2026 Supreme(Bom) 275

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Sandeep V. Marne, J.
 
M/s. Space Master Realtors - Applicant
Versus
Mulund Sandhyaprakash CHS Ltd. & Anr. - Respondents
Arbitration Application (L) No.35545 of 2025
Decided On : 06-03-2026

Dissenting non-signatory member of cooperative society not bound by arbitration clause in development agreement with developer; lacks consent as veritable party despite beneficiary status or executing alternate accommodation agreement.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 7, 9, 11, 16, 21, 35 - Development agreement executed between developer and cooperative society containing arbitration clause - Dissenting member who refused to sign development agreement - Developer cannot seek appointment of arbitrator under Section 11 for disputes with such non-signatory member arising from development agreement - Non-signatory not bound by arbitration clause despite being beneficiary or executing permanent alternate accommodation agreement - No arbitration agreement exists between developer and non-signatory for such disputes - Veritable party doctrine inapplicable to dissenting member due to lack of consent, opposition to agreement, and involuntary participation - Distinction between enforceability of substantive contractual obligations against member and binding by separate arbitration agreement - Application dismissed. (Paras 1, 23, 111-117)

(B) Non-signatories to arbitration agreement - Veritable party - Tests of mutual intent, relationship with signatory, commonality of subject matter, composite transaction, direct substantial involvement in performance - Dissenting member's conduct opposing redevelopment, refusal to sign, forced execution of alternate agreement post-eviction do not evince consent to arbitrate - Mere incidental involvement or beneficiary status insufficient - Arbitration founded on party autonomy requires express or implied consent distinct from underlying contract. (Paras 63-89)

(C) Multiple agreements - Development agreement and permanent alternate accommodation agreement - Inextricable connection for stamp duty purposes does not extend to binding non-signatory by arbitration clause of principal agreement - No incorporation by reference of arbitration clause - Disputes must arise from invoked agreement. (Paras 90-99)

Facts of the case:
Cooperative society resolved for redevelopment, executed development agreement with developer; one dissenting member opposed process, refused to sign agreement, obstructed vacation - Developer obtained interim relief under Section 9 for possession, member executed permanent alternate accommodation agreement post-eviction - Developer invoked arbitration under development agreement for delay damages claim against member, society consented but member refused.

Findings of Court:
No prima facie arbitration agreement between developer and non-signatory member for disputes under development agreement - Reference confined to disputes under invoked clause - Non-signatory not veritable party.

Issues: Whether developer can invoke arbitration clause in development agreement against dissenting non-signatory member of society; whether member is veritable party or bound via beneficiary status, composite transaction, or alternate agreement; scope of referral court inquiry under Section 11 regarding non-signatories.

Ratio Decidendi: Dissenting non-signatory member to development agreement, despite later executing alternate accommodation agreement and being beneficiary, lacks consent to arbitration clause therein - Doctrine of veritable party requires positive direct substantial involvement and harmony of conduct, absent in opposition to redevelopment - Referral court examines prima facie existence of agreement qua non-signatory; hands-off approach not mandatory if no prima facie case.

Result: Arbitration Application dismissed.

Table of Content
1. arbitrability of disputes with non-signatory society member (Para 1)
2. factual background of redevelopment dispute (Para 2 , 3 , 4 , 5 , 6)
3. applicant's arguments on veritable party (Para 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17)
4. respondent's opposition to arbitration binding (Para 18 , 19 , 20 , 21 , 22)
5. analysis of arbitration clause scope (Para 23 , 24 , 25 , 26 , 27 , 28)
6. no disputes arise from paaa (Para 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38)
7. review of prior judgments on non-signatories (Para 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52)
8. third-party beneficiary not bound by arbitration (Para 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62)
9. dissenting member not veritable party (Para 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89)
10. no incorporation of da arbitration in paaa (Para 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 101)
11. member individuality exceptions inapplicable (Para 102 , 103)
12. referral court examines non-signatory prima facie (Para 104 , 105 , 106 , 107 , 108 , 109 , 110)
13. no arbitration agreement with dissenting member (Para 111 , 112 , 113 , 114 , 115 , 116 , 117)
14. application dismissed, no costs (Para 118 , 119)

JUDGMENT :

SANDEEP V. MARNE, J.

ISSUE FOR CONSIDERATION

1. This Application, filed under Section 11 of the Arbitration and Conciliation Act, 1996, raises an issue of seminal importance about permissibility to arbitrate the disputes between developer and a dissenting member of cooperative society, who has not signed the development agreement. In the present Application, the developer is seeking appointment of arbitrator for adjudication of disputes with a non-signatory member to the development agreement. Developer’s right to seek interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 against a non-signatory member is well settled. Even though a dissenting member of a society has not signed the development agreement, Court can make interim measures against him as his individual rights remain subservient to the society’s obligations under the development agreement. The issue here is entirely different. Whether developer, who has executed development agreement with the cooperative society, can seek appointment of an arbitrator by invoking arbitration clause in the development agreement, for adjudication of disputes with a member of such society, who is not a signatory to such development agreement? Though in the present case, reference to arbitration is sought by the developer, decision of the issue involved in the present Application would also provide an answer to the converse situation of right of individual member of a cooperative society to arbitrate against the developer, even though such member has not signed the development agreement. The Court is also tasked upon to decide whether subsequent participation by the dissenting member in redevelopment process by execution of Permanent Alternate Accommodation Agreement with the developer, containing arbitration clause, can enable the developer to arbitrate the disputes arising out of the development agreement, not signed by such member.

FACTS

2. Mulund Sandhyaprakash Cooperative Housing Society Limited (Society) is registered under the provisions of Maharashtra Co- operative Societies Act, 1960. It is formed in respect of a single building having 11 members at Mulund (West), Mumbai. Since the building of the society had become old, it resolved to opt for redevelopment thereof and adopted a resolution in special general body meeting held on 15 April 2017. The Society began scouting for developers to redevelop its building. Applicant is a developer, who submitted a proposal dated 23 July 2019 which was deliberated upon and after negotiations, Applicant tendered Offer Letter dated 5 October 2019. Memorandum of Understanding dated 26 February 2020 was exec

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