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2023 (4) TMI 1357 - HC - Indian LawsSeeking appointment of a Sole Arbitrator to adjudicate the disputes between the parties - Section 11 of the Arbitration and Conciliation Act, 1996 - HELD THAT - In the present case, the impleadment of the respondent no.3 in the arbitration proceedings is mandated not on account of group of companies doctrine but on account of the fact that the authority of respondent no.1 to act as maintenance agency is directly derived from the respondent no.3 (developer) in terms of their inter se agreement dated 30.06.2008; and the said agreement is inextricably linked to the maintenance agreements to which the petitioner no.1 is the party. The agreements in question have to be read with each other to derive the respective rights and obligations of the parties. In ONGC v. Discovery Enterprises 2022 (4) TMI 1350 - SUPREME COURT the Supreme Court has taken note of the principle that a non-signatory party can be bound by the principle of estoppel to prohibit such a party from deriving the benefits of a contract while disavowing the obligations to arbitrate under the same. In the present case, (i) the respondent no.3 (developer) is deriving direct benefit (as noticed aforesaid) from the contract with the maintenance agency (respondent no.1); (ii) the maintenance agreements dated 01.11.2015 and 03.12.2010 between the maintenance agency and the owners of the built up unit/flats are inextricably connected with agreement for services dated 30.6.2008 between the maintenance agency and the developer. As such, both the 'direct benefits' estoppel theory and the 'intertwined estoppel theory' are applicable in the present case. The petitioners have made out a prima facie case for referring the parties to arbitration and for appointment of a Sole Arbitrator to adjudicate the disputes between the parties - Petition disposed off.
Issues Involved:
1. Determination of super area attributable to the petitioner's units. 2. Determination of the rate at which maintenance charges are leviable. 3. Illegality in providing and attributing electricity connection load and charging excess money. 4. Reduction of proportionate land rights due to encroachment and construction in common areas. Issue-wise Detailed Analysis: 1. Determination of Super Area Attributable to the Petitioner's Units: The petitioners sought the appointment of a Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, to adjudicate disputes, including the determination of super area attributable to their units for calculating maintenance charges. The agreements between the parties, including sale deeds and maintenance agreements, were highlighted. The arbitration agreement in Article 20 of the maintenance agreements was invoked. The respondents contended that the developer, who is not a party to the maintenance agreements, should not be included in the arbitration. However, the court noted that the maintenance agency's authority derived directly from the developer, making the developer a necessary party to the arbitration. 2. Determination of the Rate at Which Maintenance Charges are Leviable: The petitioners argued that the maintenance charges levied by the respondents were disproportionate to the super area available. The maintenance agreements specified the responsibilities of the maintenance agency, including the calculation and collection of common area maintenance charges. The court found that the developer had significant control over the maintenance agency's activities, including the right to audit and terminate services, which justified the developer's inclusion in the arbitration to resolve disputes about maintenance charges. 3. Illegality in Providing and Attributing Electricity Connection Load and Charging Excess Money: The petitioners alleged gross illegality in the provision and attribution of electricity connection load, resulting in excess charges. The court noted that the maintenance agency, appointed by the developer, was responsible for various services, including electricity. The arbitration clause in the maintenance agreements covered disputes related to these services. The court held that the developer's involvement in appointing and controlling the maintenance agency made it necessary to include the developer in the arbitration to address the petitioners' grievances comprehensively. 4. Reduction of Proportionate Land Rights Due to Encroachment and Construction in Common Areas: The petitioners claimed that the respondents encroached upon and constructed in common areas, reducing their proportionate land rights and creating safety hazards. The court examined the agreements and found that the maintenance agency's actions were under the developer's authorization. The developer's power to terminate the maintenance agency's services and the revenue-sharing arrangement indicated a direct relationship between the agreements. The court concluded that the developer's inclusion in the arbitration was essential to resolve disputes about encroachment and construction in common areas. Contentions of the Parties: The petitioners contended that the unilateral appointment of an arbitrator by the respondent no.1 was null and void, citing the Supreme Court judgment in Perkins Eastman Architects DPC vs. HSCC (India) Ltd. They argued for an independent arbitrator and the inclusion of the developer in the arbitration. The respondents opposed, arguing that the developer was not a party to the arbitration agreement and that the maintenance agency was an independent contractor. They relied on judgments like Vidya Drolia v. Durga Trading Corpn. and NTPC Ltd vs. M/S SPML Infra Ltd. to support their stance. Court's Analysis and Findings: The court found that the maintenance agency performed its functions under the developer's authorization, making the developer a necessary party in the arbitration. The agreements between the developer and the maintenance agency were inextricably linked to the maintenance agreements with the petitioners. The court referred to the Supreme Court's judgment in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., which allowed the inclusion of non-signatories in arbitration under certain conditions. The court concluded that the developer's control over the maintenance agency and the intertwined agreements justified the developer's inclusion in the arbitration. Conclusion: The court appointed a Sole Arbitrator to adjudicate the disputes between the parties, including the developer, maintenance agency, and petitioners. The arbitrator was given the authority to hold common hearings for convenience and to address preliminary objections regarding jurisdiction and arbitrability. The court emphasized that its order did not express any opinion on the merits of the parties' contentions and disposed of the petitions accordingly.
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