Bombay High Court
FLYING EARTH LLPversusDATE BUNGALOW COOPERATIVE HOUSING SOCIETY LIMITED
- Decided
- Disposal
- DISPOSED OFF
Holding
An arbitration agreement exists between Flying Earth LLP and the Society, but cannot be extended to the dissenting members who did not consent to arbitrate.
Summary
Flying Earth LLP, a limited liability partnership, was appointed developer by Date Bungalow Cooperative Housing Society Ltd (the Society) for redevelopment of its building after a majority vote and approval by the Deputy Registrar. A Development Agreement dated 22 March 2025 containing an arbitration clause was executed between the applicant and the Society, but four dissenting members (Respondents 2‑5) did not sign the agreement and opposed the redevelopment. The applicant filed a Section 11 application seeking appointment of an arbitrator to resolve disputes, arguing that the members were bound by the Society’s decision and the arbitration clause. The respondents contended that, as non‑signatories, they had never consented to arbitrate and that the arbitration clause could not be imposed on them. The Court held that an arbitration agreement exists between the applicant and the Society, but no such agreement exists with the dissenting members, who cannot be compelled to arbitrate. Consequently, a sole arbitrator was appointed only for the dispute between the applicant and the Society, and the application against the dissenting members was dismissed.
Issues considered
- The existence of a valid arbitration agreement between the applicant and the Society under Section 7 of the Arbitration and Conciliation Act, 1996.
- Whether the dissenting members, who did not sign the Development Agreement, can be deemed parties to its arbitration clause.
- The applicability of Section 11 of the Arbitration and Conciliation Act to refer non‑signatory members to arbitration.
- The effect of interim orders under Section 9 on the existence of an arbitration agreement.
Legislation cited
Subjects
- Arbitration
- Section 11
- Non‑signatory
- Co‑operative housing society
- Arbitration agreement
- Consent to arbitrate
- Redevelopment
- Section 9 interim relief
Judgment
28-arbap330-2026.doc
Shabnoor
Digitally
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
signed by
SHABNOOR
SHABNOOR AYUB
ORDINARY ORIGINAL CIVIL JURISDICTION
AYUB PATHAN
PATHAN Date:
2026.09.24
18:18:58
+0530 ARBITRATION APPLICATION NO.330 OF 2026
Flying Earth LLP … Applicant
Vs.
1. Date Bungalow Cooperative
Housing Society Limited
2. Shivji Bhojraj Gada
3. Rekha Shivji Gada
4. Hiruben Lakhamshi Gala
5. Leena Mansukh Gala … Respondents
Mr. M.B. Saraf i/by L.J. Law for the Applicant.
Mr. Jainesh Jain for Respondent No.1.
Mr. Y.R. Mishra with Mr. Sachidanand T. Singh for
Respondent Nos.2, 3, 4, and 5.
CORAM : AMIT BORKAR, J.
DATED : SEPTEMBER 24, 2026.
P.C.:
1. By the present Application under Section 11 of the
Arbitration and Conciliation Act, 1996, the Applicant seeks
appointment of an Arbitrator to decide the disputes and
differences between the parties arising out of and in connection
with the Development Agreement dated 22 March 2025.
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2. According to the Applicant, the relevant facts leading to the
filing of the present Application are as follows. The Applicant is a
limited liability partnership registered under the Limited Liability
Partnership Act, 2008. Respondent No. 1 is a housing society
registered under the Maharashtra Co-operative Societies Act, 1960.
Respondent Nos. 2 to 5 are adult Indian inhabitants and members
of Respondent No. 1. The building is occupied by 17 members of
the Society. Respondent Nos. 2 to 5 are occupying the flats which
are the subject matter of the present proceedings. On 19 March
2006, a Deed of Conveyance was executed in favour of Respondent
No. 1 in respect of the land and building. There were, however,
certain clerical errors in the said Deed. These errors were corrected
by a Deed of Rectification dated 17 February 2025. In the Special
General Body Meeting held on 14 January 2024, Respondent No. 1
resolved to redevelop the property as the building had become old
and was in a severely deteriorated condition. Thereafter, in the
Special General Body Meeting held on 25 February 2024,
Respondent No. 1 appointed Mr. Kapil Bakshi as the Project
Management Consultant ("PMC"). The Society invited offers from
developers for redevelopment of the property by publishing
advertisements in newspapers. Pursuant to the public
advertisement dated 25 August 2024, Respondent No. 1 received
16 redevelopment offers from different developers. The Applicant
submitted its revised redevelopment offer on 1 October 2024 as
requested by Respondent No. 1. On 2 October 2024, the shortlisted
developers, including the Applicant, made presentations before the
Society. Respondent No. 1 asked the shortlisted developers to
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submit modified plans on the basis of the suggestions and feedback
received from its members. The Applicant accordingly submitted
its modified redevelopment plans on 18 October 2024. In the
Special General Body Meeting held on 24 November 2024, the
Applicant was selected as the Developer by majority vote.
Respondent Nos. 2 to 5 were present at the meeting but did not
participate in the voting. Thereafter, on 12 December 2024,
Respondent No. 1 issued a Letter of Intent appointing the
Applicant as the Developer for redevelopment of the property.
3. In the Special General Body Meeting held on 26 January
2025, in the presence of the officer appointed by the Deputy
Registrar, Co-operative Societies, "K" East Ward, Mumbai, the
majority of the members approved the appointment of the
Applicant as the Developer. The Deputy Registrar, Co-operative
Societies, confirmed and approved the appointment of the
Applicant as Developer on 27 January 2025. On 22 March 2025, a
Development Agreement containing an arbitration clause was
executed between the Applicant, Respondent No. 1 Society and 13
out of its 17 members. On 23 March 2025, Respondent No. 1
executed a Power of Attorney in favour of the Applicant for
implementation of the terms of the Development Agreement. Mr.
Sunil Paradkar, one of the members who had initially dissented,
subsequently executed a declaration dated 28 July 2025
consenting to the appointment of the Applicant as Developer and
confirming the Development Agreement. In pursuance of the
Development Agreement, the Applicant incurred substantial
expenditure towards stamp duty, hardship compensation, statutory
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premiums and consultant fees. Respondent Nos. 2 to 5 initiated
various proceedings against Respondent No. 1 and the Applicant
with the object of obstructing the redevelopment. According to the
Applicant, none of those proceedings resulted in any relief being
granted in favour of Respondent Nos. 2 to 5. The Applicant
obtained approval from the BMC for the redevelopment
concessions on 11 October 2025. On 24 November 2025, the BMC
issued an Intimation of Disapproval ("IOD") approving the plans
up to seven floors. On 26 November 2025, the Applicant informed
Respondent No. 1 about receipt of the IOD and requested the
Society to obtain written consent from all its members for vacating
their respective premises. Fourteen out of the 17 members gave
their written consent to vacate. Respondent Nos. 2 to 5, however,
refused to cooperate.
4. On 23 December 2025, the Applicant invoked the arbitration
agreement and called upon Respondent Nos. 2 to 5 to comply with
the Development Agreement. The Applicant filed a Petition under
Section 9 of the Arbitration and Conciliation Act before this Court
on 29 January 2026. The Co-operative Court, Mumbai, rejected
the application for interim injunction filed by Respondent No. 5 on
7 March 2026. On 9 March 2026, this Court allowed the Section 9
Petition and directed Respondent Nos. 2 to 5 to vacate their
respective premises upon issuance of notices after obtaining the
Full FSI IOD. The Applicant obtained the amended Full FSI IOD on
8 May 2026. Thereafter, on 9 May 2026, notices were issued to the
Respondents calling upon them to vacate their respective flats and
hand over possession. The Maharashtra State Co-operative
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Appellate Court, by its order dated 21 May 2026, dismissed Appeal
No. 24 of 2026 with costs and confirmed the order passed by the
Co-operative Court. According to the Applicant, Respondent Nos. 2
to 5 have still not vacated their respective premises. They continue
to obstruct the redevelopment despite their alleged obligations
under the Development Agreement, the orders passed by the
Courts and the notices calling upon them to vacate. The Applicant
submits that this has delayed commencement of the
redevelopment project, resulted in increase in costs and caused
substantial financial loss. It is in these circumstances that the
Applicant has filed the present Application.
5. Mr. Saraf, learned Advocate appearing for the Applicant,
submits that the Applicant invoked the arbitration agreement on
23 December 2025. According to him, the dispute arises out of the
Development Agreement and concerns the failure and refusal of
Respondent Nos. 2 to 5 to comply with the obligations arising from
the said Agreement. Pursuant to the order dated 9 March 2026
passed by this Court, the Applicant issued notices calling upon
Respondent Nos. 2 to 5 to vacate their respective flats and hand
over possession. Respondent Nos. 2 to 5, however, failed to comply
with those notices and have continued to obstruct the
redevelopment project. It is therefore submitted that there is a
continuing breach of the Development Agreement. Such breach
has delayed commencement of the project, increased the cost of
redevelopment and caused substantial financial loss to the
Applicant. According to the Applicant, the delay is continuing and,
therefore, its claim is within limitation and is not barred by the law
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of limitation. Learned Advocate appearing for the Petitioner, has
placed reliance upon the judgment of the Supreme Court in Cox
and Kings Limited v. SAP India Private Limited , (2024) 1 SCC 1, as
the judgment in ASF Buildtech Private Limited v. Shapoorji Pallonji
and Company Private Limited, (2025) 9 SCC 76.
6. Mr. Singh, learned Advocate appearing for Respondent Nos.
2 to 5, submits that Respondent Nos. 2 to 5 neither signed nor
executed the Development Agreement dated 22 March 2025 on
which the Applicant relies. They never agreed to Clause 27 of the
Development Agreement and never otherwise agreed to refer any
dispute with the Applicant to arbitration. According to him,
therefore, the requirements of Section 7 of the Arbitration and
Conciliation Act are not satisfied in respect of Respondent Nos. 2
to 5. It is submitted that Respondent Nos. 2 to 5 had opposed the
process adopted for appointment of the Applicant as Developer
and had consistently disputed the legality and validity of the
redevelopment process. Their decision not to execute the
Development Agreement was deliberate. Their conduct throughout
shows that they never intended to become parties to the
Development Agreement or to its arbitration clause.
7. It is further submitted on behalf of Respondent Nos. 2 to 5
that the Applicant was aware that they had not signed the
Development Agreement. In the notice invoking arbitration dated
23 December 2025, the Applicant called upon Respondent Nos. 2
to 5 to confirm in writing that they would abide by the
Development Agreement and, upon their failure to do so,
purported to invoke Clause 27. According to the Respondents, the
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very fact that such confirmation was sought shows that they had
never agreed to be bound by the Development Agreement or its
arbitration clause. It is submitted that merely because Respondent
Nos. 2 to 5 are members of Respondent No. 1 Society, an
arbitration agreement cannot come into existence between them
and the Applicant. A resolution passed by the majority of the
Society, or execution of the Development Agreement by the
Society, may, subject to the applicable law, bind individual
members in respect of certain substantive obligations relating to
redevelopment. However, according to the Respondents, it does
not amount to individual consent to have disputes decided by a
private arbitrator.
8. The Respondents submit that there is an important
difference between being bound by certain obligations relating to
redevelopment and becoming a "party" to an arbitration
agreement. Arbitration is based on the consent of the parties.
Therefore, according to the Respondents, statutory or collective
obligations imposed upon a member of a Co-operative Housing
Society cannot be treated as consent to an arbitration agreement
which that member has neither signed nor otherwise accepted.
9. Reliance is placed upon the judgment in Avenues Seasons
Properties LLP v. Nissa Hoosain Nensey & Ors. Appeal Nos. 42, 43
and 44 of 2024 decided on 22-10-2024. It is submitted that the
issue under Section 11 has already been considered by this Court
in that case and is covered by the decision. The members in that
case had opposed redevelopment and had not signed the
Development Agreement. The Developer nevertheless sought to
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refer them to arbitration. The Division Bench held that a person
who is not named in the Development Agreement and who has not
signed the Agreement cannot, merely on that basis, be referred to
arbitration. It is submitted that the Division Bench distinguished
between interim protection under Section 9 and actual arbitration
proceedings. The fact that interim measures may, in an appropriate
case, be granted against a third party or non-signatory does not
mean that arbitration proceedings can be commenced against such
person in the absence of an arbitration agreement.
10. Reliance is placed upon the judgment of this Court in Space
Master Realtors v. Mulund Sandhyaprakash Co-operative Housing
Society Ltd. & Anr., 2026 SCC OnLine Bom 1803. It is submitted
that this Court expressly described the decision in Avenues Seasons
as being "directly on the point" and held that a person who has not
signed the Development Agreement cannot be compelled to
arbitrate merely because the Development Agreement contains an
arbitration clause. ccording to Respondent Nos. 2 to 5, therefore,
the controversy raised in the present Application is squarely
covered by the judgment of this Court in Space Master Realtors.
11. The issue considered in Space Master Realtors was whether a
Developer who had entered into a Development Agreement with a
Co-operative Housing Society could rely upon the arbitration
clause contained in that Agreement and seek appointment of an
Arbitrator against an individual dissenting member who had not
signed the Development Agreement. This Court answered the
question in the negative and dismissed the Section 11 Application.
This Court made a distinction between proceedings under Section
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9 and proceedings under Section 11 of the Arbitration and
Conciliation Act. Interim protective measures may, in an
appropriate case, operate against a non-signatory dissenting
member. However, that does not mean that the non-signatory
member can be compelled to participate in arbitration when there
is no agreement on his or her part to submit the dispute to
arbitration.
REASONS AND FINDINGS:
12. I have considered the facts placed by the Applicant, the
objections raised by Respondent Nos. 2 to 5. At this stage, the
question which arises is whether there is an arbitration agreement
between the Applicant and Respondent No. 1 Society. The second
question is whether such an arbitration agreement can be said to
exist between the Applicant and Respondent Nos. 2 to 5, who
admittedly have not signed the Development Agreement.
13. So far as Respondent No. 1 Society is concerned, there is no
difficulty in holding that an arbitration agreement exists between
the Applicant and the Society. The Development Agreement dated
22 March 2025 was executed between the Applicant and
Respondent No. 1. The said Agreement contains an arbitration
clause. Respondent No. 1 is therefore a party to the Agreement
containing the arbitration clause. Thus, the Applicant and
Respondent No. 1 are parties to an arbitration agreement in
writing as required under Section 7 of the Arbitration and
Conciliation Act.
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14. The Applicant has placed before the Court the circumstances
in which the Development Agreement came to be executed. The
Society had decided to redevelop the property. It appointed a PMC
and invited offers from developers. The Applicant submitted its
offer and submitted revised and modified plans. In the Special
General Body Meeting held on 24 November 2024, the Applicant
was selected as the Developer by majority. Thereafter, the Society
issued a Letter of Intent dated 12 December 2024. The
appointment of the Applicant as Developer was again approved in
the Special General Body Meeting held on 26 January 2025 in the
presence of the officer appointed by the Deputy Registrar. The
Deputy Registrar confirmed and approved the appointment on 27
January 2025. The Development Agreement was then executed on
22 March 2025. These facts are important because the Applicant is
not relying upon with the Society for invoking the arbitration
clause. The Development Agreement is a completed document. It
was executed by Respondent No. 1 Society. The Society has not
disputed that it executed the Agreement. Therefore, as between
the Applicant and Respondent No. 1, the existence of the
arbitration agreement is clear. At this stage, this Court is not
required to decide whether the Applicant will succeed in the claims
made under the Development Agreement. The allegations of
breach, the effect of any delay, the financial loss claimed by the
Applicant and the defence of the Society are matters which can be
considered by the learned Arbitrator. In a Section 11 Application,
the Court is required to consider whether an arbitration agreement
exists and, if the legal requirements are satisfied, to appoint an
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Arbitrator. Therefore, at this stage, the Court is concerned with the
existence of the arbitration agreement and not with the final
merits of the claims.
15. The position is different when the Applicant seeks to refer
Respondent Nos. 2 to 5 to arbitration. It is not in dispute that
Respondent Nos. 2 to 5 did not sign the Development Agreement
dated 22 March 2025. They did not become parties to the
Agreement in their individual capacity. They have stated that they
never agreed to Clause 27 and never agreed that their disputes
with the Applicant should be decided by arbitration.
16. The Applicant has relied upon the fact that Respondent Nos.
2 to 5 are members of Respondent No. 1 Society. The Applicant has
relied upon the majority decision of the Society, the steps taken for
redevelopment, the orders passed in the Section 9 proceedings and
the alleged obligation of the members to vacate their flats. These
facts may be relevant for deciding the rights and obligations of the
members in relation to redevelopment. But these facts do not
answer the question whether Respondent Nos. 2 to 5 agreed to
arbitration.
17. A member of a Co-operative Housing Society may, depending
upon the law and the facts, be bound by a decision of the Society
relating to redevelopment. But being bound by such a
redevelopment decision is different from agreeing that disputes
with the Developer will be decided by a private Arbitrator. Both
these matters cannot be treated as one and the same.
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18. The Constitution Bench of the Supreme Court in Cox and
Kings Ltd. v. SAP India Pvt. Ltd., 2023 INSC 1051, has recognised
that the arbitration agreement is from the main contract. In the
case of a non-signatory, the important question is whether such
person has consented to the arbitration agreement from the
underlying contract.
19. This principle has been applied by this Court in relation to
redevelopment agreements in Space Master Realtors. Paragraph
111 of that judgment states:
"111. A reference to arbitration cannot be made in absence
of existence of arbitration agreement between parties.
Ordinarily, “parties' to arbitration agreement are those who
have “signed” the same. However, Section 7 of the
Arbitration Act uses the expression “parties' and not
“signatories”. Therefore, in a given case, even a non-
signatory can be treated as veritable party to arbitration.
This principle applies when the doctrines of “group of
companies” or “alter ego” or “composite transaction”, etc.
can be invoked to gather intention of non-signatory to be
bound by the obligations of the contract. As held by the
Constitution Bench in Cox and Kings, a non-signatory can be
subjected to arbitration by applying the tests of mutual
intent, relationship, commonality of subject matter,
composite nature of transaction, participation in
performance of contract, etc. However, participation in
performance of contract by a non-signatory must be positive,
direct and substantial so that the same must create an
impression of assumption of obligations upon under the
contract. To join a non-signatory to arbitration, court must
satisfy that the non-signatory consented to the arbitration
agreement as contradistinct from the underlying contract
containing arbitration agreement. This is the decisive test for
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determining whether a non-signatory is a veritable party to
the arbitration agreement."
20. Therefore, merely because a person has not signed an
Agreement, it cannot be said in every case that such person can
never be made a party to arbitration. There may be cases where
the conduct and circumstances show that a non-signatory had
agreed to be bound by the arbitration agreement. But for that
purpose, there must be some material from which such intention
can be seen. Merely having a relationship with a signatory,
receiving some benefit under the contract or taking part in some
part of the transaction cannot mean that the person has agreed to
arbitration. The intention to bind a non-signatory has to be found
from the facts and conduct of that particular transaction.
21. In the present case, the material before the Court shows a
different position in respect of Respondent Nos. 2 to 5. They did
not sign the Development Agreement. They did not accept Clause
27. They were dissenting members. They had opposed the
appointment of the Applicant as Developer and had disputed the
redevelopment process. Their conduct therefore cannot be treated
as conduct showing that they had agreed to arbitration. The
Applicant has relied upon the fact that Respondent Nos. 2 to 5
were present in the Special General Body Meeting held on 24
November 2024 but abstained from voting. This fact cannot
amount to an agreement to arbitrate. Merely being present in a
meeting and not voting cannot be treated as written or implied
consent to a arbitration agreement. In fact, when this conduct is
seen along with their subsequent conduct, it supports their case
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that they had not consented to the appointment of the Applicant as
Developer.
22. The Applicant has relied upon the later events, including
issuance of the IOD, consent given by 14 members to vacate and
the proceedings filed by Respondent Nos. 2 to 5. These events
show that there is a continuing dispute between the Applicant and
Respondent Nos. 2 to 5 regarding the redevelopment. But merely
because a dispute exists, an arbitration agreement does not come
into existence. The important question is whether there is an
agreement between the parties that the dispute will be decided by
arbitration.
23. The orders passed by this Court in the Section 9 proceedings
do not change this position. Proceedings under Section 9 and
proceedings under Section 11 have different purposes. In an
appropriate case, an interim order may affect a person even
though that person may not be a party to the arbitration
agreement. Such an order does not mean that the person has
agreed to arbitration of the main dispute.
24. This distinction has been noticed in Space Master Realtors.
Paragraph 116 of the judgment states:
"116. While examining the issue of prima facie existence of
arbitration agreement under Section 11 of the Arbitration
Act, the Referral Court needs to examine and hold as to
whether the nonsignatory is a veritable party. The Referral
Court need not adopt hands-off approach in relation to the
inquiry into the status of non-signatory as veritable party.
However such inquiry can be conducted by the Arbitral
Tribunal under Section 16 of the Arbitration Act. ( ASF
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Buildtech and HPCL v. BCL Secure Premises Pvt. Ltd.)."
25. This principle applies to the present case. This Court
therefore cannot hold that Respondent Nos. 2 to 5 became parties
to the arbitration agreement merely because the redevelopment
may affect them or because certain orders were passed against
them. The Court has to see whether there is material showing their
consent to arbitration. On the material placed before this Court,
such consent is not shown.
26. The judgment in Space Master Realtors is relevant because it
considers the position of dissenting members in redevelopment
matters. Paragraph 112 states:
"112. In relation to development agreements executed for
redevelopment of society's building however, a member, who
dissents and who has no intention of signing the DA and
opposes its execution, cannot become veritable party to the
DA. His participation in the redevelopment process becomes
an involuntary act, as he is forced to vacate the old flat and
execute PAAA with the developer on account of imposition of
will of majority. In such a case, his participation in the
redevelopment process cannot be a factor for inferring that
he is a veritable party to the DA. He becomes beneficiary of
DA, not by choice, but because of imposition of majority will
on him. Therefore, his capacity as third-party beneficiary
would not make him a variable party to the arbitration
agreement contained in the DA. Far from any intention to
arbitrate, the dissenting member actually does not want to
act as per the DA, but is forced to do so by applying the
principle of loss of individuality and by forcing the majority
decision on him. Thus, the mutual intention to arbitrate
cannot be inferred in case of a dissenting member."
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27. The facts of the present case are in line with the above
principle. Respondent Nos. 2 to 5 were dissenting members. Their
conduct was not that of members who accepted the Development
Agreement but did not sign it for some technical reason. Their case
is that they did not agree with the redevelopment process and did
not agree to the Development Agreement. Their later conduct is
consistent with this position. Therefore, merely from the alleged
obligation of Respondent Nos. 2 to 5 to vacate their flats, it cannot
be said that they had agreed to the arbitration clause. The
Applicant may have a case that the decision of the majority Society
binds the dissenting members in matters concerning
redevelopment. That is a question. While deciding the present
Section 11 Application, this Court is not required to finally decide
every substantive obligation which may arise against Respondent
Nos. 2 to 5 in relation to redevelopment. The question before the
Court is whether they agreed to arbitration. On this question, the
Applicant has not established the necessary consent.
28. The same position is clear from paragraph 113 of Space
Master Realtors, which states:
"113. Ultimate participation by a dissenting member in the
redevelopment process, reaping of benefits by him under the
DA and execution of PAAA, etc. may, at the highest, give rise
to a presumption that he has finally consented to the
underlying contract (DA), but as held in para 128 of the
judgment in Cox and Kings, this would not necessarily mean
his consent for arbitration agreement."
29. Therefore, even if it is assumed that Respondent Nos. 2 to 5
may have to accept some consequences of the redevelopment or
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may receive some benefits under the Development Agreement,
that cannot create consent to the arbitration clause. The
redevelopment agreement and the arbitration agreement have to
be considered.
30. The Applicant has relied upon the fact that the
redevelopment process was approved by the majority and that
Respondent No. 1 executed the Development Agreement on behalf
of its members. This may have relevance while considering the
substantive authority of the Society and the obligations of its
members. But it cannot be extended to create an arbitration
agreement with a member who did not sign the Development
Agreement and who has consistently disputed the redevelopment
process.
31. The decision in Avenues Seasons Properties LLP supports the
requirement of consent in such a case. This Court has considered
the position of members who had not signed the development
agreement. This principle is consistent with the later decision in
Cox and Kings, where mutual intention and consent have been
treated as important while considering whether a non-signatory
can be bound by an arbitration agreement.
32. The Applicant's reliance upon the order passed in the Section
9 proceedings cannot assist it. The Court exercising jurisdiction
under Section 9 was considering whether interim protection was
required in the facts before it. The present Application under
Section 11 requires the Court to consider whether an arbitration
agreement exists. These two proceedings cannot be treated as the
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same. The fact that the Applicant obtained an order under Section
9 does not establish that an arbitration agreement exists between
the Applicant and every person against whom the interim order
operates.
33. The Applicant has submitted that Respondent Nos. 2 to 5
continue to obstruct the redevelopment and that this has caused
delay and financial loss. There may be a dispute on these matters
and the Applicant may have remedies available in law. But even if
the breach is continuing, it cannot create an arbitration agreement
where there was no such agreement. A continuing breach may be
relevant to limitation and to the merits of a claim where a person
is already bound by an arbitration agreement. It cannot take the
place of the basic requirement of consent to arbitration.
34. There is no material before the Court to show that
Respondent Nos. 2 to 5 subsequently executed any document
accepting Clause 27 of the Development Agreement. There is no
later conduct shown which can be treated as positive, direct and
substantial acceptance of the arbitration obligation. On the
contrary, the material before the Court shows that these
Respondents have disputed the appointment of the Applicant and
have continued to oppose the redevelopment.
35. Paragraph 114 of Space Master Realtors explains the
difference between a participating member and a dissenting
member in the following terms:
"114. Thus, in redevelopment agreements, the key is to find
out whether the non-signatory member has consented for
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arbitration. The consent or otherwise to arbitration can be
determined by finding out as to whether the individual
member is a participating member or dissenting member to
the redevelopment process. In case of participating member
signing the DA containing the arbitration clause, reference to
arbitration may be permissible depending on the language of
the arbitration clause and permissibility to take stand
different than the one taken by the society (Ketan
Champaklal Divecha and Shankar Vithoba Desai). Where a
participating member is not a signatory in individual
capacity, either because the DA is signed in representative
capacity by the society or because the participating member
was not physically available for signature, reference to
arbitration can still be made (Harshad B. Shah). This is
because, in both eventualities, the participating members
have intention to arbitrate. However, in case of a dissenting
member, he never intends to act in terms of DA nor expresses
any intention to arbitrate. He acts contrary to the DA.
Therefore, no reference can be made for adjudication of
disputes arising out of DA between non-signatory dissenting
member and developer."
36. In the present case, Respondent Nos. 2 to 5 fall in the second
category. They were not members who were willing to participate
but whose signatures were left out for some technical or accidental
reason. Their case is that they did not agree to the redevelopment
arrangement and did not agree to the arbitration clause. The
material before the Court supports this position.
37. I, therefore, find that Respondent Nos. 2 to 5 cannot be
made parties to the proposed arbitration merely because they are
members of Respondent No. 1. They cannot be referred to
arbitration merely because they occupy flats in the building or
because the redevelopment decision of the Society may have
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consequences for them. These matters may have relevance in other
proceedings. But they are not enough to establish an arbitration
agreement.
38. Paragraph 117 of Space Master Realtors puts the position in
clear terms:
"117. The conspectus of the above discussion is that
Respondent 2 is not a veritable party to the DA. Mere
capacity of Respondent 2 as beneficiary o the DA would not
make him a party to arbitration agreement contained in the
DA. Applicability of contractual obligations in the principal
contract (DA) to an individual member is a different and
distinct concept than the concept of being governed by
arbitration agreement contained in the principal contract.
Therefore, even if any contractual stipulations provided for
in the DA are held to be applicable to a dissenting member,
the same would not ipso-facto make him party to arbitration
agreement. To paraphrase, enforceability of DA against
dissenting member is a different concept than applicability of
arbitration agreement contained in the DA. Therefore, mere
availing of benefits flowing out of DA would not make a non-
signatory member party to arbitration agreement. Execution
of PAAA by a member who has not signed the DA would
again not make him a party to arbitration agreement
contained in the DA. Composite nature of transaction or
commonality of subject matter of DA and PAAA would again
not make non-signatory member party to the arbitration
agreement in the DA. arbitration agreement between
developer and society does not get incorporated in PAAA
executed between the developer and members. Thus, there is
no agreement to arbitrate between the Applicant and
Respondent 2 and this Court is unable to make reference to
arbitration. Consequently, the application deserves to be
dismissed."
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39. The principle stated in paragraph 117 applies to Respondent
Nos. 2 to 5 in the present case. The Applicant cannot combine the
substantive obligations claimed against the dissenting members
with the arbitration clause contained in the Development
Agreement and, on that basis, create an arbitration agreement
which those members never accepted.
40. I accordingly hold that the Applicant has established the
existence of an arbitration agreement between and Respondent
No. 1 Society. The disputes arising out of and in connection with
the Development Agreement dated 22 March 2025 are therefore
required to be referred to arbitration between the Applicant and
Respondent No. 1. At the same time, the Applicant has failed to
establish the existence of any arbitration agreement between and
Respondent Nos. 2 to 5. They therefore cannot be compelled to
participate in arbitration in respect of disputes arising from the
Development Agreement. The Application therefore succeeds
against Respondent No. 1 and fails against Respondent Nos. 2 to 5.
The Arbitrator can accordingly be appointed only for deciding the
disputes between the Applicant and Respondent No. 1. The claims
against Respondent Nos. 2 to 5 cannot be made part of that
arbitration only on the basis of the arbitration clause contained in
the Development Agreement.
41. In view of the aforesaid, the present Application filed under
Section 11 of the Act is disposed of by passing the following order:
A) Mr. Harsh Moorjani, an advocate of this Court, is
hereby appointed as the Sole Arbitrator to adjudicate upon
the disputes and differences arising out of and in
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connection with the Development Agreement dated 22
March 2025 between the Applicant and Respondent No. 1
Society;
Office Address:- C/o Sr. Ashish Kamat, 501, 5th Floor, Oval
House, Old British Lane, Kala Ghoda, Fort, Mumbai –
400001.
Email ID: [email protected]
B) A copy of this Order will be communicated to the
Learned Sole Arbitrator by the Advocates for the Applicant
within a period of one week from today. The Applicant
shall provide the contact and communication particulars of
the parties to the Arbitral Tribunal along with a copy of this
Order;
C) The Learned Sole Arbitrator is requested to forward the
statutory Statement of Disclosure under Section 11(8) read
with Section 12(1) of the Act to the Advocates for the
Applicant so as to enable them to file the same in the
Registry of this Court. The Registry of this Court shall
retain the said Statement on the file of this Applicant and a
copy of the same shall be furnished by the Advocates for
the Applicant to the Advocates for the Respondent;
D) The Learned Sole Arbitrator is requested to forward the
statutory Statement of Disclosure under Section 11(8) read
with Section 12(1) of the Act to the parties within a period
of two weeks from receipt of a copy of this Order;
E) The parties shall appear before the Learned Sole
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Arbitrator on such date and at such place as indicated, to
obtain appropriate directions with regard to conduct of the
arbitration including fixing a schedule for pleadings,
examination of witnesses, if any, schedule of hearings etc.
At such meeting, the parties shall provide a valid and
functional email address along with mobile and landline
numbers of the respective Advocates of the parties to the
Arbitral Tribunal. Communications to such email
addresses shall constitute valid service of correspondence
in connection with the arbitration;
F) All arbitral costs and fees of the Arbitral Tribunal
shall be borne by the parties equally in the first instance,
and shall be subject to any final Award that may be passed
by the Tribunal in relation to costs.
42. All issues on merits including limitation are expressly kept
open to be agitated before the arbitral tribunal appointed hereby.
43. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this
Court’s website.
(AMIT BORKAR, J.)
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