HC expounds that an Order of the Emergency Arbitrator can be taken into account at the stage of considering an application under section 9 of the Arbitration and Conciliation Act, 1996,

 

The Single Bench of Justice Ravi Krishan Kanpur of the Calcutta High Court in the case of Uphealth Holdings Inc Vs Glocal Healthcare Systems Private Limited and Ors held that the order of the Emergency Arbitrator is an additional factor that can be taken into account at this stage of considering an application under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “The Act”).  This approach is also in conformity with the principle of autonomy of parties which is fundamental to the Act. 

Brief facts:

The factual matrix of the case is that the Petitioner is a Public listed company and is also subject to the Security and Exchange Commission (SEC), USA. Respondent No. 1, Glocal Healthcare Systems Private Limited is a Private limited company incorporated under the Companies Act, 1956, and Respondent No. 2 and 3 are the Promoter Directors of Respondent No. 1. Respondent no. 3 is a shareholder and a director of Respondent no. 1.

The dispute among the parties was due to the breach of obligations by the Respondents under the share purchase agreement (hereinafter referred to as “SPA”) The Petitioner had invoked the emergency powers under the Rules and Regulations of the International Chambers of Commerce (ICC). Thereafter, the Petitioner filed an application under Section 9 of the Act. 

Contentions of the Petitioner: 

It was contended that the Respondent was in breach of its obligations under Clause 5.2.1 of the SPA, which include, among other things, failing to transfer shares of Respondent No. 1, failing to file statutory compliances with various authorities, failing to provide financial results of Respondent No. 1, and failing to furnish duly stamped transfer forms in favour of the Petitioner.

Contentions of the Respondent:

It was contended that the present disputes are not arbitral in nature. It was further argued that the Emergency Arbitrator's order is not an award and so cannot be enforced under the Act.

 

Observations of the Court:

The Hon’ble High Court rejected the argument raised by the Respondent that the proceeding before the National Company Law Tribunal is a bar to the arbitration process. It was noted that the arbitration clause between the parties is wide and explicit. The disputes raised are capable of adjudication and settlement by arbitration. Further,  there was no question of non-arbitrability of any of the disputes raised in this proceeding.

It was noted that both 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 have not been interfered with or set aside. The Court found that the order of the Emergency Arbitrator is elaborate, detailed, and reasoned. There was no illegality, perversity, or contravention of any law in the order of the Emergency Arbitrator. Thus, the order of the Emergency Arbitrator is an additional factor that 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. 

Furthermore, the bench noted that the Petitioner is a majority shareholder of Respondent No.1 and is lawfully entitled to the information, books on accounts, and records that they sought. There are statutory consequences that follow from withholding such information under US laws. On the other hand, there could be no prejudice to the Respondents in providing such information. This was also in compliance with the contractual obligations of the Respondents under the Shareholders Agreement.

The decision of the Court:

The Calcutta High Court held that the Petitioner has a prima facie case on merits. The Court was satisfied that the Petitioner will suffer irreparable prejudice if orders, as prayed for herein, were not passed, and hence, accordingly an order was passed in favour of the Petitioner. 

Case Title: Uphealth Holdings Inc Vs Glocal Healthcare Systems Private Limited and Ors

Coram: Hon'ble Justice Ravi Krishan Kapur

Case no: AP/809/2022

 

Advocates for the Petitioner: 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

Advocates for the Respondent: Mr. Jishnu Saha, Sr. Adv. Mr. Dipendra Nath Chander, Adv. Mr. Joy Saha, Sr. Adv. Mr. Debashri Karmakar, Adv. Mr. Ishan Saha, Adv. Mr. Satyam Ojha, Adv.

 

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