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TMI Blog2023 (4) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... iple 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. - HON'BLE MR. JUSTICE SACHIN DATTA For the Appellant : Rajesh Yadav, Sr. Adv., Gaurav Kakar and Amit Jain, Advs. For the Respondent : Ravinder Sethi, Sr. Adv., Badal Dayal, Puneet Sharma and Shafiq Khan, Advs. JUDGMENT SACHIN DATTA, J. ARB.P. 1296/2022 ARB.P. 1297/2022 ARB. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to function as property manager of the aforesaid buildings to maintain common areas of the buildings and operate the various facilities and to provide its services to the occupants in terms of Article 4 of the Maintenance Agreements. The respondent Nos. 1 and 2 are collectively referred to hereinafter as the maintenance agency . Disputes between the parties 6. The grievance of the petitioners, in respect of which the disputes have arisen between the parties are stated to be as under: (i) Determination of super area attributable to the petitioner no. 1's aforesaid units for the purposes of calculation of maintenance charges on the date of its appointment of maintenance agency as well as on the date of the present petition. (ii) Determination of rate at which the maintenance charges are leviable by the respondents in proportion to the super area available. (iii) Gross illegality on part of the respondents in providing and attributing electricity connection load to the petitioners' units and consequently charging excess money from the petitioners qua fixed charges, unit charges etc; and (iv) Reduction of proportionate land rights in wake of common areas being encroached, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f arbitration shall be Delhi and the language of the arbitration shall be English. 20.4 That all disputes difference between the parties or in respect of any matter with regard to rights, dues and liabilities of any of the parties, shall be settled by a reference to arbitration to a Sole Arbitrator to be appointed by the company as per provision of Arbitration and Conciliation Act, 1996, together with any statutory proceeding shall be held and conducted at Delhi. Contentions of the parties 10. It is submitted that by the petitioners that the respondent no. 1 unilaterally appointed an arbitrator vide communication dated 24.05.2022. This was in the aftermath of an order dated 29.04.2022 being passed on petitions filed by the petitioner no.1 under Section 9 of the A C Act. It is the contention of the petitioners that such unilateral appointment of the arbitrator by the respondent no.1 is null and void being in contravention of the judgment of Supreme Court in Perkins Eastman Architects DPC vs. HSCC (India) Ltd., AIR 2020 SC 59. 11. It has been contended on behalf of the petitioners that an independent arbitrator is required to be appointed to adjudicate the disputes between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a v. Durga Trading Corpn., (2021) 2 SCC 1. Specific attention was drawn by learned senior counsel to the following portions of the said judgment : 76. In view of the above discussion, we would like to propound a fourfold test for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable: 76.1. (1) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem. 76.2. (2) When cause of action and subject-matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable. 76.3. (3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable. 76.4. (4) When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s). 76.5. These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no.1 has also relied upon the judgment of this court in the case of Umesh Cimechel Consortium v. IIC Ltd., MANU/DE/4767/2022. Specific reliance is placed on the following paragraphs of the said judgment : 16. As held by a Co-ordinate Bench of this court in STCI Finance Ltd. (supra), a situation where (i) a non-signatory party to an arbitration agreement invokes arbitration against a signatory party is different from a situation where a (ii) signatory party invokes arbitration against a non-signatory party. In situation (i) where arbitration is invoked by a non-signatory party against a signatory party (even though signatory with a third party), on the basis that the non-signatory party is claiming through or under such third party, the consent of the signatory party to refer the disputes to arbitration is a given. In situation (ii) however, when a signatory party invokes arbitration against a non-signatory party, since the non-signatory party has never consented to the remedy of arbitration itself, there is a heavy burden on the signatory party to establish that the non-signatory party had agreed to arbitration. In this regard, the Supreme Court has held in Reckitt Benckiser ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e documents cited by the petitioner in the present case, this court is of the opinion that the petitioner has failed to discharge the burden to establish consent on the part of respondent No. 2 to have any disputes arising from the transaction to arbitration. The petitioner's emphasis on certain documents and correspondence exchanged with respondent No. 2, are all post the execution of the contractual documents between the petitioner and respondent No. 1; and most importantly, even such post-hock correspondence does not establish the existence of an arbitration agreement between the petitioner and respondent No. 2. From another perspective, the petitioner's reliance upon the later documents and correspondence is also destructive of the petitioner's own averment that respondent No. 2 was involved in the negotiations between the petitioner and respondent No. 1. xxx xxx xxx 23. In the opinion of this court, notwithstanding the above allegations, notice dated 27.08.2021 issued by the petitioner to respondent No. 2 does not raise any independent disputes with respondent No. 2; and does not call upon respondent No. 2 to refer any disputes to arbitration. The disputes sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster concern nor the parent company of respondent Nos. 1 and 2. Hence, the present petitions qua respondent no. 3 are stated to be misconceived. Analysis and Findings 20. A perusal of the agreement dated 30.06.2008 between the respondent no.3 (developer) and the maintenance agency leaves no manner of doubt that the maintenance agency performs its functions only in terms of the authorisation granted by respondent no.3 to respondent no.1 under the said agreement. Some salient provisions of the said agreement are as under: WHEREAS: (c) The Promoter has awarded all the rights to the maintenance agency for running and maintain the said development either itself or through any maintenance agency. ARTICLE 3 PROVISION AND SCOPE FOR SERVICES AND MANAGEMENT THEREOF 3.4 The audit with respect to all the heads for the proper performance of the duties of the Maintenance agency may be done by promoter at any time after giving notice of atleast 3 days in advance. The Maintenance agency shall make available to the Promoter the services of its Property and Facilities Management Services Division (which is a party and parcel of Maintenance agency) as may be required during the performance of its dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, in the case of a breach capable of remedy, has not been remedied by the Maintenance agency within 4 (four) days from receipt of a notice given by the occupier and/or the Promoter specifying the breach and calling for its cure/rectification/remedy. (ii) Is incompetent, guilty of misconduct and/or negligence in the providing the Services as enunciated in this Agreement. (iii) Has, after due warning by the Promoter, failed or refused to provide the Services opticomplex/building and prudently as required of it. [emphasis supplied] 21. It is evident from the aforesaid stipulations that: (i) The respondent no.3 (developer) has awarded all rights to the maintenance agency for maintaining the buildings in question, either itself or through any other agency . (ii) The respondent no.3 has the power to conduct an audit to ensure proper performance of duties by the maintenance agency; upon this option being exercised, the maintenance agency would make available to the respondent no.3 (developer) the services of its Property and Facilities Management Services Division as may be required (Clause 3.4 of the agreement). (iii) Maintenance agency has been authorized to fix and collect the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be made to the following observation of the Supreme Court: 73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed. 24. In the present case, the respondent no.3 (developer), although not a party to the maintenance agreements dated 01.11.2015 and 03.12.2010 controls the functions and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the given case, it may be possible to say that even such third party can be referred to arbitration. [emphasis supplied] 26. 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. 27. In ONGC v. Discovery Enterprises (supra) 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 this regard, it was observed as under: 39. Recently, John Fellas elaborated on the principle of binding a non-signatory to an arbitration agreement from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed estoppel theory' are applicable in the present case. 29. Gary B. Born, in his treatise 'International Commercial Arbitration', 3rd Edn. has drawn a valid distinction between binding a non-signatory party on the basis of the group of companies doctrine vis-a-vis other legal basis for binding a non-signatory, such as agency, alter ego, estoppel, third-party beneficiary, or assignment. This distinction was noticed by the Supreme Court in the case of Cox Kings Ltd. v. SAP India (P) Ltd., (2022) 8 SCC 1 [in which Chloro Controls (supra) was referred to a larger bench to expound on the group of companies doctrine ]. Reference is apposite to the observations of the Supreme court in paras 48 and 49 of Cox Kings (supra) as under: 48. The [Vidya Drolia] predominantly dealt with the scope of judicial interference at the referral stage. However, this Court did not have an occasion to explore the jurisprudential basis of group of companies doctrine and required ingredients to refer a non-signatory to arbitration. Especially, the scope of judicial reference at the stage of Sections 8 and 11 of the Arbitration Act, needs to be relooked considering the ambit of unamended Section 2(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised by respondent no.3 (developer) in the activities of maintenance agency (respondent no.1) by virtue of the inter se agreement between them. Whether or not, there has been any lapse/ shortcoming on the part of the respondent no.1 in providing the requisite services, is one of the primary issues in the proposed arbitration. The agreement between the developer and the maintenance agency obliges the maintenance agency to maintain a particular standard of maintenance and to deal with the complaints of occupiers/flat owners. Under the said agreement, it is also incumbent on the developer to terminate the services of the maintenance agency in the event of any incompetence/negligence in providing services. Moreover, there is a revenue sharing arrangement between the maintenance agency and the developer; the developer also has the right to conduct an audit in respect of the maintenance activities of respondent no.1 in respect of the buildings in question. The agreement between the maintenance agency and the developer caps the profit entitlement of the maintenance agency to 20%. In the light of these stipulations, the issue as to whether the common area maintenance charges being charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage, the Court can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute... 33. Also, it was affirmed by the Supreme Court that while exercising jurisdiction under Section 11 of the A C Act, the standard of scrutiny for examining non-arbitrability is only prima facie. Only when there is not even a vestige of doubt that the claim is non-arbitrable, the court will refuse to refer the parties to arbitration. On the other hand, even if there is a slightest doubt, the rule is to refer the dispute to arbitration. In this regard, reference may be made to the following observations: 27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts' they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te bench of this court vide order/judgment dated 20.03.2023 passed in Arb. P. 1145/2022 titled as Nexus Solutions vs Surya Maintenance Agency Pvt Ltd Ors., has allowed the said petition and has held that prima facie, the respondent no.3 (developer) would also be bound by the Arbitration Agreement. The operative portion of the said order/judgment reads as under: 6. Prima facie, I am in agreement with the submission of the learned counsel for the petitioner. The relevant recitals in the Maintenance Agreement is reproduced hereinbelow:- AND WHEREAS the Company was engaged by M/s V3S lnfratech Ltd. (herein after referred to as the Promoter or Developer) to provide maintenance and security related services by itself or through some other maintenance agency in the said Building located at the said plot either through itself or by engaging some reputed agency. 7. The respondent no.1 is, therefore, acting at the behest of the respondent no.3 and at least, prima facie, the respondent no.3 would also be a party to the Arbitration Agreement. This issue may require a further detailed examination by the Arbitral Tribunal, which for the purposes of the present should not be undertaken in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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