The benefit of contracts can be transferred for a variety of reasons as collateral for loans, restructuring or takeover or payment of a debt. A frequently asked question is whether this links the assignee to a compromise clause in the contract and what rights are vested in them, since they were not an original contractor. A rare example was the 1978 decision in The Roussel-Uclaf case against GD Searle- Co Limited and DG Searle-Co. granting a stay of legal proceedings in favour of arbitration proceedings under Section 1 of the Arbitration Act of a subsidiary whose parent company was a party to an arbitration agreement. In 2008, in the City of London/Sancheti case, this decision was overturned by the Court of Appeal of England, which found that Roussel-Uclaf had been wrongly tried. The Delhi High Court in Kotak Mahindra Bank v. S. Nagabhushan – Ors., 2018 SCC OnLine Del 6832, when deciding on the application under Section 34 was faced with the question of whether this is a valid assignment of the arbitration agreement or not. The arbitrator decided that, since the applicant is not a signatory to the arbitration agreement, the issue cannot be decided by a decision.
The Court found, however, that the loan agreement was, by its very nature, terminatable. The Court found that the Commission had held that once the rights to the loan contract had been transferred to the petitioner, the rights conferred by the arbitration agreement were merely an appeal to assert those rights and, in this case, were duly ceded in favour of the petitioner by the assignment agreement. The Court followed Bestech India Private Ltd. v. MGF Developments Ltd. (2009) 161 DLT 282 and found that when a contract can be surrendered, a compromise clause follows the assignment of the contract. The term “assignment” is defined as the transfer by a portion of all rights to a type of property, usually intangible property, such as the rights to a lease, mortgage, sales contract or partnership. The arbitration/agreement clause provides for the right to arbitrate the parties involved in this agreement.
Therefore, the question arises as to whether such a right can be transferred by transfer to another party. The authors of this contribution discussed the scope of the assignment in arbitration proceedings and the issues that arise in the development of such an award. In some other jurisdictions, the corporate veil was annulled in the context of arbitration in the so-called “business group” doctrine following the decision of the ICC dow Chemical/Isover Saint Gobain, which was later approved by the Paris Court of Appeal. One of the characteristics of the claim in this case was that the third parent company was effectively and individually involved in the conclusion, performance and termination of the corresponding contract that included the arbitration agreement.