According to the Bombay High Court, an arbitration agreement is assignable in the same way that any other contract is, and if the rights and obligations under an agreement that contains an arbitration clause are assigned in favour of the assignee, the arbitration remedy would also be assigned in that person’s favour.
In light of the fact that all of the rights in favour of the original party to the arbitration agreement (the assignor) had been assigned in favour of the assignee/claimant, and the said assignment had been specifically acknowledged by the other party, the bench of Justice Bharati Dangre held that the parties did not need to execute an arbitration agreement separately.
In order to hire out equipment, the respondent, Future Enterprises Pvt Ltd, and one LIQ Residuals Private Limited (LIQ), entered into a Master Rental Agreement. Renter Future’s obligations under the Rental Agreement were allocated by LIQ to M/s. Siemens Factoring Pvt Ltd, a non-banking financial institution. The “Sale of Receivable Agreements” between LIQ and Siemens saw the rental receivables allocated to Siemens as collateral security. Moreover, LIQ executed an irreversible Power of Attorney in Siemens’ favour.
LIQ informed Future via a “notice of assignment” letter that it had assigned the rental payments to Siemens. The applicant, Siemens, invoked the arbitration clause, alleging that the respondent, Future, had neglected to pay the amounts owed under the Rental Agreement. It claimed that it had the right to use all of the remedies provided for in the rental agreement, including seeking payment from Future. Siemens applied to the Bombay High Court for the appointment of a Single Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act).
Further, the defendant, asserted before the High Court that it and Siemens did not have a legitimate arbitration agreement. It further stated that LIQ’s signature is the sole one on the “notice of assignment” letter. It asserted that arbitration could not be used by Siemens since the company had not signed the assignment notification letter in question, which contains an arbitration clause. The Rental Agreement signed between Future and LIQ itself has an arbitration clause, according to the applicant Siemens’ argument before the court.
Siemens said that even though the “notice of assignment” letter is not signed by it, it is clear from reading its contents that it has put Siemens in LIQ’s place. The same, it was asserted, would encompass all the rights stipulated in the Rental Agreement as well as a right to request arbitration. The High Court determined that the applicant, Siemens, has now taken over as LIQ and that the respondent, Future, had acknowledged receiving the “notice of assignment” letter by signing it with the signatures of its CEO and MD. It was noted that Future had also made rental payments on Siemens’ behalf.
The Court read the pertinent provisions of the Rental Agreement and the aforementioned “notice of assignment” while taking note that Siemens has not signed it. It noted that the arbitration provision is present in the Rental Agreement itself.
It went on to say that the “notice of assignment” makes it apparent that Siemens, the assignee, has taken over LIQ’s obligations under the Rental Agreement and is entitled to all of LIQ’s rights, discretions, and remedies that have been transferred to it. Moreover, “LIQ” is defined in the Rental Agreement to include its assignees. The Court read the pertinent provisions of the Rental Agreement and the aforementioned “notice of assignment” while taking note that Siemens has not signed it. It noted that the arbitration provision is present in the Rental Agreement itself. It went on to say that the “notice of assignment” makes it apparent that Siemens, the assignee, has taken over LIQ’s obligations under the Rental Agreement and is entitled to all of LIQ’s rights, discretions, and remedies that have been transferred to it. Moreover, “LIQ” is defined in the Rental Agreement to include its assignees. The Court disagreed with Future’s argument that Siemens lacks the authority to pursue arbitration since the arbitration clause contained in the “notice of assignment” does not bind Siemens because it was not signed by Siemens.
The Court ruled that the applicant, Siemens, can invoke the arbitration clause found in the Rental Agreement “simply because the subsequent communication intimating the assignment to the respondent being not signed, which also comprise an arbitration clause would not preclude the Applicant from invoking arbitration,” according to Siemens. Given that all of LIQ’s rights, including the right to arbitration, had been assigned to Siemens and that Future had expressly acknowledged the assignment, the bench came to the conclusion that Siemens and Future did not need to execute an arbitration agreement separately. As a result, the Court granted the request and appointed a Single Arbitrator.
DUCTUS EDGE 