Glocal Healthcare Systems Pvt Ltd, the affordable healthcare provider based out of Bengal, has trashed the $110 —million award handed out to US-based UpHealth, Inc. by the International Court of Arbitration (ICA) and hit out at the Florida entity for perpetrating ‘criminal fraud’.
Glocal, founded by former bureaucrat Syed Sabahat Azim and his wife Richa Sana Azim, said the company would take ‘all legal steps’ to push for the prosecution of the culprits in this criminal fraud.
“The award itself will be taken up in courts once they come for execution and its (Glocal) legal team is confident that there is no substance in it and cannot be enforced,” Glocal said in response to a question by this newspaper.
On March 20, the Delray Beach, Florida- based UpHealth informed its shareholders that the ICA of the International Chamber of Commerce transmitted the final award in which the arbitral tribunal found the respondents liable for breach of contract and directed them to pay UpHealth Holdings up to $110.2 million in damages, as well as most of the legal costs and other expenses.
The $110.2-million damages are apportioned based on the shareholder’s percentage of each of the Indian directors and shareholders of Glocal: 34.38 per cent each to be paid by Syed Sabahat Azim, and Richa Azim, 4.69 per cent by Gautam Chowdhury, 22.54 per cent by Meleveetil Damodaran, and 4.02 per cent by Kimberlite Social India.
Former Securities & Exchange Board chairman M. Damodaran is a minority shareholder of Glocal, who is now described as the mentor of the Calcutta-based healthcare provider. He was a director on the board from December 2010 to March 2019.
The dispute
Established in 2010, Glocal has a chain of nine hospitals, including four in Bengal, and suite of digital dispensaries with the aim to offer advanced healthcare to rural India at an affordable cost. It signed a share purchase agreement 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 3 months).
The stock component had two parts: 7.14 per cent in UpHealth and 2.86 per cent to Sabahat Azim.
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 the 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 at $1.1
billion.
However, at the end of the lock-in period for the shares issued by UpHealth on 09.06.22, the value came down to $7.18 million, translating to a shortfall of $102.82 million. The partnership broke down soon thereafter. The value of the seller’s holding has further eroded from thereon as the stock, listed on NYSE, was clobbered.
Glocal charges
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 a 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.”
“They padded up their valuations to allocate what were essentially dud shares to Glocal’s shareholders. UpHealth Holdings itself filed for voluntary bankruptcy in the US and its parent UpHealth Inc. has been delisted from the NYSE. This actually proves the contention. Sufficient evidence for the same has been submitted and the police have filed FIR on the same. Competent court and investigating agencies have prima facie found the allegations made by Glocal to be true,” Glocal said in a statement.
The company is understood to have not participated in the arbitration proceedings that took place in Chicago on the premise that the subject matter was not arbitrable.
“The award is, on the face of it, unenforceable in India since it is, inter alia, vitiated by fraud, contrary to the public policy of India, not in accordance with the purported arbitration agreement and incapable of settlement by arbitration under the law of India. The disputes will be decided by Courts in India and not a private tribunal,” Glocal stated in a statement.
UpHealth had on March 20 accused Glocal of breach of contract by refusing to relinquish the control of the company despite receiving the payment in full of the acquisition consideration after the close of the deal.
