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NYSE-listed UpHealth Inc has initiated legal proceedings, including a criminal complaint, against former Tripura cadre IAS officer Sabahat Sayed Azim, the founder of Glocal Healthcare Systems, documents in the possession of businessline show.
Based on its filings in Indian court and with the Securities and Exchange Commission (SEC), the Delaware-based company claims that it has paid around ₹2,100 crore in cash, stock, and debt to acquire 94.81 per cent of Glocal, but the company’s former promoters and directors are preventing it from appointing its management and board nominees.
The case is being fought by UpHealth in various legal forums, including the National Company Law Tribunal (NCLT), the High Court of Calcutta, and ICC Arbitration.
Meanwhile, the Kolkata police have also registered an FIR against Azim, Glocal’s other officials, and shareholders. The complaint names Sabahat Azim, Richa Sana Azim, Gautam Chowdhury, and Dipanwita Mukherjee. UpHealth’s complaint alleges breach of trust, cheating, and criminal conspiracy.
Background
Before the US company came into the picture, Glocal’s original shareholders sold their stake to various funds and investors in tranches.
On the day when UpHealth, earlier known as GigCapital2, acquired Glocal in 2020, Azim and his family held a 31.16 percent stake directly. UpHealth also cleared a debt of $35 million (approximately ₹280 crore) when it purchased a majority stake in Glocal.
UpHealth says that a key covenant of the sales and purchase agreement (SPA) (clause 10.2 in the agreement) between it and Glocal’s shareholders was that they would facilitate a full acquisition of the Indian company.
Hence, after UpHealth acquired a 94.81 per cent stake, they invoked provisions of the SPA (under Clause 5.2.1.b) dated October 30, 2020 to put in place a transition team of directors to facilitate a smooth takeover of the overall management of Glocal and its day-to-day operations from the erstwhile management.
UpHealth stated in its complaint that despite having a 94.81 per cent stake in Glocal, it was not allowed to take over the management, which amounted to cheating and a criminal breach of trust.
“Despite multiple personal requests, as well as written communications, the accused persons did not allow the induction of UpHealth’s nominees on the board of Glocal (as contemplated by the SPA) for a prolonged period owing to their dishonest, malafide and fraudulent intentions,” the complaint states.
Written agreement
UpHealth also claims that Sabahat Azim claimed that following the execution of the written agreement, there was another ‘oral’ agreement between them stating that “the funds infused into Glocal by UpHealth were not for acquiring (and taking over its management)“. It said, “These were investments simpliciter, in place of which, UpHealth was to profit from payment of ‘reasonable interest’”.
UpHealth says that Glocal’s erstwhile shareholders have also said this in the NCLT. UpHealth says Azim claimed that the Glocal stake they sold to UpHealth was only as a security for the funds infused and not meant to be acted upon and that he was ready to return the money with ‘reasonable’ interest.
UpHealth has called Azim’s claim of an ‘oral’ agreement as absurd and untenable and the same was never raised before in any of the communications earlier. UpHealth says the accused are trying to show that the US company violated India’s Foreign Exchange Management laws.
“The accused persons, in furtherance of their fraudulent and dishonest intention, have not only initiated multiple civil law proceedings against the complainant, based on the claims but have also sought to arm-twist the management of the complainant by falsely implicating its senior managers in frivolous criminal cases,” UpHealth says.
On December 23, the Calcutta High Court observed in its order: “Prima facie, Uphealth in terms of the shareholders’ agreement (SHA) has invested a substantial sum of money aggregating to approximately to ₹2,100 crore and it is the single largest majority shareholder of Glocal holding approximately 94.5 per cent shares whereas respondents being the erstwhile promoters hold a minuscule miniscule shareholding.”
It added, “The petitioner having infused substantial funds in terms of the SHA is now being made to run from pillar to post. The respondents have filed proceedings before the NCLT, Commercial Court at Rajarhat, and also a criminal complaint. Insofar as prayer is concerned, it is submitted that a nominee and authorised signatory of the petitioner is already having access to the ICICI bank. In view of the aforesaid, there can be no prejudice which can be caused to the respondents if the prayer is allowed.”
Glocal’s response
A response from Glocal CEO’s office said, “Board and management of Glocal are not aware of any such FIR or NCLT Order. However, we are aware of arbitration and arbitration-related court proceedings initiated in retaliation to our legal actions commenced here in India to protect the company’s properties and interests along with its prime goal of furthering the cause of affordable healthcare.
The company added, “It is indeed disappointing to note that UpHealth has shared this information with you. Our disputes with UpHealth are sub-judice, and we do not wish to comment on the same during the pendency of the proceedings.”
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