Read Time: 10 minutes

Synopsis

The Supreme Court recently observed that at the stage of considering an application for appointment of an arbitrator, the court is required to just examine whether there exists an arbitration agreement between the parties. 

A bench of former Chief Justice of India D Y Chandrachud and Justice Manoj Misra referred a matter to the Delhi International Arbitration Centre for appointment of a sole arbitrator to adjudicate upon the dispute between the parties before it, after finding that the existence of an arbitration agreement was not an issue.

The court allowed an arbitration petition moved by US-based Lifeforce Cryobank Sciences Inc.

The company duly incorporated under the laws of the United States of America had invoked the jurisdiction of the Supreme Court under sub-sections (6) and (12) of Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitrator in terms of arbitration clause stipulated in the agreements of December 27, 2009 and February 12 2010 to adjudicate upon the disputes between the petitioner and the respondents, Cryoviva Biotech Pvt Ltd and others.

The company claimed that it purchased the assets of Cryobank International, Inc on June 8, 2010 at a public auction in pursuance of a decree of May 5, 2010 passed by the Circuit Court of Florida, USA. 

Following this, a certificate of title was issued in its favor certifying purchase of all assets, tangible and intangible, of Cryobank USA by it. On its basis, the petitioner claimed to have stepped into the shoes of Cryobank USA.

According to the petitioner, the dispute between the petitioner and the respondents stemmed from Exclusive and Perpetual License Agreement and Share Subscription and Shareholders Agreement. License agreement was between Cryobanks USA and Cryobanks India International Pvt Ltd (now known as Cryoviva Biotech Pvt Ltd Respondent No 1). 

It claimed that the agreement contained an arbitration clause in Section 7. Whereas Share Subscription Agreement was between RJ Corp (respondent no 2) acting on behalf of itself and its shareholders, namely, Devyani Enterprises Pvt Ltd - respondent no 3, Devyani Overseas Private Ltd – respondent no 4, RK Jaipuria & Sons (HUF) – respondent no 5, Dhara Jaipuria – respondent no 6; Cryobank USA; and Cryobanks India International Pvt Ltd (now Cryoviva Biotech Pvt Ltd – Respondent No 1). The same had an arbitration clause in clause XVII. 

Under both the arbitration agreements the disputes were referable to a sole arbitrator subject to the jurisdiction of courts in Delhi.

It was the case of the petitioner that under the license agreement, the respondents were entitled to use Cryobank’s intellectual property rights in lieu of consideration which included the issue of shares in the respondent company. 

The petitioner stated that it stepped into the shoes of Cryobank USA, and this fact was acknowledged by the respondent company in various correspondences. However, since petitioner’s demand was not met, arbitration clause had to be invoked by a notice of September 29, 2017.

In response to the notice, the respondents’ case inter alia was that the license agreement was non-assignable, and they did not accept the petitioner as the assignee. There was, therefore, no privity of contract. Hence, the petition was liable to be dismissed.

After hearing the parties, the court noted the issue was that it was not between the petitioner and the respondent company but between Cryobank USA and the respondents. According to the respondents, the petitioner had only bought assets of Cryobank USA but, in absence of respondents’ consent, had not stepped into the shoes of Cryobank, USA.

The petitioner, on its part, referred to several documents/correspondences to canvass that the respondent had accepted the petitioner as having stepped into the shoes of Cryobank USA. It also annexed certificate to indicate that rights under all existing contracts including intellectual property rights of Cryobank USA were purchased by the petitioner in auction sale.

The bench, however, said, "Since at the stage of consideration of a prayer under Section 11(6) of the 1996 Act the Court has to confine itself to the examination of the existence of an arbitration agreement (vide sub-section (6-A) of Section 11), it would not be appropriate for us to delve deep into the issue as it could well be considered by the arbitrator on the basis of evidence led by the parties. More so, when existence of arbitration agreement in the license agreement and share subscription agreement is not in dispute".

After referring the matter to the Delhi International Arbitration Centre for appointment of a sole arbitrator to adjudicate upon the dispute between the parties, the bench clarified that it had not expressed any opinion on the merits of the claim of either party including with regard to the arbitrability of the dispute. 

It kept open all contentions and pleas for the parties to raise before the arbitral tribunal.

Case Title: Lifeforce Cryobank Sciences Inc Vs Cryoviva Biotech Pvt Ltd & Ors