calcutta high court

Calcutta High Court: A single-judge bench comprising of Ravi Krishan Kapur,* J., affirmed the sanctity of arbitration agreements and emphasized a holistic interpretation of their scope. The Court recognized the enforceability of Emergency Arbitrator’s orders in situations where both parties participated and agreed to be bound by the orders, even though the Act lacks explicit provisions for such enforcement.

The Court granted interim relief in favor of the petitioner, allowing access to financial records and directing the parties to cooperate with the accounting firm.

Factual Matrix

In the instant matter, the petitioner is a company incorporated in Delaware, USA, and a subsidiary of Uphealth Inc., a publicly listed company on the New York Stock Exchange. The petitioner entered into a Share Purchase Agreement (SPA) with the respondent wherein the petitioner undertook to become the largest shareholder of the respondent company. The petitioner allegedly paid a substantial sum to the respondent as part of the agreement.

A dispute arose between the parties and the petitioner claimed that the respondent breached its obligations under the SPA, including failure to provide access to financial statements, delay in filing consolidated financial statements, and attempts to evade obligations by filing various proceedings against the petitioner.

The petitioner invoked the arbitration clause in the SPA and initiated proceedings before an Emergency Arbitrator, seeking access to financial records and related relief. The Emergency Arbitrator, vide order dated 16-11-2022, directed the respondents to provide access to financial statements, cooperate with accounting firms, and refrain from accessing certain funds. The petitioner filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) seeking interim relief to aid the ongoing arbitration proceedings.

Parties' Contentions

The petitioner alleged that the respondent breached their obligations under the SPA by not providing access to financial statements, thereby causing a delay in filing consolidated financial statements. The petitioner contended that the disputes fell within the scope of the arbitration agreement and sought interim reliefs to protect their rights.

The respondents argued that the Emergency Arbitrator’s orders cannot be enforced under the Act, and the disputes are non-arbitrable due to parallel proceedings before the National Company Law Tribunal (NCLT).

Moot Point

  1. Whether the disputes which arose between the parties fall within the scope of the arbitration agreement?

  2. Whether the Emergency Arbitrator’s orders can be enforced under the Act?

  3. Whether the ongoing proceedings before NCLT bar arbitration proceedings?

Court's Observation

The Court held that the disputes raised in the present proceedings are covered by the arbitration clause in the SPA. The wide language of the arbitration clause encompassed the present disputes.

The Court rejected the argument that pre-arbitral steps were mandatory, considering them as procedural formalities and not absolute requirements. The Court also rejected the argument that the ongoing proceedings before NCLT render arbitration non-arbitrable. The Court held that arbitration agreements should be given full effect and disputes should be seen based on their substance.

“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.”

The Court addressed the enforceability of Emergency Arbitrator’s orders, acknowledging that the Act does not provide a provision similar to Section 17(2) of the Act for enforcing Emergency Arbitrator’s orders in cases of foreign-seated arbitration. However, the Court considered that both parties participated in the Emergency Arbitration proceedings, agreed to be bound by the orders, there was no illegality in the orders, and the orders have not been interfered with nor challenged, therefore, the same cannot be ignored. The Court observed that “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.”

The Court observed that the laws applicable in USA require the petitioner to furnish information of their complete financial dealings without any delay so that they do not meet severe consequences, making information sought from the respondents necessary. The Court observed that all reliefs sought by the petitioner are to protect the subject matter of arbitration and preserve the parties’ rights under the SPA.

Court's Verdict

The Court held that the petitioner had demonstrated a strong prima facie case on merits, and the balance of convenience and irreparable injury favored granting the requested orders, therefore, the ad interim order dated 23-12-2022 was confirmed, and the Court granted the requested reliefs related to access to financial records and account funds.

[Uphealth Holdings Inc. v. Glocal Healthcare Systems (P) Ltd., AP 809 of 2022, order dated 23-08-2023]

*Judgment by Justice Ravi Krishan Kapur

Advocates who appeared in this case :

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

Mr. Jishnu Saha, Senior Advocate Mr. Jishnu Chowdhury, Ms. Sonali Ghosh Panda, Mr. Dipendra Nath Chunder, Counsel for the Respondent 1

Mr. Joy Saha, Senior. Advocate Mr. Siddhartha Banerjee, Mr. Debashri Karmakar, Mr. Ishan Saha, Mr. Arya Nandi, Mr. Satyam Ojha, Counsel for the Respondent 2 to 4

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