Case Note & Summary
The petitioner, Lifeforce Cryobank Sciences Inc., a company incorporated under the laws of the United States of America, filed an arbitration petition under Section 11(6) and (12) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator to adjudicate disputes with the respondents, Cryoviva Biotech Pvt. Ltd. and others. The petitioner claimed to have purchased all assets, tangible and intangible, of Cryobank International, Inc. (Cryobank USA) at a public auction on 8 June 2010, pursuant to a decree of the Circuit Court of Florida, USA. The petitioner asserted that it stepped into the shoes of Cryobank USA and that the respondents acknowledged this fact in various correspondences. The disputes arose from an Exclusive and Perpetual License Agreement dated 27 December 2009 and a Share Subscription and Shareholders Agreement dated 11 February 2010, both containing arbitration clauses. The petitioner invoked the arbitration clause via notice dated 29 September 2017. The respondents opposed the petition, contending that the license agreement was non-assignable and that they had not accepted the petitioner as an assignee, thus no privity of contract existed. The Supreme Court, after hearing both sides, noted that the existence of an arbitration agreement was not in dispute, but the issue was whether the petitioner could enforce it. The court referred to the precedent in Khardah Company Ltd. v. Raymon & Co (India) Pvt. Ltd., which distinguishes between assignment of rights and obligations. However, the court held that at the stage of considering a Section 11 application, it must confine itself to examining the existence of an arbitration agreement under Section 11(6-A) and should not delve into the merits of the assignment issue, which could be considered by the arbitrator. Accordingly, the court referred the matter to the Delhi International Arbitration Centre for appointment of a sole arbitrator, clarifying that it expressed no opinion on the merits or arbitrability of the dispute, and all contentions were left open for the arbitral tribunal.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) and (12) of Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The court examined whether an arbitration agreement exists between the petitioner and the respondents. The arbitration clauses were in agreements between Cryobank USA and respondents. The petitioner claimed to have stepped into the shoes of Cryobank USA by purchasing its assets. The respondents disputed privity of contract. The court held that at the Section 11 stage, it need only examine existence of an arbitration agreement, not delve into merits of assignment. Since the arbitration agreement existed in the underlying contracts, the matter was referred to arbitration. (Paras 1-12) B) Contract Law - Assignment of Contract - Rights and Obligations - The court referred to Khardah Company Ltd. v. Raymon & Co (India) Pvt. Ltd., AIR 1962 SC 1810, which held that obligations under a contract cannot be assigned without consent of the promisee, but rights are assignable unless personal in nature. The court noted that the issue of assignment could be considered by the arbitrator. (Paras 9-11) C) Arbitration Law - Scope of Section 11 - Limited Examination - Section 11(6-A) of Arbitration and Conciliation Act, 1996 - The court confined itself to examining the existence of an arbitration agreement and did not express any opinion on the merits of the claim or arbitrability of the dispute, leaving all contentions open for the arbitral tribunal. (Paras 11-13)
Issue of Consideration
Whether the petitioner, having purchased assets of Cryobank USA, can invoke the arbitration clause contained in agreements between Cryobank USA and the respondents, and whether the court should appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
Final Decision
The Supreme Court referred the matter to the Delhi International Arbitration Centre for appointment of a sole arbitrator to adjudicate the dispute between the parties. The court clarified that it expressed no opinion on the merits of the claim or arbitrability of the dispute, and all contentions and pleas are kept open for the parties to raise before the arbitral tribunal. The petition and all pending applications were disposed of.
Law Points
- Section 11(6) and (12) of Arbitration and Conciliation Act
- 1996
- Existence of arbitration agreement
- Assignment of contract
- Privity of contract
- Limited scope at Section 11 stage
