The Bombay High Court has held that a dissenting member of a cooperative housing society who has not signed the redevelopment agreement cannot be compelled to arbitrate disputes with the developer under the arbitration clause contained in that agreement.
The case arose from a Section 11 petition filed by developer- Space Master Realtors seeking appointment of an arbitrator against a member of Mulund Sandhyaprakash Cooperative Housing Society who had opposed the redevelopment project and had not executed the development agreement (DA). The developer alleged that the member’s refusal to vacate his flat caused project delays and sought recovery of over ₹13 crore in damages by invoking the arbitration clause in the development agreement.
Justice Sandeep V. Marne noted that while the development agreement contained an arbitration clause, the respondent member had consciously chosen not to sign the agreement. Although the member later executed a Permanent Alternate Accommodation Agreement (PAAA) with the developer, the disputes raised by the developer related to obligations under the development agreement and not the PAAA.
Rejecting the developer’s contention that arbitration could proceed based on the PAAA or by treating the member as a “veritable party”, the Court held that the disputes sought to be raised were traceable solely to the development agreement.
“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.”
Addressing the argument that the PAAA and development agreement formed part of a composite transaction, the Court held that no arbitrable dispute had arisen under the PAAA, and therefore its arbitration clause could not be relied upon to refer the dispute to arbitration.
“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.”
Accordingly, the High Court dismissed the Section 11 application, holding that a dissenting, non-signatory society member cannot be compelled to arbitrate disputes arising from a development agreement executed between the developer and the society.
Cases Referred
Ketan Champaklal Divecha v. DGS Township Pvt. Ltd. Arbitration Petition (L) No.20483 of 2023
Shankar Vithoba Desai v. Gauri Associates, Commercial Arbitration Application (L) No.21070 of 2023
Daman Singh v. State of Punjab, (1985) 2 SCC 670
Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1
Ajay Madhusudan Patel v. Jyotrindra S. Patel, (2025) 2 SCC 147
ASF Build-Tech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd., (2025) 9 SCC 76
Appearances
Mr. Mayur Khandeparkar with Mr. Vikramjit Garewal, Mr. Vishwanath Patil and Ms. Nidhi Chauhan i/b Mr. Akshay Naidu for the Applicant. Mr. Karl Tamboly with Mr. Ryan D’souza, Mr. Meezan Patel and Ms. Harshada Kamble for Respondent No.2. Mr. Dhruvin J. Modi for Respondent No.1-Society.
