Composite transaction principle allows a non-signatory developer to be referred to arbitration in linked maintenance disputes.

In a Section 11 petition under the Arbitration and Conciliation Act, the Delhi High Court held that disputes under maintenance agreements could be referred to arbitration where the developer, though a non-signatory, was directly connected to the composite commercial arrangement. The maintenance agency's authority derived from the developer's agreement, and the unit owners' maintenance contracts expressly incorporated that arrangement, making the agreements inextricably linked. On that prima facie basis, the Court treated the developer as bound by the arbitration arrangement and referred the dispute to arbitration with a sole arbitrator appointed. The Court also stated that objections on jurisdiction and arbitrability could still be raised before the arbitral tribunal.

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Issues: Whether, in a petition under Section 11 of the Arbitration and Conciliation Act, 1996, disputes arising out of maintenance agreements could be referred to arbitration with the developer also being impleaded as a non-signatory party on the basis of the interconnected service and maintenance arrangements.

Analysis: The maintenance agency's authority flowed from the developer's agreement with it, and the maintenance agreements with the unit owners expressly referred to that arrangement. The agreements were found to be inextricably linked and formed a composite commercial arrangement with common subject matter. On that basis, the Court held that the developer could not be disassociated from the dispute, and that the petitioners had made out a prima facie case for reference of the dispute to arbitration including the developer. The Court also held that, at the referral stage, objections on jurisdiction and arbitrability were open before the arbitral tribunal, while the Court's scrutiny remained prima facie.

Conclusion: The dispute was referred to arbitration and a Sole Arbitrator was appointed, with the developer treated as prima facie bound by the arbitration arrangement.

Ratio Decidendi: A non-signatory may be referred to arbitration at the Section 11 stage where interconnected agreements form a composite transaction and the non-signatory's rights and obligations are directly intertwined with the contract containing the arbitration clause, subject to prima facie scrutiny and fuller determination by the arbitral tribunal.

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