Chugh v. Kalra

CourtSupreme Court of Connecticut
Citation342 Conn. 815,271 A.3d 993
Docket NumberSC 20562
Parties Rakshitt CHUGH v. Aashish KALRA et al.
Decision Date12 April 2022

342 Conn. 815
271 A.3d 993

Rakshitt CHUGH
Aashish KALRA et al.

SC 20562

Supreme Court of Connecticut.

Argued October 13, 2021
Officially released April 12, 2022

271 A.3d 995

John W. Cerreta, with whom was Joseph T. Nawrocki, Hartford, for the appellant (named defendant).

John G. Balestriere, pro hac vice, with whom were Stefan Savic and, on the brief, Matthew W. Schmidt, pro hac vice, for the appellee (named plaintiff).

Robinson, C.J., and McDonald, D'Auria, Mullins, Kahn and Keller, Js.


342 Conn. 818

This case is the latest in a series of cases arising out of a failed business venture between the named plaintiff, Rakshitt Chugh,1 and the named defendant, Aashish Kalra.2 Chugh commenced the present action seeking compensatory and punitive damages for,

342 Conn. 819

inter alia, breach of partnership agreement, breach of fiduciary duty, and libel per se. A jury found in favor of Chugh on those three counts, awarding him damages in the amount of $9,400,0003 and authorizing the imposition of punitive damages, which the trial court awarded in the amount of $2,965,488.29. On appeal,4 Kalra claims that the trial court improperly denied his motions to set aside the verdict and for judgment notwithstanding the verdict because (1) Chugh's claims are barred by the compulsory counterclaim rule set forth in rule 13 (a) (1) of the Federal Rules of Civil Procedure,5 (2) as a matter of law, no partnership

271 A.3d 996

existed between the parties during the relevant time frame, and (3) with respect to the libel claim, the trial court improperly admitted the testimony of Chugh's expert witness on damages because there was no evidence to support the testimony. We agree with Kalra's third claim and, accordingly, reverse in part the judgment of the trial court.

Because issues related to the underlying action have been litigated on prior occasions in numerous other forums,6 when appropriate, we quote directly from the

342 Conn. 820

decisions in those cases in setting forth the relevant facts and procedural history. Chugh and Kalra, both of whom are naturalized citizens of the United States, were born in India but immigrated to the United States to pursue postsecondary educational and employment opportunities. In 2002, Chugh's brother, who had attended high school with Kalra in India, introduced them in New York City. The two men became friends, and, between 2002 and 2004, Kalra worked as a consultant for Byte Consulting, Inc., a company founded by Chugh in 2000. By 2004, they were meeting nearly every day for lunch. It was during one of their lunch meetings, in early 2004, that they agreed to form a partnership to pursue investment opportunities in India. At the time, India had just announced that it would open its doors to foreign investment in real estate and infrastructure projects in early 2005, an opportunity that they saw themselves as uniquely positioned to exploit. They agreed that theirs would be a 50/50 partnership and that all strategic decisions relating to the business, including where to set up offices and whom to hire, would have to be unanimous.

In furtherance of the partnership agreement, Chugh and Kalra established numerous companies around the world.7 Principal among them was Trikona Advisors Limited (TAL), an investment advisory company incorporated in the Cayman Islands. "Each man held a [50] percent equity stake in TAL through entities controlled by them. Chugh's shares were owned by ARC Capital, LLC (ARC Capital), and Haida Investments [Limited

342 Conn. 821

(Haida)], and Kalra's shares were owned by Asia Pacific [Ventures Limited (Asia Pacific)]. At the same time, the two men formed Trinity Capital [PLC (Trinity)], a closed-end fund listed on the London Stock Exchange, through which they solicited investments. Kalra and Chugh managed Trinity through TAL. Trinity paid TAL a fee for its management services, calculated at [2] percent of Trinity's net asset value plus a performance fee.

271 A.3d 997

"The 2008 economic crisis took its toll on TAL and soured the relationship between Chugh and Kalra. Trinity's shareholders began pressuring the Trinity board [of directors (board)] to sell the company's assets and [to] distribute capital which, while it might benefit the shareholders, would reduce TAL's management fees by lowering Trinity's net asset value. Chugh and Kalra differed on how to respond to the Trinity board's proposed asset sale: Kalra opposed the move, while Chugh wanted to be more conciliatory to the shareholders. TAL tried to prevent the sell-off by acquiring the shares of [QVT Financial LP (QVT)], one of Trinity's main shareholders, but the deal collapsed when TAL could not secure the necessary financing. Frustrated, Kalra advocated taking legal action against QVT for breach of contract, but was ultimately dissuaded from that course by Chugh and outside legal counsel." Trikona Advisers Ltd . v. Chugh , 846 F.3d 22, 26–27 (2d Cir. 2017).

"The souring of Kalra and Chugh's relationship culminated on January 11, 2012, when, with no notice to Chugh, TAL's board of directors voted to remove him as a director. This left Kalra exclusively in charge of TAL. Thereafter, Kalra proceeded to treat TAL and its assets as his own and Chugh was excluded from further involvement in the business." Id., at 27. "TAL's collapse spawned a number of legal proceedings in the United States and abroad, [including] a [winding up] proceeding

342 Conn. 822

in the Cayman Islands and [a] federal civil [action] in Connecticut ...." Id.

"On February 13, 2012, ARC [Capital] and Haida, which held Chugh's TAL shares and were controlled by Chugh, filed a petition in the Grand Court of the Cayman Islands (Cayman court), seeking to ‘wind up’ TAL, a Cayman corporation. The [petition] sought to liquidate the business and [to] divide its assets between Chugh and Kalra. Asia Pacific, which held Kalra's TAL shares and was controlled by Kalra, opposed [the] petition. Under Cayman Islands law, a court may order a company to be wound up if it is ‘of [the] opinion that it is just and equitable’ to do so. ... [ARC Capital and Haida] argued to the Cayman court that it would be just and equitable to liquidate the company because: (1) TAL had experienced a ‘loss of substratum,’ i.e., a loss of its ability to ‘carry on the business for which it was established,’ due to its dire financial condition and the complete breakdown in trust between Kalra and Chugh; (2) Kalra had wrongfully caused Chugh to be removed from TAL's board and thereby deprived Chugh of his ‘legitimate expectation of being involved in [TAL's] management’; and (3) after he had removed Chugh from the board, Kalra proceeded to misuse TAL's assets for his sole benefit.

"[Asia Pacific] opposed the [winding up of TAL] by asserting the affirmative defense that Chugh had breached his fiduciary duty to TAL in several ways, and that his removal from the board was therefore justified. Specifically, [it] argued that: (1) Chugh intentionally sabotaged TAL's attempt to acquire [QVT's] shares in Trinity and had ‘caused’ TAL to pay QVT £2 million for covenants of ‘extremely limited value’; (2) Chugh had later ‘prevented’ TAL from bringing suit against QVT for breach of contract, over Kalra's objections; (3) Chugh ‘forced’ Kalra to agree to an unfavorable settlement with Trinity in the breach of contract arbitration arising

342 Conn. 823

out of [a] failed [business] deal; and (4) Chugh ‘stole’ TAL's assets and customer information for use in establishing Peak XV [Capital, LLC (Peak XV) and other entities] and interfered in the distribution of payments due to Kalra. [Asia Pacific] framed these arguments as jurisdictional defenses, arguing that if any one of these allegations were true, Chugh would be precluded

271 A.3d 998

from invoking the Cayman court's equitable jurisdiction under the doctrine of unclean hands.

"The Cayman court tried the [winding up] proceeding over seven days in January of 2013. At the trial's conclusion, the court granted [the] petition. It found that ‘each of’ [ARC Capital and Haida's] allegations was supported by evidence, and that these allegations ‘taken together’ supported a finding that it was just and equitable to wind up TAL.8 It also rejected each of [Asia Pacific's] affirmative defenses, concluding that there was ‘no merit whatsoever [to] the allegations made against ... Chugh.’ " (Citation omitted.) Id., at 27–28. Indeed, the Cayman court found that Asia Pacific's allegations against Chugh, including its claim that Chugh had stolen TAL's assets and destroyed its business, were "completely at odds with the evidence of what actually happened ...." In re Trikona Advisors Ltd ., Grand Court of the Cayman Islands, Docket No. FSD 18 of 2012 (AJJ) (January 31, 2013). The court concluded that, in fact,...

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