ICA awards UpHealth Holdings USD 110M in Glocal Healthcare Systems case

UpHealth, Inc. provided an update on the arbitration brought by UpHealth Holdings, Inc., a wholly-owned direct subsidiary of UpHealth, against Glocal Healthcare Systems and several of Glocal’s officers and shareholders. On March 18, 2024, the International Court of Arbitration of the International Chamber of Commerce transmitted the Final Award to the parties. In the Final Award, the arbitral tribunal found the Respondents liable for breach of contract and directed them to pay Holdings up to $110.2 million in damages, as well as most of the legal costs and other expenses that Holdings incurred in the arbitration. The $110.2 million damages are apportioned based on the shareholders percentage of each of the Indian directors and shareholders of Glocal: 34.38% to be paid by Dr Syed Sabahat Azim, 34.38% by Richa Sana Azim, 4.69% by Gautam Chowdhury, 22.54% by Meleveetil Damodaran, and 4.02% by Kimberlite Social India Private Limited.

The dispute arose out of Holdings’ acquisition of Glocal pursuant to a Share Purchase Agreement dated October 30, 2020, and the subsequent breach by Respondents of their contractual obligations to relinquish control of Glocal to Holdings. In particular, the Tribunal found that the Respondents “failed to give [Holdings] control of [Glocal]” after the closing of the acquisition, despite the payment in full of the acquisition consideration. The Respondents were held personally liable.

UpHealth provided the following statement, “We remain steadfast in our determination to hold fully accountable the Respondents in the ICA proceeding, who sold us Glocal and then refused to relinquish control of it, using misleading and baseless claims, for their indefensible conduct and the resulting harm caused to UpHealth and its stockholders. We appreciate the unanimous decision from the arbitrators and we thank them for a thorough and impartial elaboration and ruling. The Company is now focused on improving UpHealth’s remaining business, collecting the award, and maximizing stockholder value.”

Dr Avi Katz, Chair of UpHealth’s Board of Directors said, “UpHealth and its Board of Directors have always been committed to acting within our fiduciary duties to protect, unlock, and maximize stockholders’ value.” Dr Katz continued, “Among many other business restructuring actions we have taken and announced in the past, we are committed to ensuring that our Board is comprised of individuals who are free from conflict or entanglement with the Glocal bad actors shareholders. In this regard, we are gravely disappointed that two of our fellow Board members, Dr Chirinjeev Kathuria and Dr Mariya Pylypiv had joined an investment and voting group with the Glocal shareholders in 2022, when the breach of contract occurred, concerning the election of directors to the Board of UpHealth in an attempt to actively take control of UpHealth, and that since that time, stockholders affiliated with this investment and voting group have sought to effectuate changes to the corporate governance of UpHealth, including seeking to nominate directors. Given the harmful conduct of the Glocal shareholders, the remainder of the Board calls upon Dr Kathuria and Dr. Pylypiv to resign immediately from the Board to ensure the UpHealth Board is comprised of directors who will pursue the collection of this award impartially and without conflict or delay.”

However, Glocal rejected exparte award saying it had no jurisdiction in a case of criminal fraud perpetrated by UpHealth.

“An ICC Tribunal seated in Chicago, Illinois, has communicated a one-sided and perverse Award against M/s Glocal Healthcare Systems Private Limited, a company doing path-breaking work in the field of accessible healthcare, and its shareholders. This is in the face of criminal fraud perpetrated by UpHealth Holdings Inc., UpHealth Inc. and Avi Katz, Raluca Dinu, Martin S.Beck etc which has been accepted prima facie by both relevant courts and the investigating authorities. While finding no evidence of misrepresentation by Glocal or its management/shareholders, the private tribunal proceeded to award damages on the claim of loss of control to UpHealth Holdings Inc, which had never been transferred nor could have legitimately been transferred as the transaction was a part of egregious criminal fraud by UpHealth Holdings Inc (& Others) that has subsequently filed for voluntary bankruptcy and is under investigation by the SEC in the US and by investigating authorities in India. The sole reason given by the tribunal is that Glocal and others did not present their case and therefore they are responsible for this award. Glocal has always intimated that this case requires criminal investigation and encompasses issues that are on the face of it, nonarbitrable. Participation in such proceedings, which were a nullity and lacking subject matter jurisdiction, would be in contrast to every tenet of legal procedure,” said Rushab Aggarwal, Counsel for Glocal Healthcare Systems Pvt Ltd

Rushab Aggarwal said the ex-parte Award was pronounced notwithstanding the non-participation of the company as well as its Promoters/Shareholders in the arbitral proceedings.

“The Arbitral Tribunal was, without prejudice, and repeatedly informed about the clear legal bar to taking cognizance of the issues referred to arbitration, which on the face of it were non-arbitrable. However, the Tribunal failed to issue any preliminary findings on the challenge to its jurisdiction, in sheer and brazen violation of settled legal principles. Strangely, the Tribunal refused to read documents evidencing the fraud and perjury being done by the Claimants and made statements contrary to documentary facts. The award issued by the Tribunal is simply evidence of why matters involving serious fraud cannot be left to the mercy of for-hire private tribunals,” he said.

“The issues referred to Arbitration were non-arbitrable on the grounds of egregious fraud perpetrated by the Claimant (M/s UpHealth Holdings Inc, USA) as well as its principals and officials in conspiracy with its holding entity M/s UpHealth Inc. The delinquents dishonestly and fraudulently induced the shareholders of Glocal to enter into a Share Purchase Agreement, knowing full well that they neither had the intent nor had the wherewithal to fulfill the obligations of the Agreement and the garb of the Share Purchase Agreement was only used as an artifice to dishonestly gain access to the shareholding of Glocal. These Agreements have subsequently been terminated by Glocal, and consequently, the majority shareholding of the delinquents in Glocal also stands canceled,”

He said Glocal, immediately upon learning about the intricate fraud as had been played upon it, alerted the authorities in India and immediately registered FIRs against the principals of M/s UpHealth Inc., including inter alia Dr Avi Katz, Raluca Dinu, Martin Samuel Arthur Beck, Ramesh Balakrishnan, and Ranjini Ramakrishna. These crimes are under active investigation in West Bengal

“In so far as FIR No. 105/2023 is concerned, the Investigating Agency has prima facie found sufficient evidence against the accused persons to proceed to investigate these persons in the US and has submitted its preliminary report to the Chief Judicial Magistrate. A competent commercial court in India has also returned a categorical finding of fraud committed against Glocal by the delinquents. This was also communicated to the ICC Tribunal, but was brushed aside,” he said.

“Glocal had also filed a complaint seeking criminal enforcement action against UpHealth Inc. with the Securities and Exchange Commission, USA (SEC). The SEC was informed that UpHealth Inc. has committed securities fraud of extraordinary proportions in violation of (i) Section 10(b) of the Securities Exchange Act of 1934, (ii) Title 15 U.S. Code § 78j(b), and (iii) Title 17 Code of Federal Regulations § 240.10b-5. Further, UpHealth Inc has also committed Securities and Commodities fraud punishable with imprisonment under Title 18 U.S. Code § 1348.”

He said any award issued by such a Tribunal, which was inter alia, prematurely constituted, functus officio, and wholly without jurisdiction for lack of subject matter jurisdiction, is a nullity and cannot be executed.

“The company has obtained a legal opinion from eminent luminaries including former Judges of the Supreme Court of India and forensic opinion from leading global forensic advisor. The company is committed to resisting any and every manner of enforcement of such a defective, void, and non-est Award. Other matters that the Tribunal is opining on are infructuous including shares fraudulently received by UpHealth Holdings are subject matter of Indian Courts and the said excess shares have already been canceled by the Glocal Board after Court observations and forensic and legal reports duly received. The company is also in the process of filing a claim for damages against the said entities. Based on initial estimates, the same is likely to be quantified at over USD 500 Million,” Rushab Aggarwal said.
MB Bureau