Bombay High Court
Avenues Seasons Properties Llp vs Rakeysh Omprakash Mehta And 5 Ors on 22 October, 2024
Author: A. S. Chandurkar
Bench: A. S. Chandurkar
2024:BHC-OS:17367-DB
Diksha Rane/ADN
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.42 OF 2024
IN
INTERIM APPLICATION (L) NO. 18441 OF 2021
WITH
INTERIM APPLICATION (L) NO. 22423 OF 2021
IN
APPEAL NO.42 OF 2024
AVENUES SEASONS PROPERTIES LLP .APPLICANT/APPELLANT
VS.
NISSA HOOSAIN NENSEY & ORS. .RESPONDENTS
WITH
APPEAL NO.43 OF 2024
IN
INTERIM APPLICATION (L) NO. 18438 OF 2021
WITH
INTERIM APPLICATION (L) NO. 22422 OF 2021
IN
APPEAL NO.43 OF 2024
AVENUES SEASONS PROPERTIES LLP .APPLICANT/APPELLANT
VS.
RAKEYSH OMPRAKASH MEHTA & ORS. .RESPONDENTS
WITH
APPEAL NO. 44 OF 2024
IN
ARBITRATION PETITION NO.1 OF 2023
AVENUES SEASONS PROPERTIES LLP .APPLICANT/APPELLANT
VS.
PALI HILL NEPTUNE CO-OPERATIVE
HOUSING SOCIETY LTD. & ORS. ..RESPONDENTS
------------
Mr. Virendra Tulzapurkar, Senior Advocate with Mr. Sean Wassoodew,
Mr. Rupesh Mandhare, Ms. Ashna Shah for the appellants.
Mr. Mandar Soman with Ms. Vijaya S. Ingule for respondent no. 2 in
APP/42/2024 and for respondent no.3 in APP/43/2024 and for
respondent no.1 in APP/44/2024.
1
Diksha Rane/ADN
Mr. J. P. Sen, Senior Advocate with Mr. Parag Khandhar, Ms. Pranita
Saboo, Ms. Nidhi Chauhan i/b. DSK Legal for respondent.
------------
Coram : A. S. Chandurkar & Rajesh S. Patil, JJ.
Date on which the arguments were heard : 31st July 2024.
Date on which the judgment is pronounced :22nd October 2024.
JUDGMENT (PER : Rajesh S. Patil, J.)
1. The present three appeals are filed under Section 37 of the
Arbitration and Conciliation Act, 1996 (for short "Arbitration Act"),
by the original defendant no.5/developer, thereby challenging the
impugned common judgment and order dated 23 rd September 2021
passed by the Single Judge of this Court, thereby dismissing the two
Section 8 Interim Applications filed by the original defendant no.5/
developer, in two suits, and dismissing defendant no.5's Section 9
Arbitration Petition.
FACTS
2. The respondent no.1 in Appeal No. 42 of 2024 and the
respondent no.1 in Appeal No. 43 of 2024, are the original plaintiff
who have filed their respective Civil Suit in the Original Side of this
Court being Suit (L) No. 17585 of 2021 and Suit (L) No. 17583 of
2021, thereby seeking two major reliefs (i) a declaration that their
bungalow No.1 and bungalow No.2, respectively are separate and
Diksha Rane/ADN
independent bungalows along with exclusive open space, and (ii)
that the resolution passed by the Housing Society are illegal, non-est
and void. The facts narrated in both the Civil Suits are identical.
3. The parties are hereinafter referred to as per their
nomenclature in the civil suits.
4. In both the Civil Suits, the plaintiffs also preferred an Interim
Application seeking to stay the various resolutions passed by the Co-
operative Housing Society and also not to take any steps to vacate the
plaintiffs during the pendency of this suit, from the suit bungalow
no.1 and suit bungalow no.2.
5. The original defendant no.5/deveoper in both the Civil Suits
preferred interim application under Section 8 of the Arbitration Act
thereby seeking a relief that pending the hearing and final disposal of
the suit, in view of Clause 23 of the Development Agreement, the
plaint be returned, to be presented before the proper Court and so
also, refer the present suit and all disputes and contentions raised
therein to Arbitration. The defendant no.5/developer in both the Civil
Suits also preferred an Arbitration Petition, under Section 9 of the
Arbitration Act, thereby seeking interim measures before the
arbitration proceedings are commenced. The interim application
Diksha Rane/ADN
preferred by the plaintiff in both the Civil Suits and the interim
application preferred by the defendant no.5/developer in both the
Civil Suits filed under Section 8 of the Arbitration Act, so also,
Arbitration Petition preferred by the defendant no.5/developer were
clubbed together, and heard. By his judgment and order dated 23 rd
September 2021 the Single Judge of this Court, dismissed the Interim
Application preferred by the defendant no.5/developer under Section
8 and the Arbitration Petition filed under Section 9 by the defendant
no.5/deveoper, so far as against the plaintiff was dismissed. The
Interim Applications preferred by the plaintiffs in their respective
Civil Suits were deferred for hearing after parties have completed
pleadings.
6. Being aggrieved by the judgment and order dated 23 rd
September 2021, the defendant no.5/developer has preferred the
present three appeals under Section 37 of the Arbitration Act.
SUBMISSIONS
7. Mr. Virendra Tulzapurkar, the learned Senior Advocate
appeared on behalf of the appellant/developer (original defendant
no.5) and made his submissions.
(i) He submitted that as per Section 8 of the Arbitration Act, a
Diksha Rane/ADN
party claiming through and under is included in the definition of a
"party" as per the amendment of 2015 to the Arbitration Act.
(ii) By signing the Development Agreement, it was the mutual
intention of the Society as well as the Developer to bind the
signatories as well as the non- signatories, being the dissenting
members of the society.
(iii) The finding in the impugned judgment that, the Respondent
No. 1 do not fall within the meaning of the party, as defined under
Section 8 of the Arbitration Act is perverse in as much as once an
individual becomes a member of a cooperative society then such
member loses his individuality and gets merged with the cooperative
society and becomes a party claiming through and under as laid
down in Section 8 of the Arbitration Act.
(iv) He submitted that the impugned judgment and order,
essentially watered down a line of judgments delivered under Section
9 of the Arbitration Act, whereby party claiming through and under,
could have been joined as a party to a petition under Section 9 of the
Arbitration Act, in as much as once it is held that the dispute is Non-
Arbitrable, by virtue of a single member of the society not signing the
Development Agreement then, in such an event no dissenting
Diksha Rane/ADN
member can ever be joined as a party to an Arbitration Petition, even
under Section 9 of the Arbitration Act, the dispute being Non-
Arbitrable.
(v) By amendment to Section 8 (1) of the Arbitration Act the
relevant "party" that is entitled to apply seeking reference to
arbitration has been clarified/amplified to include persons claiming
"through or under" such a party to the arbitration agreement.
(vi) In present case, the respondent no. 1 (original plaintiffs) are
members of the Society, who have actively participated in
redevelopment process and voted in favour of redevelopment and
have proposed resolutions dated 6th February 2019 approving the
development, 17th March 2019, approving the tender and resolution
dated 22nd June 2019 approving the appellant as the Developer.
Hence, at a later stage they could not oppose redevelopment.
(vii) The well settled principles of law that a member's identity is
lost to the society and to the discipline of the majority opinion
prevailing.
(viii) The reasoning of the impugned judgment is wholly consistent.
On one hand, it lays down that the settled law is that it is not open
for a dissenting member to obstruct or challenge the DA or say that
Diksha Rane/ADN
he has not signed the agreement but at the same time has ignored the
said well settled law and dismissed the Section 9 petition on the
specious reasoning that a Section 8 application had been filed.
(ix) Based on the aforementioned artificial distinction, the Learned
Single Judge has come to the erroneous conclusion that merely by
reason of the fact that in addition to the society, some of the
individual members had signed the Development Agreement,
whereas others had not, the long line of judgments following Girish
Mulchand Mehta became inapplicable.
(x) The individual members have signed the Development
Agreement in pursuance of Clause 9.2 of the Development Agreement
and by reason of circular dated 30 th March 2017, wherein it has been
set out that in the event the members sign the Development
Agreement, then the stamp duty on the areas agreed to be provided
by the Developers to the Society members free of cost would be Rs.
100/-, provided such members have signed the Development
Agreement.
(xi) The word "existing members" occurring in the arbitration
clause was sufficient to include within its compass the society and all
its members and not merely those who had signed the Development
Diksha Rane/ADN
Agreement.
(xii) In Sarthak Developers vs. Bank of India Amrut Tara
Cooperative Housing Society Ltd.1, a Division Bench of this Court had
held in paragraph 14,
14. A member of a co-operative society cannot assert a right in respect of a flat
occupied by him independent of the rights of the cooperative society. Each of
the dissenting members continues to be a member of the Co-operative Society
and continues to be bound by the agreement that was entered into by the
Society with the developer. Under Section 9 of the Arbitration Act, a party to an
arbitration agreement is entitled to apply to a Court for an interim measure of
protection including for appointment of a receiver. The property in respect of
which a Receiver is sought to be appointed may well be in possession of a third
party. The crucial test for the application of Section 9 is whether the party
moving the application under Section 9 is a party to the arbitration agreement
and whether the appointment of a receiver is sought in respect of property
which forms the subject matter of the arbitration agreement. In the present
case, the dissenting Respondents are subsumed within the identity of a
cooperative society of which they are members. Each one of them is bound by
the agreement which was entered into by the co-operative society of which they
are members, with the Appellant. The First Respondent Society has supported
the redevelopment through the Appellant. In these circumstances, a Petition
under Section 9 would be maintainable."
The Learned Single Judge failed to appreciate that the Respondent
No. 1 were therefore bound by the Development Agreement entered
into with the Appellant including the arbitration clause therein.
(xiii) The Supreme Court in the case of Cheran Properties Ltd.
v. Kasturi & Sons Ltd.2 held that the requirement, in Section 7, that an
arbitration agreement be in writing, did not exclude the possibility of
binding third parties who may not be signatories to an agreement
1 Appeal (L) No 310 of 2012 in Arbitration Petition 1385 of 2010.
2(2018) 16 SCC 413 at page 434
Diksha Rane/ADN
between two contracting entities. The Supreme Court in that case
further held that the evolving body of academic literature as well as
adjudicatory trends indicated that in certain situations, an arbitration
agreement between two or more parties would operate to bind other
parties as well.
(xiv) He also relied upon the findings of the Supreme Court in
the judgment of Mahanagar Telephone Nigam Ltd. v. Canara Bank
and Ors.3.
(xv) In rejoinder argument, Mr. Tulzapurkar submitted the
judgment referred by the original plaintiff cannot be considered as
good law in view of ratio laid down in the judgments referred by
appellant and in the judgment passed by Division Bench of this Court
in Adityaraj Builders vs. State of Maharashtra 4 and judgment passed
by the learned Single Judge in Commercial Arbitration Appeal (L)
No.21070 of 2023 (Shankar Desai vs. Gauri Associates).
(xvi) He submitted that the appeals should be allowed and the
impugned judgment and order dated 23 rd September 2021 passed by
the Single Judge of this Court should be quashed and set aside.
8. Mr. Mandar Soman appeared on behalf of the respondent -
society and made his submissions. He submitted that entire society is
3 2019 SCC OnLine SC 995
4 (2023) SCC OnLine Bom. 540
Diksha Rane/ADN
in favour of the redevelopment and only because of the plaintiffs the
redevelopment cannot happen. He submitted that the plaintiffs are
minority members of the society, because of whom the entire
redevelopment has stuck. He submitted that the plaintiffs would be
bound by the Development Agreement. He submitted that the
impugned judgment and order dated 23 rd September 2021 should be
quashed and set aside.
9. Mr. J. P. Sen, the learned Senior Advocate made his
submissions on behalf of the respondent.
(i) He submitted that on 8th March 2020, Special General
Body Meeting was held when 18 of the existing members present
passed the resolutions approving the same and authorizing the
society's Managing Committee to finalize, settle, sign and execute the
same for and on behalf of the society. In view of the aforesaid, the
Section 8 Application filed against non-signatories to an arbitration
agreement is not maintainable and is correctly rejected in the
impugned order for reasons stated therein.
(ii) In support of his submissions, he relied upon the
following decisions:
(a) Vardhaman Developers Limited vs. Andheri Krupa Prasad Co-
Diksha Rane/ADN
operative Housing Society Ltd.5;
(b) Wadhwa Estate Developers (India) Pvt. Ltd. Vs. Omprakash
Raheja and others6;
(c) Vardhaman Developers Ltd. vs. Thailambal Co-op. Housing Soc.
Ltd. & ors.7;
(d) Harnish Gada vs. Vardhaman Developers Ltd. & Ors.8;
(e) Mukesh Nanji Gala vs. Heritage Enterprises, 20149;
(f) Shankar Vithoba Desai & ors. vs. Gauri Associates & ors.10;
(g) Ketan Champaklal Divecha vs. DGS Township Pvt. Ltd. & anr.11
(iii) He submitted that the appellant has assailed the
impugned order inter alia on the basis that the learned Single Judge
has relied upon Section 8 of the Arbitration Act as it stood prior to its
amendment with effect from 23 rd October 2015. More particularly,
the appellant has sought to rely upon the addition of the words "or
any person claiming through or under him". He submitted that
Section 8 amended or otherwise, does not in any manner affect the
argument sought to be raised by the original plaintiffs as the original
plaintiffs are neither claiming through nor under the society or
appellant/developer (who are parties to the Development
Agreement).
5 N.M. (L) No.248/2014 (Corm : S. J. Kathawalla, J.)
7 N.M.No.3274/2010 in Suit No.2725/2010 (Corm : Dr. D. Y. Chandrachud, J.)
8 Appeal No.227/2-11 in NOM/3274/2010 in Suit No.2725/2010 with NOM/1282/2011
((Corm : Mohit S. Shah and D. G. Karnik, JJ.)
9 SCC OnLine Bom 1817
10 Comm. Arbitration Application (L) No.21070/2023.
11 2024 SCC OnLine Bom 1.
Diksha Rane/ADN
(iv) In support of the aforesaid submission, reliance is placed
on the decisions of this Court in Supreme Mega Construction LLP vs.
Symphony Co-operative Housing Society Ltd. & Ors.12 and Shankar
Vithoba Desai (supra).
(v) He submitted that on perusal of prayers sought in the
Plaint it can be seen that the same cannot be granted by an Arbitral
Tribunal.
(vi) The Development Agreement consisting of Arbitration
Agreement is restrictive and limited to the extent of disputes stated
therein. In the event, an arbitrator is appointed, such arbitrator being
a creature of the Arbitration Agreement would not be able to grant
reliefs which ex-facie fall outside the scope and ambit of the
Arbitration Agreement.
(vii) The appellant relied upon the case of Girish Mulchand
Mehta vs. Mahesh Mehta13 and the judgments following this line cited
by the appellants are concerned, the said decisions are wholly
inapplicable to the facts and circumstances of this case.
(viii) During the course of arguments on the appeal, the
appellant has placed reliance on Clause 9.2 of the Development
12 2014 SCC OnLine Bom 4624
13 2009 SCC OnLine Bo 1986)
Diksha Rane/ADN
Agreement to content that it was not necessary for the original
plaintiffs to sign the Development Agreement except for claiming the
benefit of exemption under the Stamp Act.
(ix) In respect of the aforesaid submission, firstly, it is
submitted that the appellant did not raise this argument before the
learned Single Judge and therefore, cannot now raise an argument
not previously raised. Secondly and in any event, the fact remains
that the original plaintiffs are not signatories to the Development
Agreement which agreement contains the arbitration clause the
appellant seek to bind the original plaintiff ( to which the original
plaintiff are not signatories).
(x) He submitted that the appeals be dismissed with costs.
ANALYSIS AND CONCLUSION :-
10. We have heard the learned counsel for all the parties and have
gone through the documents on record.
11. The present appeals are filed under Section 37 of the
Arbitration Act by the original defendant no.5/developer, challenging
the dismissal of his applications filed under Section 8 of the
Arbitration Act, which sought that the issue raised in the suits filed by
the plaintiffs be referred to arbitration as per the "Dispute Resolution
Diksha Rane/ADN
Clause" as mentioned in the Development Agreement, which is
signed by the Co-operative Housing Society of the first part, along
with 18 of its members of the second part and by the developer of the
third party.
12. It is the case of the developer that since the Housing Society
has signed the Development Agreement, all the members of the
Housing society are bound by the clauses mentioned in the
Development Agreement and since there is a specific "Dispute
Resolution Clause" which mentions about in case of any dispute
arising the same be referred to arbitration, hence the suit as filed by
the plaintiff's should have to be referred to arbitration. So also, in the
meantime, the reliefs as prayed in Section 9 Arbitration Petition
should be granted.
13. The original plaintiffs have pleaded in the plaint that their
structures are individual bungalows with open space around the
bungalows, and they also have separate gate for road access. The
building in which the members are residing has a separate gate for
access to the public road. It is further their case that they have not
signed the Development Agreement, unlike other members of the
Housing Society.
Diksha Rane/ADN
14. We have gone through the Development Agreement. In the
Preamble of the Development Agreement, the party of the First Part is
the society and thereafter, a list of the members have been mentioned
who are described as party of Second Part. The developer is described
as party of Third Part. The names of the plaintiffs in both the suits are
not mentioned in the Development Agreement. So also, the
Development Agreement, apart from the society has been signed by
all other members and admittedly, there is no signatures of both the
plaintiffs. All the members have also inserted their initial on each and
every page of the Development Agreement. Whereas the plaintiffs
have admittedly not signed on each and every page of the
Development Agreement neither their names are mentioned in the
Development Agreement. In this background, it has to be seen
whether the plaintiffs would be bound by the clauses of the
Development Agreement.
15. This is a case where not only the society but also each and
every member of the society has signed the Development Agreement
and hence, they would be bound by the terms and conditions of the
Development Agreement. The plaintiffs have admittedly not signed
the Development Agreement and have in fact raised their grievance.
The plaintiffs have mentioned that earlier there was some other
Diksha Rane/ADN
developer who had promised the plaintiffs to redevelop the entire
property along with the building, and after redevelopment the
plaintiffs would receive individual bungalows. However, the said
Development Agreement was not fruitful. As regards the present
developer, the plaintiffs agreed that the property can be redeveloped
but on the same terms as promised to them by the earlier developer.
However, the society has not agreed to such demands of the plaintiffs
and has passed certain resolutions to that effect. The plaintiffs have
dispute with the society in this regard therefore, the plaintiffs have
filed two separate Civil Suits against the society and the developer in
this Court. The interim applications have been filed by the plaintiffs
in both the suits and the same are pending for hearing.
16. Section 7(4) (a) of the Arbitration Act mentions that the
Development Agreement must be signed by the parties. Section 8 of
the Arbitration Act has been amended in the year 2016, by which
Section 8 has been further clarified. In our view, it would have been a
total different case if any of the member who has signed the
Development Agreement, or society who has signed the Development
Agreement would have filed the suits against the developer, and in
such a suit the developer could have preferred an application under
Section 8 of the Arbitration Act, for referring the dispute to
Diksha Rane/ADN
arbitration.
17. The learned Single Judge while dismissing the developer's
applications under Section 8 and the Arbitration Petition of the
developer under Section 9 has held that he has not foreclosed the
arguments of the developer that the plaintiffs have lost their identity
to the society and to the discipline of the majority opinion prevailing.
Those contentions of the developer are kept open.
18. Certain relevant authorities cited before us are discussed
hereinbelow:-
(i) In the judgment of Andheri Krupa Prasad CHS Ltd. (supra), the
learned Single Judge of this Court held that in the absence of the
Development Agreement being individually signed by the members of
a Society, the members who have not signed the agreement cannot be
a relegated to arbitration. Paragraph 7 of the said judgment reads
thus:-
"7. Even in the present case, there is no arbitration agreement in
writing duly signed by the Plaintiffs and the Applicants who have
moved the Notice of Motion. The Development Agreement is signed by
the Plaintiffs-Developer and the Defendant No.1 Society and not by the
individual members of the Society. Faced with the above judgments
cited by the Learned Senior Advocate appearing for the Plaintiffs, Mr.
Abdi contended that though as in the present case, in the cases cited by
the Plaintiffs, the description of the Society also included its members,
no argument was raised by the Defendants therein that in view of such
description of the Society which includes members, the arbitration
clause contained therein would be binding on the Plaintiffs as well as
Diksha Rane/ADN
the Applicants/Defendants and therefore the said issue needs to be
decided in the present case. In my view, though the Society is
described/defined in the Development Agreement as including its
members, the fact remains that the said Agreement is between the
Society as a whole i.e. representing all its members and the Plaintiffs-
Developer. The arbitration clause/agreement contained in the
Development Agreement can therefore be invoked only in the event of
any dispute or difference arising between the parties to the said
Development Agreement viz. the Society and the Plaintiffs- Developer
as set out in clause 55 of the Development Agreement. The said
arbitration clause cannot be invoked by 17 of the 74 members of the
Society in their capacity as members of the Society against the
Plaintiffs on the ground that in the Development Agreement the
expression 'Society' means and includes the members of the Society
and their heirs, etc. I therefore do not accept the submissions advanced
on behalf of the Applicants that they are entitled to invoke the
arbitration agreement entered into by and between the Plaintiffs and
the Defendant No.1 Society."
(ii) In Harnish Gada (supra), the Division Bench of this Court while
dealing with the appeal arising out of the judgment of the learned
Single Judge of this Court in Andheri Krupa Prasad Co-operative
Housing Society Ltd. held that they are in agreement with the
reasoning and conclusion of the learned Single Judge. The Division
Bench held that the learned Single Judge had dealt with the
contentions raised by defendant nos.5 and 6 in paragraph 6 of the
impugned order. The contentions raised by defendant nos. 5 and 6
before the learned Single Judge are also raised before them and they
did not find any merit in the contentions.
(iii) In Wadhwa Estate Developers (India) Pvt. Ltd. (supra), the
learned Single Judge of this Court held that in the absence of
Diksha Rane/ADN
dissenting members, having signed the Development Agreement,
there is no arbitration agreement between the parties. Paragraph 43
of the said judgment reads as under :-
"43. The dissenting members have also contended that the matter be
referred to arbitration. The dissenting members i.e. Defendant Nos. 1 to
3 have neither signed the Development Agreement nor the Supplemental
Agreement. In fact, the cause of action in the present Suit has arisen due
to the failure of Defendant Nos. 1 to 3 to sign the Development
Agreement and the Supplemental Agreement. Hence there is no
arbitration between the Plaintiff and Defendant Nos. 1 to 3. This being
so, the present Suit is maintainable and cannot be referred to arbitration.
Such contention is taken by the dissenting members only to delay the
matter and grant of reliefs as prayed for in the above Notice of Motion.
Such a contention has also been rejected by a Learned Single Judge of
this court (Dr. D.Y. Chandrachud, J.) in para II (b) of the decision in
Vardhman Developers (supra)."
(iv) In Thailambal Co-op. Housing Soc. Ltd. (supra), the learned
Single Judge of this Court has held that a suit filed by the individual
member is maintainable as there was no dispute between the society
and the developer as contemplated under the arbitration clause
contained in the Development Agreement. Paragraph 6 of the
judgment reads as under:-
"6. There is no merit in the contention based on Section 91 of the
Maharashtra Cooperative Societies Act 1960. Section 91 brings within
its purview disputes touching interalia the constitution, management or
business of a society. Now in the present case. the process of
redevelopment of the Society by the Developer does not constitute the
business of the society within the meaning of Section 91. The
demolition of the existing building and the reconstruction of the
building of the society is not the business of the society. Section 91 is
therefore not attracted. For the same reason, no notice under Section
164 is required. The contention based on the guidelines of the State
Diksha Rane/ADN
Government dated 3 January 2009 is without any substance. The
Development Agreement in this case was entered into on 27 August
2008 much prior to the enforcement of the guidelines. The contention
that the Director of the Plaintiff had no authority is belied by the copy of
the Board Resolution dated 15 May 2010 which has been placed on
record. The Resolution authorised the Director in question to represent
and sign documents, returns, statements and other writings on behalf of
the Company to be submitted interalia before any Court of law.
Similarly there is no merit in the contention of the objectors that the
Power of Attorney in favour of the nominee of the Plaintiff has not been
registered. The Development Agreement admittedly has been registered.
The Power of Attorney executed by the Society was similarly registered
and stamp duty in excess of Rs.19 lacs was paid. The contention based
on the Consent Affidavits is similarly devoid of substance. It has been
stated on behalf of the Plaintiff that the Developer had forwarded the
stamp paper to the Cooperative Society. The Consent Affidavits were
executed, notarized and remitted back to the Developer. Significantly
there is no dispute about the fact that the Consent Affidavits have been
duly executed. There being no dispute about the fact that the Consent
Affidavits have been signed and executed by the objecting Defendants,
the objection is lacking in substance. The contention that there is an
arbitration clause in the Development Agreement between the Society
and the Developer, over looks the basic factual position that there is no
dispute between the Society and the Developer. It is the objectors who
are objecting to the enforcement of the Development Agreement. A suit
for obtaining necessary reliefs is therefore maintainable. For these
reasons I am of the view that the objections which are raised on behalf
of Defendant Nos. 5 to 6, however technical, are devoid of any material
substance."
(v) In Mukesh Nanji Gala (supra), the learned Single Judge of this
Court held that only party to arbitration agreement can challenge an
arbitral award.
(vi) In Shankar Vithoba Desai (supra), the learned Single Judge of
this Court held that arbitration cannot be invoked by individual
members or group of members of the society for resolving the
disputes emanating from the conduct of the developer, even if such
Diksha Rane/ADN
disputes arise out of the import of the Development Agreement. This
is for the simple reason that individual members are not parties to
the arbitration agreement contained in the Development Agreement.
In paragraph 10 it has been held that it being an admitted position
that individual members are not signatories to the arbitration
agreement, fundamental requirement under Section 7 of the
Arbitration Act, that the arbitration agreement has to be in writing
among parties to the arbitration proceedings has also not being met.
19. Therefore, according to us, even this judgment supports the
contention of the original plaintiff.
20. In Ketan Champaklal Divecha (supra), the learned Single
Judge of this Court has held that an individual member does not have
the capacity to invoke arbitration under the Development Agreement.
Paragraph 15 of the said judgment reads as under :-
15. The aforesaid clause has to be read in the backdrop of the settled
position of law that when a Co-operative Housing Society enters into a
development agreement with a developer, the will of the majority
members prevails. The individual desire or identity of the member is
subsumed within the will of the Co-operative Housing Society, which
collectively represents the aspirations and the cause of its members.
There is substance in the contention raised on behalf of the respondents,
by placing reliance on the judgment of the Supreme Court in the case of
Daman Singh v. State of Punjab (supra), wherein it is specifically laid
down that the Society alone can act and speak for an individual member
and that the member loses his individuality qua the Society, having no
independent rights. Clause 35.2, quoted herein above, clearly
encapsulates the said status of a member of a cooperative housing
society and thereby indicates that even if clause 35.1 uses the plural
Diksha Rane/ADN
'parties', the same has to be interpreted as referring to the society and
members on the one hand and the developer on the other. Clause 35.2
cannot be relegated to being merely a mechanism because the very
invocation of arbitration and appointment of a sole arbitrator is
governed by the said clause. For a valid invocation of arbitration, in the
facts and circumstances of the present case, notice will have to be issued
by the society along with its member or members on the one hand or
the developer on the other. An individual member simply does not have
the capacity to invoke arbitration under clause 35.2 of the development
agreement. Once this conclusion is reached, it becomes clear that the
arbitration clause in the development agreement signifies an arbitration
agreement for resolution of disputes between the society with its
members on the one hand and the developer on the other. The society
espouses the cause of its own members, which in turn, as per settled
law, is based on the will of the majority members of the Society.
21. The citation referred by the appellant of Girish Mehta (supra)
lays down preposition of law that interim measures of protection may
be granted against the Third Parties who are not parties to the
Arbitration Agreement in a Petition under Section 9. However, it does
not extend its ratio to hold that arbitration proceedings can be
commenced against Third Parties who are not parties to the
Arbitration Agreement. Adityaraj Builders (supra) reaffirms the said
preposition of law laid down in Girish Mehta (supra). Even in
Adityaraj Builders (supra), the Court was not dealing with an
application filed under Section 8 of the Arbitration Act and it instead
dealing with Writ Petition raising question of law with respect to
stamping under Maharashtra Stamp Act. Hence, according to us, the
ratio laid down in these two judgments does not in any event help
the appellant.
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22. In Cheran Properties Limited (supra), the Supreme Court was
dealing with "Group of companies doctrine". In the said proceedings,
the parent agreement envisaged the allotment of equity shares with
the intent that company would take over the business, assets and
liabilities and under the agreement the company was entitled to
transfer shareholding. The Court held that it would not be open to
the appellant to contend that while it was bound by all other terms of
the agreement, it would not be bound by the Arbitration Agreement
contained in the very same agreement. Since, the facts in this
judgment are quite different than the present proceedings, the ratio
of the judgment would not be applicable to the present proceedings.
23. In Mahanagar Telephone Nigam Limited (supra), again the
concept of doctrine of "group of companies" was involved. It dealt
with impleadment of the subsidiary company. Hence, the ratio laid
down in the said judgment cannot be applicable to the present
proceedings as the present proceedings dealt with the individual
persons (owners of bungalows).
24. In Sarthak Developers (supra), the Arbitration Petition was
filed under Section 9 by the developer against the society and its
members seeking appointment of Receiver. The minority members
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lodged a complaint with Registry of Co-operative Court. The
Development Agreement was executed by the developer with the
society. 142 members out of 160 members executed the tri-partite
agreement with the developer for redevelopment. 143 members had
already vacated their flats. The condition of the building was bad in
shape and required urgent repairs or redevelopment. The society was
in a position to carry out repairs, hence, the option of redevelopment
was accepted. In proceedings under Section 11 (6) an Arbitrator had
already been appointed by an order dated 29 th June 2012. For these
aforesaid reasons an order was passed appointing a receiver. The
facts in these case are not at all identical to the present proceedings
since Sarthak Developers (supra) the Arbitration Petition was under
Section 9 and Arbitrator was already appointed under Section 11 by
an order dated 29th June 2012. Therefore, the ratio laid in the said
judgment could not be applied to the present proceedings.
25. Therefore, sum and substance of all these judgments is that
either developer or the society, who has signed Development
Agreement can invoke the arbitration agreement in case of dispute.
26. In the background of these facts, we are of the view that at this
stage where a party who is not mentioned in the Development
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Agreement and who has not signed the contract, can not be referred
to arbitration.
27. While these arbitration appeals filed by the developer under
Section 37 of the Arbitration Act are pending before the Division
Bench of this Court, this Court by its order dated 23 rd February 2024
has clarified that the developer will be free to redevelop the property
belonging to the society (other than two bungalows) by submitting
the necessary plans to the society for their approval and thereafter, to
the Planning Authority. It was also clarified that rights of the original
plaintiffs are not to be touched in respect of their two bungalows
until the disposal of these appeals.
28. In view of the above findings, we pass following order:
ORDER
(i) Appeal No.42 of 2024, Appeal No.43 of 2024 and Appeal
No.44 of 2024 are hereby dismissed.
(ii) The clarification made by Coordinate Bench of this Court on
23rd February 2024 in the present appeals is hereby continued till the
disposal of the two suits filed by the plaintiffs.
(iii) The hearing of the Suit (L) No. 17587 of 2021 and Suit (L) No.
17583 of 2021 is hereby expedited and the learned Single Judge is
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requested to make an endeavor to dispose of the suits within a period
of one year from today, subject to parties co-operating in this regard.
29. The Interim Applications are also disposed of.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
Signed by: Diksha Rane
Designation: PS To Honourable Judge
Date: 23/10/2024 11:09:43
