Justice Ravi Krishan Kapur of the Calcutta High Court (HC) has refused to accept the 'sealed cover' business in his court. After losing a multi million dollar international arbitration case in the US and subsequent appeals against it in India, the promoters, shareholders and key officials of India's Glocal Healthcare Systems including former bureaucrat Sayed Sabahat Azim and ex SEBI chairman M Damodaran had submitted the list of their assets in a 'sealed cover.' But Justice Kapur has ordered for the sealed covers to be opened and handover its contents for inspection to the advocates appearing on behalf of the respondents i.e. US based UpHealth Inc. that won the Chicago arbitration award.
"The award debtors cannot have repeated bites at the cherry when in defiance of orders of court. In such circumstances, the entire notion of attempting to file the Affidavit of Assets in sealed covers is ill advised and borders on being contemptuous. There is no case which the petitioners have been able to make out warranting them to file the Affidavit of Assets in sealed covers," Justice Kapur said.
In the view of Justice Kapur, the petitioners (Azim, Damodaran and others) are all debtors or potential debtors and the entire rationale behind filing the Affidavit of Assets would be rendered nugatory and meaningless if the affidavits were kept in sealed covers.
"In such circumstances, the prayers sought for are misconceived and untenable. To grant the prayers sought for, would not only nullify the order dated 12 April, 2024 but also render meaningless the orders passed by the Hon’ble Division Bench. This also nullifies the entire purpose and object behind passing the ad interim order dated 12 April 2024," Justice Kapur said.
How the Sealed Cover Came
Earlier when Justice Kapur had asked the parties that lost the arbitration to submit the list of their assets, they appealed against this order to a larger bench in HC and argued that the single bench judge had no jurisdiction to seek their list of assets and liabilities. The division bench led by Justice I. P. Mukerji and Justice Biswaroop Chowdhury dismissed these appeals by Azim, Damodaran and others and asked them to comply with Justice Kapur's order. "Justice Kapur had neither levied execution nor taken any coercive step. Only some information and data have been sought. No valuable right of (Azim, Damodaran and others) has so far been affected," the division bench said.
But Azim, Damodaran and others submitted their asset list in a sealed cover, which is not acceptable to Justice Kapur, who cited past precedents to reject the seal cover business. In the view of Justice Kapur, the remedy of disclosure by way of filing of an Affidavit of Assets is only for protection of the respondent’s interest post award. By directing the filing of Affidavit of Assets, the object of the Court was to ascertain from the petitioners, particulars of their properties and assets on which execution or enforcement could thereafter be levied.
"Simply put, the entire object behind the filing of the Affidavit of Assets is to ascertain whether the petitioners have the money or assets to satisfy the awarded amount. The filing of Affidavit of Assets is ordinarily a mode of discovery from a reluctant judgment debtor as to what debts are owing to him and the assets or properties they have, if any, to satisfy the decree," Justice Kapur said.
Further, in the view of Justice Kapur, the procedure of filing information in sealed covers is ordinarily contrary to the basic process of justice. "It is elementary that in an adversarial proceeding anything that the Court can see, the opposite party must be allowed to see. The concept of sealed covers also makes serious inroads into the principle of natural justice and fairness. If the respondent was in the dark about the financial affairs of the petitioner prior to the filing of the application under section 9 of the Act, it is now sought to be kept in anxiety and suspense if the filing of sealed covers is permitted. There is no element of public interest nor national security involved in these proceedings. The parties are commercial men. The disputes raised between the parties are purely contractual," he said.
Bad Conduct Mischievous Intent
Earlier, Justice Kapur had observed that there was risk of dissipation of assets by Azim, Damodaran and others with mischievous intent to render the (arbitration) award worthless, since he found their conduct dishonest and fraudulent. Apart from being the ex SEBI chairman, Damodaran is also a high profile corporate governance expert and a well known independent director on the board of several large listed companies. He 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.
UpHealth had purchased a 94 percent stake in Glocal Healthcare in a cash, debt and equity deal worth more than Rs 2200 crore but despite this, its ownership was not being transferred to the US company. In arbitration, a Chicago tribunal 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 had said in an earlier order.