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SUPREME COURT OF INDIA
SANJAY KUMAR, K. VINOD CHANDRAN, J.
Hirani Developers – Appellant
versus
Nehru Nagar Samruddhi CHS Ltd. and another Etc. – Respondents
Civil Appeal Nos of 2026 (@ SLP (C) Nos. 38407-38411 of 2025)
Decided On : 13-05-2026
Arbitration and Conciliation Act, 1996 – Sections 11 and 7(5) – Appointment of Arbitrator – Dispute arising from Permanent Alternate Accommodation Agreements – By impugned common order, High Court negated plea of appellant on the ground that arbitration clause was contained in Development Agreement that appellant had with society but there was no such arbitration clause in Permanent Alternate Accommodation Agreements that appellant had executed with each of respondent members – Arbitration clause in another document would get incorporated into later contract by reference, if contract contains a clear reference to document containing arbitration clause and such reference to other document clearly indicates intention to incorporate arbitration clause into contract – This was a fit case for High Court to have accepted plea of appellant that there was arbitration agreement between parties by incorporation – Advocate of Bombay High Court, appointed as Sole Arbitrator to resolve disputes and differences between appellant and respondent members. (Paras 7, 10, 12 and 13)
Facts of the case:
By common order dated 26.06.2025, High Court of Judicature at Bombay held that there was no such arbitration agreement between parties and dismissed five applications filed under Section 11 of Arbitration and Conciliation Act, 1996, appellant, seeking appointment of Arbitrator.
Findings of Court:
High Court was in error in its understanding of legal position obtaining under Section 7(5) of Arbitration Act. This was a fit case for High Court to have accepted plea of appellant that there was an arbitration agreement between parties by incorporation.
Result : Appeals allowed.
Key Points: - The appellant, Hirani Developers, entered into a Development Agreement with the respondent society on 20.12.2011, which included an arbitration clause (Clause 36) (!) . - The appellant subsequently entered into Permanent Alternate Accommodation Agreements with individual respondent members, which included a clause (Clause 14) stating that all terms and conditions of the Development Agreement were to be construed as part of the new agreements and binding on the parties (!) . - The High Court had previously dismissed the appellant's Section 11 applications, ruling that there was no arbitration agreement because the individual members were not privy to the original Development Agreement (!) . - The Supreme Court held that Clause 14 of the Permanent Alternate Accommodation Agreements demonstrated a clear intention to incorporate the Development Agreement in its entirety, including the arbitration clause (!) (!) . - The Supreme Court clarified that under Section 7(5) of the Arbitration Act, an arbitration clause in another document is incorporated into a later contract if the reference indicates an intention to make that clause part of the contract (!) (!) . - The Supreme Court set aside the High Court's order and allowed the appeals (!) . - Mr. Vishal Kanade, Advocate, Bombay High Court, was appointed as the Sole Arbitrator to resolve the disputes between the appellant and the respondent members (!) .
JUDGMENT :
SANJAY KUMAR, J
1. Leave granted.
2. Existence of an arbitration agreement is in dispute.
3. By common order dated 26.06.2025, the High Court of Judicature at Bombay held that there was no such arbitration agreement between the parties and dismissed the five applications filed under Section 11 of the Arbitration and Conciliation Act, 1996 1 [For short, ‘the Arbitration Act’], by the appellant, Hirani Developers, seeking appointment of an arbitrator.
4. Hirani Developers, the appellant, a proprietary concern involved in real estate business, entered into a Development Agreement on 20.12.2011, registered as Document No. BDR13-05469-2012 on 04.07.2012, with Nehru Nagar Samruddhi Co-operative Housing Society Limited, respondent No. 1, for redevelopment of its project which was in a dilapidated condition. The Development Agreement provided for a dispute resolution mechanism in Clause 36, which reads as under: -
5. Long thereafter, the appellant entered into separate Permanent Alternate Accommodation Agreements with the society and its members. We are concerned with five such agreements that the appellant entered into with the society and its members, viz., Narayan Haldankar, Malan Valkunde, Ravindra Walanju, Pradeep Govekar and Suchita Pawar, the respondents herein. These agreements were executed on 02.09.2023 and 12.01.2024. All the agreements were on identical lines and each of them contained the very same Clause 14, which reads as under: -
6. It appears that the respondent members filed complaints against the appellant under the Consumer Protection Act, 2019. At that stage, the appellant got issued individual legal notices dated 28.02.2025 to the five respondent members under Section 21 of the Arbitration Act, invoking Clause 36 of the Development Agreement and calling upon them to nominate/choose one of the arbitrators named therein. However, by reply dated 07.03.2025, the respondent members stated that they had approached the Consumer Disputes Redressal Commission at Bandra and refused to proceed with the proposed arbitration. Thereupon, the appellant filed the subject applications before the High Court under Section 11 of the Arbitration Act seeking appointment of an arbitrator.
7. By the impugned common order, the High Court negated the plea of the appellant on the ground that the arbitration clause was contained in the Development Agreement that the appellant had with the society but there was no such arbitration clause in the Permanent Alternate Accommodation Agreements that the appellant had executed with each of the respondent members. The High Court opined that, in terms of Section 7(5) of the Arbitration Act, mere reference to an earlier document in the later one would not be adequate to incorporate the arbitration clause from the former into the latter, as it would be necessary to demonstrate a firm commitment to go in for arbitration in the later document itself. According to the High Court, the members of the society were not privy to the arbitration clause in the Development Agreement in their individual capacity and, by a mere generic reference, the arbitration clause which was binding upon the appellant and the society could not bind the members of the society individually. It was concluded that, for arbitration to be firmly discerned, there needs to be a specific arbitration clause binding the members also and that being absent, the High Court held that the appellant would have to take recourse to appropriate proceedings, as advised,
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