Earlier Arbitration Clause Binds Developer, Society Members As Redevelopment Agreements Adopted All Terms: Supreme Court

The Supreme Court has recently referred a redevelopment dispute between a developer and five members of a co-operative housing society to arbitration, holding that an arbitration clause in an earlier development agreement became binding through later accommodation agreements that adopted all its terms.

"This was, thus, not a case of mere reference to an earlier agreement but a case where the parties to the later contract clearly intended to import the Development Agreement, body and soul, into the later agreements," the Court held.

A Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran set aside a Bombay High Court order that had refused to appoint an arbitrator, holding that the later agreements clearly incorporated the arbitration clause contained in the original development agreement.

The ruling came in appeals filed by Hirani Developers against a common order dated June 26, 2025, by the Bombay High Court, which had dismissed its applications seeking the appointment of an arbitrator in disputes with five members of Nehru Nagar Samruddhi Co-operative Housing Society.

The dispute arose from a redevelopment project undertaken by Hirani Developers for the society, whose building was in a dilapidated condition. The developer and the society entered into a Development Agreement on December 20, 2011, which was registered on July 4, 2012.

The agreement contained an arbitration clause providing for resolution of disputes through arbitration under the Arbitration and Conciliation Act, 1996.

Years later, the developer entered into separate Permanent Alternate Accommodation Agreements with the society and individual members, including the five respondents before the Supreme Court, on September 2, 2023 and January 12, 2024.

Clause 14 of these agreements stated that all terms and conditions of the earlier Development Agreement “shall be construed to form a part” of the later agreements and that all clauses of the earlier agreement would be binding on the parties.

The dispute escalated after the members filed complaints under the Consumer Protection Act, 2019.

Hirani Developers then issued individual legal notices under Section 21 of the Arbitration and Conciliation Act invoking the arbitration clause and calling upon the members to nominate or choose one of the arbitrators named in the notices.

The members refused, stating that they had already approached the Consumer Disputes Redressal Commission at Bandra.

Hirani Developers then approached the Bombay High Court seeking appointment of an arbitrator.

The High Court rejected the plea, holding that the arbitration clause existed only in the Development Agreement between the developer and the society and not in the later agreements executed with individual members.

It held that a mere reference to an earlier agreement was insufficient to incorporate an arbitration clause into a later contract unless the later agreement itself demonstrated a clear commitment to arbitrate.

Before the Supreme Court, Hirani Developers argued that the later agreements expressly adopted all terms of the earlier Development Agreement, including the arbitration clause.

The Supreme Court agreed.

Referring to its earlier decisions in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited and NBCC (India) Limited v. Zillion Infraprojects Private Limited, the Court reiterated the distinction between a mere reference to an earlier document and incorporation of that document in its entirety.

“There could be no clearer indication of the intention of the parties to incorporate and assimilate the Development Agreement dated 04.07.2012 in its entirety into the later Permanent Alternate Accommodation Agreements,” the Bench observed.

It said Clause 14 not only stated that all terms and conditions of the earlier agreement would form part of the later agreements, but also expressly provided that all clauses of the earlier agreement would bind the parties.

“Therefore, there can be no doubt as to the incorporation of Clause 36 of the Development Agreement, i.e., the arbitration clause, into the Permanent Alternate Accommodation Agreements,” the Court said.

Holding that the Bombay High Court had erred in its understanding of the law, the Supreme Court appointed Advocate Vishal Kanade as sole arbitrator to adjudicate the disputes between Hirani Developers and the respondent members.

The arbitrator has been directed to furnish the disclosure required under Section 12 of the Act within 15 days.

For Appellant (Hirani Developers): Advocate Suchitra Atul Chitale.

For Respondents (Nehru Nagar Samruddhi CHS Ltd. and members): Advocate Surbhi Kapoor for Respondent Nos. 2, 4, 5 and 6.