr. Syed Sabahat Azim, Richa Sana Azim, Gautam Chowdhury, Meleveetil Damodaran, and Kimberlite Social Infra Private Limited

For the petitioner : Mr. S.N. Mookerjee, Senior Advocate Mr. Ratnanko Banerjee, Senior Advocate Mr. Suddhasatva Banerjee, Advocate Mr. Anand S. Pathak, Advocate Mr. Amit K. Mishra, Advocate Mr. Vijay Purohit, Advocate Mr. Shivam Pandey, Advocate Mr. Anujit Mookherji, Advocate Mr. Anirudhya Dutta, Advocate Ms. Didon Misri, Advocate Ms. Shyra Hoon, Advocate Mr. Naman Choudhury, Adv. Mr. Nav Dhawan, Advocate

For the respondent no.1 : Mr. Jishnu Saha, Senior Advocate Mr. Jishnu Chowdhury, Advocate Ms. Sonali Ghosh Panda, Advocate Mr. Dipendra Nath Chunder, Advocate

For the respondent nos. 2 to 4 : Mr. Joy Saha, Senior. Advocate Mr. Siddhartha Banerjee, Advocate Mr. Debashri Karmakar, Advocate Mr. Ishan Saha, Advocate Mr. Arya Nandi, Advocate Mr. Satyam Ojha, Advocate

Reserved on : 25.04.2023

Judgment on : 23.08.2023 2

Ravi Krishan Kapur, J.

1. This is an application under Section 9 of the Arbitration and Conciliation

Act, 1996. The disputes between the parties arise out of a Share Purchase

Agreement dated 30 October 2020 as amended on 20 November, 2020 and

4 March, 2021 respectively (SPA).

2. Briefly, the petitioner is a company incorporated under the laws of

Delaware, USA and is a wholly owned direct subsidiary of Uphealth Inc.

Uphealth Inc is a public company listed on the New York Stock Exchange.

The petitioner is carrying on business inter alia of providing health care

treatment. The respondent is incorporated under the provisions of the

Companies Act, 1956 and provides technology enabled healthcare services.

3. By the SPA, the petitioner undertook to become the single largest

shareholder of the respondent no.1 company. It is alleged that pursuant to

the SPA and in terms thereof, the petitioner has paid the respondent, a

sum of approximately USD 174.5 million (equivalent to Rs.2100 crores)

which comprises of a substantial portion in cash and the balance by way of

shares in the petitioner's parent company Uphealth Inc. It is also alleged

that portion of the aforesaid amount had been paid by the petitioner to

repay the debts of the respondents.

4. The SPA contains reciprocal obligations on both parties whereby the

petitioner was to eventually become the single largest shareholder and

ultimately have 100% ownership of the respondent no.1 company and the 3

respondent no.1 would become an indirect subsidiary of the UPH. In this

connection, Clause 10.2 of the SPA provides as follows:

"All Parties agree that the commercial intent is through the transactions contemplated by the SPA the Acquirer shall eventually own 100% of the Target Share Capital. To that end, the Promoter and Option Sellers shall cooperate with the Acquirer to increase the Acquirer's ownership in the Target after the IR Cash Closing Date in a form and manner acceptable to the Acquirer."

5. The SPA also contemplated that the financial statements of the respondent

no.1 would ultimately have to be consolidated and reflected in the financial

statements of Uphealth Inc. It is contended that the respondents have in

breach of their obligations under the SPA, failed to provide the petitioner

with any access to the financial statements of the respondent no.1 which

has caused delay in UPH filing their consolidated financial statements.

6. It is also contended that after transfer of the last tranche of monies to the

respondents, the respondents have sought to renege from their obligations

under the SPA and have filed diverse proceedings against the petitioner

with the oblique and ulterior aim of defeating the rights of the petitioner

under the SPA. In particular, the respondents have filed a criminal

complaint dated 14 September, 2022 with the Commissioner of

Bidhannagar Police, a separate complaint registered with the Technocity

Police Station dated 15 October, 2022, an application being CP No.298 of

2022 before the National Company Law Tribunal, Kolkata Bench and a 4

Title Suit before the Learned Commercial Court at Rajarhat being Suit

No.19 of 2022.

7. Pursuant to the aforesaid, the petitioner had been compelled to invoke the

arbitration clause contained in the SPA and also file an application dated

25 October, 2022 before the Emergency Arbitrator. By an order dated 16

November, 2022 the Emergency Arbitrator held 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.

5 8. The respondents have deliberately chosen not to comply with any of the

aforesaid directions passed by the Emergency Arbitrator. In this

background, the petitioner has filed this application seeking interim reliefs

in aid of the arbitration proceedings.

9. On behalf of the respondent nos. 2 to 4 it is contended that, the order of

the Emergency Arbitrator dated 16 November, 2022 is not an award and

cannot be enforced under the Act. It is alleged that the disputes between

the parties are the subject matter of a petition pending before the National

Company Law Tribunal and are not arbitrable. It is alleged that the

demand for the access to financial records of the respondent no.1 ought to

have been made before the National Company Law Tribunal. It is alleged

that the petitioner has failed to comply with the mandatory condition for

resolution by way of mediation before initiating of arbitration proceedings

as stipulated in Clause 14.2.2 of the SPA. It is alleged that the Arbitral

Tribunal has been rendered functus officio and cannot continue with the

reference. In support of their contentions, the respondents rely on the

decisions in Raffles Design International India Private Limited & Anr. Vs.

Educomp Professional Education Limited & Ors. 2016 SCC OnLine Del 5521,

Rakesh Malhotra Vs. Rajinder Kumar Malhotra and Others 2014 SCC

OnLine Bombay 1146, Amazon.com NV Investment Holdings LLC v. Future

Retail Ltd. & Ors. (2022)1 SCC 209, Fource Infrastructure Equipments Pvt.

Ltd. & Ors. vs. General Atlanta Singapore Fund Pte. Ltd.

Manu/CL/0068/2014 and Dhananjay Mishra vs. Dynatron Services Pvt. 6

Ltd. 2019 SCC OnLine NCLAT 163. The respondent no. 1 company had for

all purposes adopted the submissions made by the respondent nos. 2 to 4.

10. Clause 14 of SPA is 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 7

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.

11. The petitioner had also invoked the emergency powers under the Rules and

Regulations of the International Chambers of Commerce (ICC). The

petitioner in terms of the SPA has also invested a substantial sum of

money both by way of cash and in the form of equity shares. The petitioner

as the single largest shareholder of the respondent no.1 holding

approximately 94.5% shares in the respondent no.1 is now being prevented

from exercising their rights under the SPA. The respondent nos. 2 to 4

being the erstwhile promoters of the respondent no. 1 hold a miniscule

shareholding in the company and are refusing to perform their remaining

obligations under the SPA.

12. The proceedings before the Emergency Arbitrator had concluded on 16

November, 2022. The Emergency Arbitrator published two orders dated 10

November, 2022 and 16 November, 2022 respectively. The respondents

have chosen not to comply with any of the directions of the Emergency 8

Arbitrator. Prima facie, having received the entire funds under the SPA, the

respondents are now entangling the petitioners before every possible Police

Station, Tribunal and Court while refusing to discharge their obligations

under the SPA.

13. There is also no merit in the argument of the respondent that the

proceeding before the National Company Law Tribunal is a bar to the

arbitration proceedings. The arbitration clause is the bedrock of any

arbitration. The words "any dispute, controversy or claim arising under or

relating to this agreement" are of wide import and embrace the disputes

raised in the present proceedings. Any arbitration agreement is a matter of

contract and the sanctity of the same must be given its full effect. To decide

whether a claim falls within the arbitration clause, it is the substance of

the claim which has to be seen. One cannot get into technicalities or

conduct a hair splitting exercise. A holistic and commonsense approach is

required to be adopted on the basis of the text of the arbitration clause. On

a combined reading of inter alia clauses 4.1.8 and 4.2.15 and 5.2.1 of the

SPA, the disputes raised in these proceedings fall within the scope and

ambit of the arbitral clause. For the sake of convenience, the aforesaid

clauses are set out hereinbelow:

"4.1.8 The Sellers and the Acquirer will mutually agree upon a methodology that will enable the Acquirer to hold up to 90% (Ninety per cent) of the Target's Share Capital immediately after the NR Closing. To give effect to this, the Sellers, the Target and the Acquirer shall take all necessary actions, including corporate actions.

9 4.2.15 The Sellers and the Acquirer will mutually agree upon a methodology that will enable the Acquirer to hold up to 90% (Ninety per cent) of the Target's Share Capital immediately after the NR Closing. To give effect to this, the Sellers, the Target and the Acquirer shall take all necessary actions, including corporate actions.

5.2.1 IR Cash Closing Actions by the Target and the Cash Sellers

(a) Each of the Cash Sellers shall deliver to the Acquirer, duly executed and stamped statutory share transfer forms for transfer of such Respective Cash Sale Shares;

(b) The Target shall convene and hold a meeting of the Board at which resolutions shall be passed approving and authorizing: (i) the transfer of the Cash Sale Shares from the respective Cash Sellers to the Acquirer; (ii) updating of its register of members to record the transfer of the Cash Sale Shares, and to record the name of the Acquirer as the owner of the Cash Sale Shares; (iii) appointing Acquirer's designee(s) as director(s) to the Board of the Target (iv) providing certified true copies of items in (i) and (ii) above to the Cash Sellers and the Acquirer;

(c) The Target shall file Form DIR-12 with the jurisdiction registrar of companies in relation to appointment of the Acquirer's designee(s) to the Board of the Target;

(d) The Target shall provide to the Acquirer true extracts, duly certified by its Director, of the updated register of members and the register of directors and key managed personnel.

14. In this background, there is no question of non-arbitrability of any of the

disputes raised in this proceeding. All the disputes raised in this

proceeding are covered under the SPA and are ex facie contractual

disputes. There is also no merit in the contention that the SPA is confined

only to the purchase and sale of shares. This argument is misconceived

and ignores the entire scope, purport and ambit of the SPA. It is true that a 10

pernicious practice has been prevalent to file dressed up petitions before

the NCLT with the ulterior object of defeating the arbitral proceedings. (See

Rakesh Malhotra v. Rajinder Kumar Malhotra, 2014 SCC OnLine Bom 1146

and Rishima SA Investments LLC v. Shristi Infrastructure Development

Corporation Ltd., 2017 SCC OnLine NCLT 12082 para 62). However, since

the question of maintainability of the proceedings is pending in an

application under section 45 of the Act before the NCLT, the same is to be

decided by the Tribunal.

15. 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 by way of filing an

application under section 9 of the Act. 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]. Nevertheless, it cannot be

ignored that both parties had participated in the proceeding before the

Emergency Arbitrator. The order of the Emergency Arbitrator is reasoned.

The parties agreed to be bound by the orders. The orders of the Emergency

Arbitrator have not been interfered with nor challenged. There appears to

be no illegality nor perversity nor contravention of any law shown in the

order of the Emergency Arbitrator. Accordingly, the orders of the

Emergency Arbitrator are a supplemental factor which may be taken into

consideration at this stage of the proceedings.

11

16. There is also no substance in the argument that there are no pleadings to

grant the reliefs prayed for. The prayers made before the Emergency

Arbitrator can always be the subject matter of an application under section

9 of the Act meant for protection and preservation of the rights of the

parties pending the arbitral proceedings. In this context, the decision of

Bachhaj Nahar vs. Nilima Mandal (2008) 17 SCC 491 cited on behalf of the

respondents is distinguishable and inapposite.

17. The contention that pre-arbitral steps being mandatory have not been

complied with is also without basis and an empty formality. [See Demerara

Distilleries (P) Ltd. vs. Demerara Distillers Ltd. (2015) 13 SCC 610 paras 4-5

and IMZ Corporate Pvt. Ltd. vs. MSD Telematics Pvt. Ltd. 2021 SCC OnLine

Del 3016 para 9].

18. In respect of the prayer (b) of the Notice of Motion, it is alleged that in view

of the prevalent laws of the USA and the mandatory filing requirements

which the parent company of the petitioner has to comply with, the

financial information sought for from the respondents is necessary. There

are severe consequences which follow from the delay in filing of the

aforesaid documents insofar as the petitioner and its parent company are

concerned. In any event, the petitioner being the single largest shareholder

of the respondent no.1 is lawfully entitled to such information, books on

accounts and financial records of the respondent no.1. Such obligations

and information must also be provided in terms of the SPA. 12

19. 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 would be caused to the respondents if prayer (d) is

allowed.

20. All the reliefs sought for are in aid of and to protect the subject matter of

the arbitration and to preserve the rights of the parties under the SHA.

21. The Arbitral Tribunal is fully competent to consider and decide all other

issues including the jurisdictional challenge of the proceedings having

terminated or not and the time period for publishing of the award within

the extendable time limits or the interplay of laws, if any. The autonomy of

the arbitral process must be preserved. [See Vidya Drolia & Ors. vs. Durga

Trading Corporation (2021) 2 SCC 1 para 129 and Sanjiv Prakash vs. Seema

Kukreja (2021) 9 SCC 732]

22. For the foregoing reasons, the petitioner has been able to demonstrate a

strong prima facie case on merits. The balance of convenience and

irreparable injury are also in favour of orders being passed as prayed for

herein.

23. In such circumstances, the ad interim order dated 23 December, 2022

stands confirmed. There shall be an order in terms of prayers (b) and (d) of

the Notice of Motion. With the aforesaid directions, AP 809 of 2022 stands

disposed of.

(RAVI KRISHAN KAPUR, J.) 13

Later:

After pronouncement of the judgment Mr. Saha, Senior Advocate appearing

on behalf of the respondent nos.2 to 4 prays for stay of operation of this

order. The prayer for stay is considered and rejected.

(RAVI KRISHAN KAPUR, J.)