Supreme Court holds arbitration clause in redevelopment agreement stood incorporated into permanent alternate accommodation agreements through express contractual language.
The Supreme Court has held that an arbitration clause in a redevelopment agreement stood validly incorporated into later Permanent Alternate Accommodation Agreements signed with society members.
The Court noted that the later agreements expressly adopted all terms and conditions of the earlier redevelopment agreement.
A Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran delivered the judgment on May 13, 2026, in Hirani Developers v. Nehru Nagar Samruddhi CHS Ltd. and Another.
The Court set aside a Bombay High Court order that had refused to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
Dispute Arose From Redevelopment Project
Hirani Developers entered into a Development Agreement dated December 20, 2011 with Nehru Nagar Samruddhi Co-operative Housing Society Limited.
The agreement concerned redevelopment of a dilapidated housing project.
Clause 36 of the Development Agreement provided for arbitration.
It stated that disputes or differences between the parties would go to arbitration under the Arbitration and Conciliation Act, 1996.
Later, the developer signed separate Permanent Alternate Accommodation Agreements with individual society members.
These members included Narayan Haldankar, Malan Valkunde, Ravindra Walanju, Pradeep Govekar and Suchita Pawar.
The parties executed these agreements in September 2023 and January 2024.
Clause 14 of these agreements stated that all terms and conditions of the Development Agreement dated July 4, 2012 would form part of the later agreements.
It also stated that all clauses of the Development Agreement would bind the parties.
Members Approached Consumer Forum
Disputes later arose between the developer and the society members.
The respondent members initiated proceedings under the Consumer Protection Act, 2019 before the Consumer Disputes Redressal Commission at Bandra.
The developer then issued notices under Section 21 of the Arbitration Act.
Through these notices, the developer invoked Clause 36 of the Development Agreement.
It also called upon the respondents to nominate arbitrators.
The respondents refused to participate in arbitration.
This led Hirani Developers to file applications under Section 11 of the Arbitration Act before the Bombay High Court.
Bombay High Court Rejected The Arbitration Plea
The Bombay High Court dismissed five Section 11 applications by a common order dated June 26, 2025.
It held that no arbitration agreement existed between the developer and the individual society members.
According to the High Court, the Development Agreement contained an arbitration clause.
However, the Permanent Alternate Accommodation Agreements did not contain a separate arbitration clause.
The High Court held that a mere reference to an earlier agreement could not incorporate the arbitration clause.
It relied on Section 7(5) of the Arbitration and Conciliation Act, 1996 for this conclusion.
The High Court also held that the society members were not individually privy to the arbitration clause in the Development Agreement.
On this basis, it rejected the developer’s request for appointment of an arbitrator.
Supreme Court Explains Section 7(5) Of Arbitration Act
The Supreme Court disagreed with the Bombay High Court’s interpretation.
It observed that Section 7(5) allows incorporation of an arbitration clause from another document.
However, the reference must show that the parties intended to make that arbitration clause part of the contract.
The Bench relied on M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited.
In that case, the Supreme Court had explained the difference between a mere reference and incorporation by reference.
The Court also referred to NBCC (India) Limited v. Zillion Infraprojects Private Limited.
That decision held that parties can incorporate an arbitration clause from another document when the later contract clearly shows such an intention.
Later Agreements Adopted Development Agreement In Full: Supreme Court
Applying these principles, the Supreme Court examined Clause 14 of the Permanent Alternate Accommodation Agreements.
The Bench held that Clause 14 clearly showed the parties’ intention to adopt the Development Agreement in full.
It noted that the later agreements did not make a casual reference to the earlier agreement.
Instead, they stated that all terms and conditions of the Development Agreement would form part of the later agreements.
They also stated that all clauses of the Development Agreement would bind the parties.
The Court therefore held that Clause 36 of the Development Agreement stood incorporated into the Permanent Alternate Accommodation Agreements.
Supreme Court Appoints Sole Arbitrator
The Supreme Court held that the Bombay High Court had erred in its understanding of Section 7(5) of the Arbitration Act.
It set aside the High Court’s common order dated June 26, 2025.
The appeals filed by Hirani Developers were allowed.
The Court appointed Vishal Kanade as the Sole Arbitrator.
He will adjudicate the disputes between Hirani Developers and the respondent society members.
The Court directed the arbitrator to make the disclosure required under Section 12 of the Arbitration Act within fifteen days of receiving the order.
It also directed that the arbitrator would receive fees in terms of the Fourth Schedule to the Act.
