U.S. Court Strikes down decision of an arbitral tribunal directing Ex-Sebi Chairperson to pay approx. $25 million
In a path-breaking decision, a U.S. Court has set aside an award passed by an Arbitral Tribunal seated in Chicago against Mr. Meleveetil Damodaran, former Chairperson of SEBI. The award had held Mr. Damodaran liable to pay approximately $25 million to UpHealth Holdings Inc. (“UpHealth”) (a U.S. based entity). The Court set aside the award against Mr. Damodaran while holding that there was no evidence in the record to hold him liable for damages.
The award was rendered in relation to a Share Purchase Agreement (“Agreement”) between UpHealth, Glocal Healthcare Systems Private Limited (“Glocal”) (an India-based healthcare company), certain shareholders/directors of Glocal and Mr. Damodaran. Pursuant to the Agreement, Uphealth acquired certain shares of Glocal held by Mr. Damodaran and others. However, a dispute arose between Glocal, its board of directors and UpHealth in relation to UpHealth acquiring control over Glocal. Thereafter, UpHealth commenced arbitration proceedings in 2022 claiming that Glocal, its directors and its shareholders (including Mr. Damodaran), had breached their obligations under the Agreement.
The Arbitral Tribunal awarded UpHealth damages of more than $110 million, including almost $25 million individually against Mr. Damodaran.
Glocal/the Glocal board and Mr. Damodaran separately challenged the award before the United States District Court, Northern District of Illinois, Eastern Division. Such challenges to arbitral awards rarely succeed as the standard for setting aside such awards is exceedingly high. Despite the above, the U.S. Court allowed Mr. Damodaran’s challenge against the award on the ground that there was no evidence, on which the Tribunal relied upon, to hold Mr. Damodaran liable. The U.S. Court has remanded the case to the Arbitral Tribunal as stated in the extract below. While doing so, the U.S. Court also rejected the challenge to the award by other Respondents.
The relevant extract of the U.S. Court’s Order is as follows:
“…There was no evidence in the record on which the Tribunal relied to make the finding…”
“The Court grants Damodaran’s motion to vacate….”
“For these reasons, the Court grants in part and denies in part UpHealth’s Petition to Confirm Foreign Arbitral Award [1], grants Respondent Damodaran’s Motion to Vacate [47], and denies the Glocal Respondents’ Motion to Vacate [49]. The Court confirms the Award as to Glocal Healthcare Systems Private Limited, Dr. Syed Sabahat Azim, Richa Sana Azim, Gautam Chowdhury, and Kimberlite Social Infra Private Limited. The Court vacates the Award as to Meleveetil Damodaran only on the issues identified in this Opinion and remands to the Tribunal for further proceedings consistent with this Opinion.”
Mr. Damodaran was represented in the U.S. proceedings by Jenner & Block LLP and was advised by Shardul Amarchand Mangaldas & Co. (“SAMCo”), led by Managing Partner – Mrs. Pallavi S. Shroff, Partners – Mr. Siddhartha Datta and Mr. Aditya Mukherjee and the team comprising Mr. Krishna Tangirala (Principal Associate), Ms. Trisha Mukherjee (Principal Associate), Mr. Aditya Thyagarajan (Senior Associate) and Mr. Chetan Kabra (Associate).
Glocal and other shareholders / directors were represented by Paul Hastings LLP. UpHealth was represented by DLA Piper and advised by P&A Law Offices.