Calcutta High Court Affirms Broad Authority under Section 9 of A&C Act Surpassing Order 38 Rule 5 of CPC

In a significant legal development, the bench of Justice Ravi Krishan Kapur delivered a landmark judgment in the case of Uphealth Holdings Inc. v. Glocal Healthcare Systems Pvt Ltd, elucidating the jurisdictional scope of Section 9 of the Arbitration and Conciliation Act, 1996 vis-à-vis the procedural requirements under Order XXXVIII Rule 5 of the Civil Procedure Code. The case, revolving around a Share Purchase Agreement dated 30.10.2020, witnessed a dispute between the petitioner, Uphealth Holdings Inc., and respondent no.1, Glocal Healthcare Systems Pvt Ltd.

According to Clause 14 of the aforementioned agreement, any dispute between the parties was to be resolved through arbitration with a seat in the United States. However, a conflict arose when respondent no.1 failed to transfer control and management to the petitioner despite the latter fulfilling its obligations under the agreement. Consequently, Uphealth Holdings Inc. invoked arbitration proceedings.

The arbitrator, subsequently, rendered an award dated 15.03.2024 in favor of the petitioner, directing the respondent to pay a substantial sum of Rs. 2,91,36,96,629. Seeking enforcement of this award, Uphealth Holdings Inc. approached the High Court under Section 9 of the A&C Act, requesting the respondents to either deposit the awarded amount with the Court or provide bank guarantees of equivalent value. Additionally, the petitioner sought a directive from the Court to compel the respondents to submit an affidavit declaring their assets and liabilities.

In response to the petition, the respondents raised several objections:

1. Jurisdictional Challenge: Contesting the jurisdiction of the Court, the respondents argued that the application was not maintainable.
2. Premature Affidavit of Assets: They claimed that the request for an Affidavit of Assets was premature and should only be entertained during execution or enforcement of the award.
3. Bankruptcy Proceedings in the USA: The respondents cited ongoing bankruptcy proceedings against the petitioner in the United States, asserting that this rendered the application non-maintainable.
4. Public Policy Concerns: They contended that the award violated public policy under Section 48 of the A&C Act, as it exceeded the damages stipulated in the agreement and was passed beyond the mandated 60-day period.

In its analysis, the Court meticulously addressed each objection raised by the respondents:

• Jurisdictional Issue: The Court dismissed the argument that the relief sought couldn't be granted due to the failure to meet the requirements of Order XXXVIII Rule 5 of CPC. Justice Kapur emphasized that the powers of the Court under Section 9 are broader than those available under Order XXXVIII Rule 5 of CPC, emphasizing that parties invoking Section 9 should not be burdened with the procedural rigors of the CPC.
• Validity of the Award: The Court refuted the objection regarding the timing of the award, asserting that it was passed within the extended period permissible under the ICC Arbitration Rules.
• Public Policy Considerations: Regarding public policy concerns, the Court highlighted the importance of facilitating ease of doing business in India, emphasizing that the respondents' actions, including defiance of tribunal orders and fraudulent conduct, undermined this objective. The Court noted that the respondents' threats against the petitioner's legal team further demonstrated their attempts to render the award unenforceable.

Based on a prima facie assessment, the Court concluded that the respondents had failed to establish grounds for challenging the award under Section 48. Considering the balance of convenience and the risk of irreparable harm to the petitioner, the Court granted the application and directed the respondents to file an affidavit detailing their assets and liabilities.