US-based UpHealth Inc has upped the ante in the battle for control of Calcutta-headquartered Glocal Healthcare Systems Pvt Ltd, seeking interim protection to secure Rs 291 crore in the initial arbitral award.

The Calcutta High Court on Friday passed an interim order which asked Glocal and its shareholders to file affidavits of their assets, liabilities and detailed list of litigations against them within two weeks.

The direction of Justice Ravi Krishan Kapur follows an application filed by UpHealth under Section 9 of the Arbitration and Conciliation Act, 1996 which extends interim protection to the applicant anytime after the declaration of the arbitral award but before it is enforced under Section 36 of the Act.

Legal sources said Glocal will file an appeal against the single bench order shortly. The company did not comment on the court order.

The dispute

Glocal, which has a chain of nine hospitals, including four in Bengal, and a suite of digital dispensaries with the aim to offer advanced healthcare to rural India at an affordable cost, had signed a share purchase agreement (SPA) with UpHealth Holding Inc on October 30, 2020.

According to SPA, UPHI would acquire 90 per cent of Glocal, and the existing shareholders of the Indian outfit would be bought out by a mix of cash and stock. The cash component was $22 million (part of it to be discharged in the form of promissory notes, payable within three months). The stock component had two parts: 7.14 per cent in UpHealth and 2.86 per cent to Syed Sabahat Azim, the promoter of Glocal.

As part of the transaction, UPHI would also repay/refinance up to $35 million of Glocal’s existing debt and also invest $4 million in growth capital.

A clause in SPA stated that the value of the UpHealth stock received by the Glocal shareholders would not be less than $110 million, based on the enterprise value of the US-based company to be $1.1 billion. However, at the end of the lock-in period for the shares issued by UpHealth on 09.06.22, the value of the holding came down to $7.18 million, translating a shortfall of $102.82 million for Glocal shareholders. The partnership soured soon thereafter.

In September 2022, Glocal rebuffed UpHealth’s demand to induct directors on the board of the Calcutta-based healthcare chain and take control of the company and assets, precipitating legal conflict.

Alleging fraud, the Azim-led healthcare provider claimed that UpHealth Holdings Inc, UpHealth Inc and its principals including Avi Katz and Raluca Dinu “fraudulently induced Glocal and its shareholders into entering into an SPA by showing money that turned out it never had and they had neither the wherewithal nor the intent to honour the warranties they gave.”

The interim order

Glocal and its shareholders, including former Sebi chief M. Damodaran, countered UpHealth’s section 9 application in HC on several grounds, including that HC has no jurisdiction to entertain and try this application, that the petitioner is undergoing liquidation in the US, the award has not reached finality among others.

However, the single bench rejected the contentions of the respondents. In a strongly worded order, Justice Kapur said, “Prima facie, the respondents have all the traits of a defaulter.”

Noting that respondents have filed multiple cases, both civil and criminal, Justice Kapur in the order wrote, “It is fair to assume that having received a sizeable portion of the funds in cash under SPA, the respondents are determined to embroil the petitioner in a heap of litigation.”

After dissecting arguments put forward by both the parties, the bench ordered: “In view of the aforesaid, at this ad interim stage unless orders are passed to secure the award, the petitioner would suffer irreparable loss prejudice and injury.”