VILAS SHUDRIKversusSUPREME DEVELOPERS

                                                                          carap382-2025-J.doc


                   AGK
                            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                ORDINARY ORIGINAL CIVIL JURISDICTION
                                     IN ITS COMMERCIAL DIVISION

                           COMM ARBITRATION APPLICATION NO.382 OF 2025

ATUL               Vilas Shidruk, Sole Proprietor of
GANESH
KULKARNI           M/s. Balaji Construction                         … Applicant
Digitally signed
by ATUL
GANESH
KULKARNI                                  Vs.
Date: 2026.09.17
11:35:16 +0530
                        1. Supreme Developers
                        2. Shree Sadguru Cooperative Housing
                           Society Limited                          … Respondents



                   Mr. Yuvraj Narvankar with Mr. Kshitij Munj i/by Mr.
                   Ashish Pawar for the Applicant.
                   Mr. S.B. Pawar with Ms. Lubna Shaikh and Milkesha
                   Sangle i/by S.K. Legal Associates LLP for Respondent
                   No.1.


                                       CORAM                  : AMIT BORKAR, J.

                                       RESERVED ON            : SEPTEMBER 11, 2026.

                                       PRONOUNCED ON          : SEPTEMBER 17, 2026

                   JUDGMENT:

                   1.      By the present Arbitration Application filed under Section 11
                   of the Arbitration and Conciliation Act, 1996, the Applicant is
                   seeking appointment of an Arbitrator to decide the disputes
                   between the parties arising out of APMC Agreement dated 13 May
                   2014.




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2.    The facts and circumstances stated by the Applicant, which
have led to filing of the present Arbitration Application, are as
follows. Respondent No. 1 and Respondent No. 2 had entered into
an Agreement for Project Management Consultancy (“APMC”)
dated 13 May 2014. Pursuant to the said APMC, Respondent No. 1
entered into a Memorandum of Understanding (“MOU”) with the
Applicant. Thereafter, under the said APMC dated 13 May 2014,
Respondent No. 1 obtained the right to assign the development
rights relating to the project. Accordingly, Respondent No. 1
executed an MOU dated 12 September 2018 in favour of the
Applicant. According to the Applicant, the Respondents accepted
the Applicant as the Developer of the said project. The said MOU
was executed with the knowledge and consent of Respondent No.
2. Under this arrangement, the Applicant acquired the right to
construct and develop the buildings for Respondent No. 2, namely,
Shree Sadguru Co-operative Housing Society Ltd. In pursuance of
the aforesaid MOU and the development arrangement between the
parties, the Applicant states that it invested substantial amounts in
the project. Between 31 July 2018 and 22 October 2019, the
Applicant paid a total amount of Rs. 4,01,00,000/- (Rupees Four
Crores One Lakh only). Respondent No. 1 received these payments
towards the project, including payments towards extension order
charges and other expenses relating to the project. A major part of
these payments was made by NEFT and/or RTGS and, according to
the Applicant, the same is reflected in its bank statements and
other records. The Applicant states that the Respondents accepted
and used the amounts paid by it and continued to take benefit of




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the money invested by the Applicant. However, according to the
Applicant, the Respondents did not comply with the terms of the
MOU and did not provide the necessary details and accounts
regarding the amounts received and used by them. The Applicant
states that, even after accepting it as the Developer and receiving
and using the substantial amount invested by it in the project, the
Respondents failed to comply with the terms and conditions of the
MOU. Instead, the Respondents thereafter started inviting and/or
negotiating with other developers for development of the project
of Respondent No. 2. This was done without giving effect to the
MOU executed in favour of the Applicant and without first
resolving the Applicant's rights and claims under the said MOU.
According to the Applicant, this conduct of the Respondents has
caused serious prejudice and irreparable loss to it. The Applicant
had invested Rs. 4,01,00,000/- in the project relying upon the
representations, commitments and obligations of the Respondents.
The Applicant states that, after receiving and retaining its money
and enjoying the benefit of the same, the Respondents are now
seeking to deny its rights under the MOU and are attempting to
create or give rights to third parties in respect of the same project.

3.    The Applicant issued a legal notice dated 2 August 2022
calling upon the Respondents to comply with and honour the
terms and conditions of the MOU and to resolve the disputes and
differences between the parties. According to the Applicant, even
after receiving the notice, the Respondents failed to comply with
the MOU and did not show any readiness or willingness to perform
their obligations. Respondent No. 1, by its reply dated 22 August



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2022, denied the contents and allegations made in the legal notice.
According to the Applicant, the said reply did not show any
intention or willingness on the part of Respondent No. 1 to honour
and perform the terms of the MOU. The Applicant states that the
Respondents failed to perform their obligations under the
arrangement and disputes and differences arose between the
Applicant and the Respondents which have remained unresolved.
The Applicant submits that, since disputes and differences have
arisen between the parties under and in connection with the APMC
and the MOU, it has been required to approach this Court under
Section 11 of the Arbitration and Conciliation Act, 1996. The
Applicant seeks appointment of an independent and impartial Sole
Arbitrator to decide these disputes and differences. The Applicant
accordingly seeks appointment of an officer of this Court, or an
Advocate from the panel of Arbitrators of this Court, or any other
suitable person as the Sole Arbitrator to decide all disputes and
differences arising between the Applicant and the Respondents
under and/or in connection with the said APMC and MOU.

4.   Mr. Narvankar, learned Advocate for the Applicant, submits
that certain facts are not disputed. According to him, these facts
are clear from the record and are admitted on the face of the reply.
He submits that Respondent No. 2 Society had appointed
Respondent No. 1 as its Project Management Consultant and
Construction Contractor for development of the said property
under an Agreement for Project Management Consultancy ("the
said APMC") dated 13th May 2014. Clause No. 10 of the said
APMC contains an arbitration clause. Under that clause, disputes



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relating to the terms of the APMC were to be referred to the sole
arbitration of Mr. Shreekant Ghanekar of M/s. Ghanekar and Co.
under the Arbitration and Conciliation Act, 1996.

5.   Mr. Narvankar submits that Respondent No. 1 and the
Applicant thereafter executed a Memorandum of Understanding
dated 12th September 2018 ("the said MOU"). In the said MOU,
Respondent No. 1 expressly stated that it was the appointed PMC
and Construction Contractor of Respondent No. 2 Society under
the APMC dated 13th May 2014. Respondent No. 1 stated that it
was unable to arrange the funds required for obtaining extension
of the Collector's NOC and for taking the project forward.
Respondent No. 1 requested the Applicant to arrange the required
funds and to step into the shoes of Respondent No. 1 as PMC and
Construction Contractor for development of the same property.

6.   The Applicant submits that Clauses 3, 5, 6, 9 and 10 of the
said MOU show that the MOU was not a separate and independent
commercial agreement. According to the Applicant, it was a
continuation of the said APMC and was dependent upon it. Clause
No. 3 provides that the Applicant would pay the premium
demanded by the Collector for obtaining extension of the NOC
and, against such payment, Respondent No. 2 Society would allot
membership to the representatives of the Applicant. Clause No. 5
states that the Applicant was engaged in the development field and
was familiar with the entire procedure. It agreed to step into the
shoes of Respondent No. 1 and take the project forward by
appointing as PMC and Construction Contractor. The said clause
records the agreed consideration payable by the Applicant to



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Respondent No. 1 as Rs.13,72,60,000/- (Rupees Thirteen Lakhs,
Seventy-Two Lakhs and Sixty thousand only). Clause No. 6
provides that an “Agreement for Project Management Consultant
and Construction Contractor” would be executed between
Respondent No. 2 Society and the Applicant. According to the
Applicant, this meant that the same PMC contract which was
earlier held by Respondent No. 1 under the APMC was to be
transferred or novated in favour of the Applicant. Clause No. 9
states that the payment by the Applicant is “the essence of the
contract”. It provides that, in case of default, the MOU would stand
cancelled and the money would be refunded. According to the
Applicant, this shows that the MOU was connected with and
dependent upon the continuing rights of Respondent No. 1 under
the APMC.

7.   The Applicant relies upon Clause No. 10 of the MOU. Under
that clause, Respondent No. 1 was to continue to act as Mediator
between the Applicant and Respondent No. 2 and was to be
"responsible   to   act   as   an       Arbitrator   in   case    of    any
misunderstanding while implementing the project between Balaji
and the Society". According to the Applicant, this shows that the
parties themselves contemplated that disputes arising during
implementation of the same project would be resolved through a
dispute resolution arrangement connected with the arbitration
mechanism contained in the APMC.

8.   The Applicant submits that the APMC was the principal
agreement and the MOU was an agreement made inance of the
APMC. According to the Applicant, both agreements formed part of



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one composite transaction for development of the same property.
Both were entered into for the common purpose of completing the
redevelopment project of Respondent No. 2 Society. The Applicant
submits that the MOU cannot be properly understood or
performed separately from the APMC because its subject matter,
consideration and performance arose from and depended upon the
rights and obligations created under the APMC.

9.    In view of the above, the Applicant submits that the disputes
between the Applicant and Respondent No. 1 under the MOU are
closely and inseparably connected with the rights and obligations
under the APMC, which contains the arbitration clause in Clause
No. 10. The Applicant relies upon the following circumstances.
First, the subject matter of both agreements is the same, namely,
development of the property belonging to Respondent No. 2
Society. Second, Respondent No. 1 executed the MOU only because
of the rights which it had received as PMC and Construction
Contractor under the APMC. Third, the MOU repeatedly refers to
the APMC and, according to the Applicant, incorporates its terms
and remains subject to the continuing existence of the APMC and
the rights of Respondent No. 1 under it. Fourth, the consideration
and performance under the MOU, including payment of the
premium for extension of the NOC and appointment as PMC and
Construction   Contractor,   are       directly   connected   with      the
obligations which Respondent No. 1 had under the APMC.

10.   The Applicant submits that the MOU dated 12th September
2018, in substance, amounted to a novation and assignment of the
rights and obligations of Respondent No. 1 under the APMC in



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favour of the Applicant. According to the Applicant, Clause No. 10
of the APMC is the arbitration agreement governing this entire
composite transaction and governs the disputes between the
Applicant and Respondent No. 1. The Applicant submits that any
other interpretation, as suggested by Respondent No. 1, would
result in treating one development project as two separate and
unrelated agreements. According to the Applicant, such an
interpretation would mean that one agreement is arbitrable while
the other is not, although both relate to the same project and arise
from the same commercial arrangement.

11.   The Applicant denies the statement made in paragraph No. 5
of the reply that there was no invocation of arbitration. The
Applicant submits that its Advocate's legal notice dated 2nd August
2022, at Exhibit-D to the Arbitration Application, called upon
Respondent No. 1 to furnish accounts, comply with the terms of
the MOU and refund the amounts paid by the Applicant. According
to the Applicant, the MOU is inseparably connected with the APMC
for the reasons stated. After Respondent No. 1 gave its reply dated
22nd August 2022, at Exhibit-E to the Arbitration Application,
which according to the Applicant was evasive, the Applicant
approached this Court under Section 11 of the Arbitration and
Conciliation Act, 1996 seeking appointment of an Arbitral
Tribunal.

12.   Mr. Pawar, learned Advocate for Respondent No.1, submits at
the outset that the present Arbitration Application filed by the
Applicant is illegal and is not maintainable in law. According to
him, there is no legal or valid arbitration agreement between the



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Applicant and Respondent No.1. He submits that the Applicant is
trying to rely upon the Agreement for Project Management
Consultancy dated 13 May 2014 and is thereby seeking to mislead
this Court. The said agreement was entered into between
Respondent No.2 Society and Respondent No.1 independently. The
Applicant is admittedly not a party to that Agreement for Project
Management Consultancy.

13.   Mr. Pawar submits that the MOU dated 12 September 2018
executed between the Applicant and Respondent No.1 does not
contain any arbitration agreement. According to him, the said
MOU does not provide that disputes between the Applicant and
Respondent No.1 are to be referred to arbitration. There is no
arbitration clause in the MOU as required for referring a dispute to
arbitration and for seeking appointment of an Arbitral Tribunal
under Section 11 of the Arbitration and Conciliation Act, 1996
("said Act"). He submits that, since there is no arbitration
agreement between the Applicant and the Respondents, the
Applicant cannot seek adjudication of its alleged claims and
disputes under the said Act. On this ground alone, according to
Respondent No.1, the present Arbitration Application is bad in law
and deserves to be dismissed or rejected by this Court.

14.   Mr. Pawar submits that even the alleged demand notice
dated 2 August 2022 issued by the Advocate for the Applicant to
the Respondents does not change the position. The said notice
refers to the MOU dated 12 September 2018 and raises the alleged
claims of the Applicant. However, according to Respondent No.1,
the MOU is not an arbitration agreement between the parties. He



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submits that even in the notice dated 2 August 2022, the Applicant
did not refer to arbitration or invoke arbitration proceedings.
Therefore, according to Respondent No.1, the alleged claims of the
Applicant cannot be referred to arbitration. The present Arbitration
Application deserves to be rejected, with compensatory costs.

15.   Mr. Pawar submits that the reliefs sought by the Applicant in
the present Arbitration Application, particularly the relief seeking a
declaration regarding Clause 10 of the Agreement for Project
Management Consultancy dated 13 May 2014, are illegal and
misconceived. According to him, while exercising jurisdiction
under Section 11 of the said Act, this Court cannot grant any such
declaration regarding the interpretation or effect of Clause 10 of
an agreement to which the Applicant is admittedly not a party.

16.   Mr. Pawar submits that the Applicant is wrongly trying to
combine two separate agreements, namely, the Agreement for
Project Management Consultancy dated 13 May 2014 and the
MOU dated 12 September 2018. According to Respondent No.1,
both are separate and independent contracts between the
respective parties. They cannot be combined or treated as one
agreement for the purpose of referring the disputes between the
Applicant and Respondent No.1 to arbitration.

      REASONS AND FINDINGS

17.   I have considered the submissions made by the learned
Advocates appearing for the Applicant and Respondent No.1. I
have considered the judgments relied upon by both sides. It is not
dispute that there are disputes between the Applicant and



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Respondent No.1. The question is whether there is at least a prima
facie arbitration agreement between the Applicant and Respondent
No.1 which can bind both of them and on that basis an Arbitrator
can be appointed under Section 11 of the Arbitration and
Conciliation Act, 1996.

18.   Before considering what is submitted by both sides, it is
necessary to see what is written in the two documents. The
Agreement for Project Management Consultancy, which is referred
to as the APMC, was entered into between Shree Sadguru Co-
operative Housing Society Ltd. and Supreme Developers. Under
this Agreement, the Society appointed Supreme Developers as
Project Management Consultant and Construction Contractor for
development of the Society's property. The APMC contains various
works to be done by Supreme Developers regarding development
of the property, obtaining permissions, construction and other
related matters. Thus, the arrangement under the APMC was
between the Society and Supreme Developers. The Applicant,
Balaji Constructions, was not a party to this Agreement. This
position is not disputed.

19.   The APMC contains an arbitration provision. Clause 10
provides for disputes touching the terms and conditions of the
Agreement to be referred to the sole arbitration of Mr. Shreekant
Ghanekar of M/s. Ghanekar and Co. Therefore, there is an
arbitration agreement in the APMC. But the existence of this clause
alone does not finish the issue before the Court. The difficulty is
that the Applicant did not sign the APMC and was not a party to
that Agreement.



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20.   The other document is the MOU dated 12 September 2018.
This MOU was executed between Supreme Developers and Balaji
Constructions. The Applicant relies upon this MOU and says that
under the MOU it stepped into the position of Supreme Developers
and could rely upon the arbitration clause contained in the APMC.
The MOU refers to the earlier arrangement concerning the same
project. It records that Supreme Developers had been appointed as
Project Management Consultant and Construction Contractor for
development of the Society's plot. It records that Supreme
Developers was not able to arrange the amount required for
getting extension of the Collector's NOC. Thereafter, the MOU
records that Balaji was ready to arrange the required funds and
take the project forward by stepping into the position of Supreme
Developers. Therefore, the MOU is connected with the earlier
project. It was not some separate document having no relation
with the project. It came in the background of the work which
Supreme Developers was doing. But the question remains whether
this connection is enough to make Balaji a party to the arbitration
agreement contained in the APMC.

21.   The Applicant has relied upon Clauses 3, 5, 6, 9 and 10 of
the MOU. There is some substance in saying that the MOU was
connected with the APMC. Clause 3 contemplated payment by
Balaji for getting extension of the Collector's NOC. Clause 5 dealt
with Balaji taking the project forward and stated the consideration
payable by Balaji to Supreme Developers as Rs.13,72,60,000/-.
The MOU records that Balaji was willing to “step into the shoes” of
Supreme Developers and take the project forward. Therefore, both



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documents are concerning the same development project and the
MOU was made with reference to the earlier arrangement.
However, Clause 6 of the MOU is required to be seen. It
contemplated execution of an “Agreement for Project Management
consultant and Construction Contractor” between the Society and
M/s. Balaji. This shows that the proposed arrangement between
the Society and Balaji was still to be separately entered into.
Therefore, only because Balaji was to take the project forward, it
cannot be said that Balaji had completely replaced Supreme
Developers under the original APMC arrangement. The MOU
shows that some arrangement between the Society and Balaji was
still contemplated.

22.   This difference becomes important. Two documents can
relate to the same project. One document can be made because of
an earlier agreement. One person can agree to take over the work
which another person was earlier doing. But from this alone, the
arbitration clause in the earlier agreement does not go into the
later agreement.

23.   In the present case, the MOU does not say that the
arbitration clause in the APMC is incorporated into the MOU. It
does not say that Balaji accepts Clause 10 of the APMC and agrees
to be bound by it. It does not say that disputes between Supreme
Developers and Balaji under the MOU will be referred to the
Arbitrator named in the APMC. It does not say that the APMC has
been novated in favour of Balaji with the consent of the Society.
Rather, Clause 6 shows that another agreement between the
Society and Balaji was contemplated. Therefore, merely from the



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wording of the MOU, it is difficult to hold that Balaji had accepted
the arbitration clause contained in the APMC.

24.   In this connection, the judgment relied upon by Respondent
No.1 in S.N. Prasad v. Monnet Finance Ltd., (2011) 1 SCC 320, is
relevant. The Supreme Court has held that arbitration can be
referred only when there is an arbitration agreement between the
parties to the dispute. The Supreme Court stated in paragraph 8:

      “Thus there can be reference to arbitration only if there is an
      arbitration agreement between the parties.”
25.   This principle applies to the present case. The APMC
contains an arbitration agreement between the parties who
entered into that Agreement. The Applicant was not one of those
parties. The fact that the Applicant later entered into a connected
MOU with Supreme Developers cannot, by, make the Applicant a
party to the arbitration agreement in the APMC. The Applicant
submits that the matter should not be seen only from the
signatures appearing on the APMC. According to the Applicant, the
entire commercial transaction, the connection between the two
documents and the conduct of the parties should be seen. For this
purpose, reliance has been placed upon Cox & Kings Ltd. v. SAP
India (P) Ltd., (2024) 4 SCC 1 and ASF Buildtech (P) Ltd. v.
Shapoorji Pallonji & Co. (P) Ltd., (2025) 9 SCC 76.

26.   There is some substance in the general principle relied upon
by the Applicant. Cox & Kings holds that even a person who has
not signed an agreement may be bound by its arbitration
agreement if his participation and conduct in the transaction,




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along with the surrounding circumstances, show an intention to be
bound. Therefore, only because a person has not signed the
agreement, the matter cannot always end there. The conduct and
circumstances can be looked into.

27.   ASF Buildtech holds that the question whether an arbitration
agreement exists and the question whether a non-signatory is
bound by an existing arbitration agreement are separate questions.
The wider arrangement, conduct of the parties and their intention
can be relevant.

28.   But these judgments do not mean that every person who is
connected with a commercial transaction becomes a party to the
arbitration agreement. There has to be consent. Such consent can
be directly shown or can be understood from the conduct and
surrounding circumstances. Therefore, there should be some
material from which it can be prima facie seen that the Applicant
agreed to be bound by the arbitration clause in the APMC.

29.   On looking at the documents relied upon by the Applicant, I
do not find such prima facie consent. The MOU shows that Balaji
wanted to take the project forward. It shows that Balaji was ready
to undertake the work which was earlier being done by Supreme
Developers. Therefore, the participation of the Applicant in the
project and its commercial arrangement with Supreme Developers
are shown. But the MOU does not state that Balaji accepted the
arbitration clause contained in the APMC. It does not say that
Balaji agreed that its disputes with Supreme Developers under the
MOU would be decided under Clause 10 of the APMC. The MOU,




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when read as a whole, shows something. Clause 6 contemplated a
future agreement between the Society and Balaji. That agreement
was to concern the appointment of Balaji as Project Management
Consultant and Construction Contractor. Therefore, one more step
was still contemplated for completing the proposed arrangement.
Because of this, it becomes difficult to say that the Applicant had
become a party to the APMC and its arbitration clause.

30.   The Applicant has relied upon Clause 10 of the MOU. The
said clause states that Supreme Developers would continue as
Mediator between Balaji and the Society and would be
“responsible   to   act   as   an        Arbitrator   in   case    of    any
misunderstanding while implementing the project between Balaji
and the Society”. This provision has to be looked at in the manner
in which it is written. It is different from the arbitration clause
contained in the APMC. Clause 10 of the APMC provides for
arbitration of disputes touching the terms and conditions of that
Agreement. Clause 10 of the MOU speaks about Supreme
Developers continuing as mediator and, in a particular situation,
acting as an arbitrator in case of any misunderstanding between
Balaji and the Society. It does not say that disputes between Balaji
and Supreme Developers under the MOU are to be referred to
arbitration. The present dispute raised by the Applicant against
Respondent No.1 is based on the rights and obligations which the
Applicant claims under the MOU. Therefore, Clause 10 of the MOU
cannot be understood as an arbitration agreement between Balaji
and Supreme Developers for deciding such disputes.




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31.   There is one more difficulty in the Applicant's case. The
Applicant wants to rely upon the APMC though it was not a
signatory to that Agreement. The Applicant submits that the MOU
amounted to “novation-cum-assignment” of the rights and
obligations of Supreme Developers under the APMC. This cannot
be accepted only because Balaji agreed to take over the
development work. If Supreme Developers was to be replaced by
Balaji under the existing arrangement with the Society, such
intention should appear from the documents and conduct of the
parties in a reasonably clear manner. The Society was a party to
the APMC. It was not a party to the MOU dated 12 September
2018 between Supreme Developers and Balaji. More importantly,
the MOU contemplated another agreement between the Society
and Balaji. Therefore, from the material presently before the
Court, it cannot be held that the APMC stood novated or assigned
in favour of Balaji in such a manner that Balaji became a party to
the arbitration agreement contained in Clause 10 of the APMC.

32.   The judgment in ASF Buildtech explains the difference
between existence of an arbitration agreement and the question
whether a non-signatory is bound by it. Paragraph 101 states that
once existence of an arbitration agreement is established, whether
a non-signatory is bound by that agreement is a separate question.
Paragraph 102 holds that the two questions are connected but
different. The present case is not merely a case where there is a
prima facie arbitration agreement between Balaji and Supreme
Developers and only the question of binding effect remains. The
documents themselves do not show such prima facie agreement



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between these two parties. The arbitration clause in the APMC is
between the parties to that Agreement. The MOU between Balaji
and Supreme Developers does not incorporate that arbitration
clause as a term governing their disputes. Therefore, the Court
cannot first presume that there is an arbitration agreement
between the Applicant and Respondent No.1 and then leave the
question of its binding effect for later consideration. The basic
foundation for appointment of an Arbitrator between these two
parties is not shown from the material presently available.

33.   The Applicant has relied upon the principle in Cox & Kings
that at the stage of reference the Court has to see only the prima
facie existence of an arbitration agreement. This principle is
correct. At the Section 11 stage, the Court is not required to
conduct a full trial regarding every dispute between the parties.
But even for a prima facie finding, there should be some material
showing an arbitration agreement between the parties. In the
present case, the documents show a commercial relationship
between Supreme Developers and Balaji. They show that the MOU
was connected with the same redevelopment project for which
Supreme Developers had earlier been appointed. However, the
commercial connection and consent for arbitration are different
things. The connection between the two documents is there. But
the necessary consent of Balaji and Supreme Developers to have
their disputes under the MOU decided under the arbitration clause
in the APMC is not shown.

34.   The decision in Nagreeka Indcon Products v. Cargocare
Logistics, (2026) 267 Comp Cas 39, is relevant while considering



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whether the MOU contains an arbitration agreement. The Supreme
Court, while referring to K.K. Modi and Jagdish Chander, has held
that the words used in an agreement should show a clear intention
and obligation to go to arbitration. If the words only keep open
some possibility of arbitration and consent is required, then such
wording by does not become a binding arbitration agreement. The
same appears to apply here. The MOU does not state that disputes
between Balaji and Supreme Developers arising under the MOU
shall be referred to an Arbitral Tribunal. Clause 10 refers to
Supreme Developers continuing as mediator and, in a particular
situation, acting as an arbitrator in case of a misunderstanding
between Balaji and the Society. Such wording cannot be treated as
a arbitration agreement between Balaji and Supreme Developers
for all disputes arising from the MOU.

35.   The Applicant has submitted that the legal notice dated 2
August 2022 amounted to invocation of arbitration and that
merely because particular words of arbitration were not used, the
Application should not fail. Respondent No.1, on the other hand,
submits that the notice did not invoke arbitration. It is not
necessary to finally decide this question for deciding the present
Application. Even if the notice is treated as an invocation of
arbitration, the notice cannot create an arbitration agreement
when such agreement is otherwise not found between the parties.
The arbitration agreement has to come from the agreement or
other material satisfying Section 7 of the Act. A notice sent by one
party cannot create the consent of the other party to arbitration.




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36.   The principle stated in Bhagheeratha Engg. Ltd. is relevant.
Section 21 is concerned with commencement of arbitral
proceedings and limitation. It is procedural in nature. Therefore,
even if there is some issue regarding the notice under Section 21,
that cannot provide the basic arbitration agreement which is
otherwise absent between the Applicant and Respondent No.1.

37.   The Applicant has relied upon the substantial amounts
allegedly paid by it in connection with the project and the receipt
of those amounts by Respondent No.1. The MOU contains a
detailed payment arrangement. Clause 5 records the consideration
payable by Balaji to Supreme Developers as Rs.13,72,60,000/-.
Clause 9 states that payment is the “essence of Contract” and
provides consequences if the required payments are not made.
These provisions show that there was a substantial commercial
arrangement between Balaji and Supreme Developers. The MOU
contemplated handing over of documents by Supreme Developers
to Balaji so that approvals could be obtained, and the project could
proceed. Therefore, the Applicant has shown that the MOU was an
important   document    concerning    the   project   and   involved
substantial financial and other obligations. But these facts, by
themselves, do not create an arbitration agreement. The Applicant
may have claims for refund, recovery of money, damages, accounts
or other reliefs. Whether such claims are correct or not is not the
issue which is required to be decided in the present Section 11
Application. The claim and the arbitration agreement are two
different matters.




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38.   The Applicant has submitted that it should be treated as a
party to the APMC because it had stepped into the shoes of
Supreme Developers. The expression “step into the shoes” used in
the MOU indicates that Balaji was to take over the work of
Supreme Developers and take the project forward. But these words
by themselves do not establish that Balaji legally became a
substituted party under the APMC. The MOU shows that the
Society had earlier appointed Supreme Developers and that a
separate    agreement    between       the   Society   and     Balaji     was
contemplated. This becomes important. If Balaji had become a
substituted party in place of Supreme Developers under the APMC,
including its arbitration clause, then the agreement contemplated
between the Society and Balaji would have to be held. Therefore,
the words used in the MOU cannot be extended to the extent of
holding that there was a completed novation of the APMC in
favour of Balaji.

39.   The Applicant has submitted that the APMC and the MOU
should not be treated as two completely separate documents
because both concern the same redevelopment project. This
submission cannot be rejected so far as the commercial connection
between the documents is concerned. Both documents are
connected with the same project. But commercial connection alone
cannot     create   an   arbitration    agreement.     Where       different
agreements are parts of one transaction, they may, in an
appropriate case, be considered together for understanding the
intention of the parties. Even then, the Court has to find that the
parties intended the particular disputes to be referred to



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arbitration. In the present case, the APMC created rights between
the Society and Supreme Developers and contained the arbitration
clause. The MOU was executed between Supreme Developers and
Balaji. Though the MOU is connected with the earlier project, it
does not incorporate the arbitration clause of the APMC as
governing disputes between Balaji and Supreme Developers. It
does not state that disputes between them under the MOU will be
decided by the Arbitrator named in the APMC.

40.   The principle stated by the Supreme Court in S.N. Prasad
becomes important. An arbitration agreement between certain
parties cannot be treated as an arbitration agreement against
another person who was not a party to it. The judgments
concerning non-signatories permit the Court to look at conduct
and surrounding circumstances where consent may be gathered
from such material. But the requirement of consent does not
disappear. In the present case, the surrounding circumstances
show that Balaji participated in the project and entered into an
important commercial arrangement with Supreme Developers. But
they do not show, even prima facie, that Balaji agreed with
Supreme Developers that disputes under the MOU would be
referred to the arbitration clause contained in the APMC.

41.   I find substance in the objection of Respondent No.1
regarding the prayer seeking declaration concerning Clause 10 of
the APMC. The Applicant was not a party to the APMC. Therefore,
the arbitration clause in that Agreement cannot become binding
upon the Applicant merely by interpreting that clause in the
present Section 11 Application.



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42.   The Court is conscious that the inquiry under Section 11 is
limited. I am not deciding finally all questions relating to the
APMC, the MOU, novation, assignment, payments or the other
claims of the Applicant. Those questions may arise before the
competent forum in appropriate proceedings. But for deciding the
present Application, the Court has to see whether there is a prima
facie arbitration agreement between the Applicant and Respondent
No.1. On the material before the Court, such agreement is not
established.

43.   Therefore, on the material before the Court, the basic
requirement for exercising jurisdiction under Section 11 of the
Arbitration and Conciliation Act, 1996 is not satisfied. There is no
prima facie arbitration agreement between the Applicant and
Respondent No.1 in respect of the disputes raised in the present
Application. An Arbitrator cannot be appointed on the basis of the
arbitration clause contained in the APMC.

44.   The Arbitration Application is accordingly rejected.

45.   The rejection of this Application will not prevent the
Applicant from pursuing such remedies as may otherwise be
available to it in law before the competent forum. No final opinion
is expressed on the merits of the Applicant's underlying monetary
or claims.


                                            (AMIT BORKAR, J.)




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