Holistic, Common-Sense Approach Required To Interpret Arbitration Clause: Calcutta HC Grants Interim Relief To US-Based Healthcare Company

The Calcutta High Court while exercising its admiralty jurisdiction, recently allowed an application for interim relief by Uphealth Holdings Inc. a wholly owned subsidiary of Uphealth Inc., a US-based healthcare company under section 9 of the Arbitration & Conciliation Act, 1996.Justice Ravi Kishan Kapur observed that the applicant had made out a prima facie case for interim relief regarding an arbitrable dispute over its Share-Purchase Agreement (“SPA”) with the respondent."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. 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 SPA. The Arbitral Tribunal is fully competent to consider and decide all other issues. 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."It was argued by the petitioners that the respondent company was one providing technology-based healthcare services, and through the impugned SPA, they had undertaken to become the single-largest shareholder in the respondent company, by paying a sum of USD 174.5 million (approx. 2100 crores).The petitioners argued that the SPA contained reciprocal obligations through which they would eventually acquire 100% ownership of the respondent company, which would thereby become their indirect subsidiary, reflected in their consolidated financial statements as well. It was submitted that the respondents had breached their SPA obligations by failing to provide the petitioner with any access to their financial statements, causing them a delay in being able to file the consolidated financial statements. The petitioners argued that after the last instalment had been paid, the respondents sought to renege on their SPA obligations and filed various proceedings against the petitioner, including criminal complaints in order to wriggle out of their obligations. Aggrieved by the respondent’s actions, the petitioners claimed that they were compelled to invoke the emergency arbitration clause in the SPA, which led to various directions passed by the emergency arbitrator, none of which had been allegedly followed by the respondents.On the other hand, the respondents argued that orders of the emergency arbitrator could not be construed to be an award, and would therefore be unenforceable under the 1996 Act. It was contended that in view of an ongoing dispute, the petitioners would have had to seek financial records by filing an application before the National Company Law Tribunal (“NCLT”), and that they had failed to comply with a mandatory condition in the SPA for resolution through mediation before arbitration proceedings were invoked. Upon hearing both parties, the Court was of the opinion that the emergency arbitration had been instituted by the petitioners under the Regulations of the International Chambers of Commerce, after having made a substantial financial outlay to acquire 94.5% shareholding in the respondent-company.The court observed that the respondents had chosen not to comply with any orders of the emergency arbitrator, passed in 2022, and had prima facie after receiving entire funds under the SPA, entangled the petitioner “before every possible police station, tribunal and court, while refusing to discharge their obligations under the SPA.”It was observed that proceedings before the NCLT would not be a bar to arbitral proceedings, since the arbitral clause could not be interpreted “technically, like a hair-splitting exercise,” but would have to be read holistically. The Court concluded that while the Emergency Arbitrator’s orders were not directly enforceable under the 1996 Act, the same could not be ignored, since both parties had participated in the proceedings. The order was unchallenged, well-reasoned, and without any illegalities.In allowing the application for interim relief, the Court noted that USA laws would require the petitioner to furnish information of their complete financial dealings and that any delay would be met with severe consequences, making information sought from the respondents necessary, since they were lawfully entitled to the same, as majority shareholders in the respondent company. It concluded: “The contention that pre-arbitral steps being mandatory have not been complied with is also without basis and an empty formality. 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. ...

Holistic, Common-Sense Approach Required To Interpret Arbitration Clause: Calcutta HC Grants Interim Relief To US-Based Healthcare Company

Srinjoy Das

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