M Damodaran, a high profile corporate governance expert and a well known independent director on the board of several large listed companies, will have to submit the list of his assets and liabilities to the Calcutta High Court. A division bench of the Calcutta HC confirmed an order of the single bench judge against Damodaran and others in a matter involving an international arbitration. Damodaran is party to an arbitration award delivered by a Chicago Arbitrator that imposed a total liability of over Rs 200 crore against him and primary liability of between Rs 63 to Rs 65 crores.
Damodaran and others had argued that the Calcutta HC single bench judge had no jurisdiction to seek their list of assets and liabilities. The division bench disagreed with such an appeal and asked them to comply. Final option left for Damodaran is to move the Supreme Court against the division bench order or simply comply with the HC ruling.
Damodaran and others had submitted that the single bench order of Justice Ravi Krishan Kapur order was in the nature of execution, which the court ought not to have passed. In his order, Justice Kapur had observed that in view of their past conduct and shenanigans, there was every risk of dissipation of assets by the respondents (Damodaran and others) with the mischievous intent to render the award a paper award.
Others who were asked to file their list of assets in the matter are Glocal Healthcare and its promoters Syed Sabahat Azim (former IAS Officer Tripura Cadre), Richa Sana Azim, Gautam Chowdhury and Kimberlite Social Infra Pvt Ltd.
However, the division bench led by Justice I. P. Mukerji and Justice Biswaroop Chowdhury disagreed. "Justice Kapur had neither levied execution nor taken any coercive step. Only some information and data have been sought. No valuable right of (Damodaran and others) has so far been affected."
Hence, the division bench rejected the contention of Damodaran and others that Calcutta HC had no jurisdiction to pass such an order.
But the division bench said that the said judgement and order that the question of jurisdiction, raised before his lordship (justice Kapur), was gone into by him at the prima facie stage. After considering the contentions, he (Justice Kapur) held that HC had jurisdiction. "Prima facie, we endorse that view," the division bench said.
Dishonesty And Fraud By Glocal Healthcare Systems
Justice Kapur had directed Damodaran to submit within two weeks a list of all the assets and liabilities on his name. Justice Kapur had rejected arguments by Damodaran and others that the Chicago arbitration award could not be applicable against them. Justice Kapur observed that there was risk of dissipation of assets by respondents (including Damodaran) with mischievous intent to render the (arbitration) award worthless, since he found their conduct dishonest and fraudulent. The matter relates to India's Uphealth Healthcare Systems v. Uphealth Holdings of the US.
Overall, the Chicago tribunal had imposed damages to the tune of nearly Rs 920 crore ($110.2 million) against Glocal Healthcare, its promoters, key shareholders and directors. The $110.2 million damages are apportioned based on the shareholders' percentage of each of the Indian directors and shareholders of Glocal: 34.38 per cent to be paid by Syed Sabahat Azim, 34.38 per cent by Richa Sana Azim, 22.54 per cent by M Damodaran, 4.69 per cent by Gautam Chowdhury and 4.02 per cent by Kimberlite Social India Private Limited.
According to Justice Kapur, it was an indisputable fact that pursuant to the SPA (Share Purchase Agreement), UpHealth had inter-alia paid to Glocal and their directors and associates a sum of approximately Rs.538 crores in cash. He also observed that the prompt response furnished by Glocal (respondent no. 1) to Damodaran (respondent no. 5) in producing its Minutes Books and the Attendance Register of the company with regard to the EGM dated 26 September 2022 demonstrates lack of bonafides and ill motive in not providing similar information contemporaneously insofar as UpHealth was concerned.
The HC observed, "it was mystifying as to how individuals work in unison when it comes to receipt of money whereas divorce each other when it comes to payment. The petitioners have neither control nor access to management nor the working of Glocal. Prima facie, the shares transferred to Uphealth have been made useless and reduced only for ornamental purposes."
The HC also said that the orders of the Emergency Arbitrator had been violated and there was no compliance with the orders passed in the earlier application under section 9 of the Act being AP 809 of 2022. The financial information, books of accounts and other financial records of Glocal were deliberately not made available to UpHealth.
Further, the HC observed that Glocal and other respondents had filed proceedings both civil and criminal, spanning from the District Court at Rajarhat, The National Company Law Tribunal, a criminal complaint dated 14 September, 2022 with the Commissioner of Bidhannagar Police, a separate compliant registered with the Technocity Police Station dated 15 October, 2022 and an application being CP/298/2022 before the National Company Law Tribunal Kolkata Bench, a Title Suit before the Learned Commercial Court at Rajarhat being Suit no. 19 of 2022 and another suit before the Learned Commercial Court at Rajarhat.
From the above slew of legal proceedings filed by the respondents, Justice Kapur deduced that was it fair to assume that having received a sizable portion of the funds in cash under the SPA, the respondents are determined to embroil the petitioner in a heap of litigation.
"The conduct of the respondents to say the least is prima facie dishonest and fraudulent. Prima facie, the respondents have all the traits of a defaulter," Justice Kapur said.
Balance in Favour of UpHealth
Calcutta HC believed that the balance of convenience and inconvenience was overwhelmingly in favour of orders being passed as prayed for (by UpHealth) until the grind of the formal enforcement and execution was concluded.
In favour of UpHealth that had won an arbitration (initiated as per the SPA), the HC observed that "The fruits of the award must be made real and realizable so that the award is not rendered illusory or meaningless."
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