Bombay High Court
Pranav Constructions Limited vs Priyadarshini Co Operative Housing ... on 20 June, 2025
2025:BHC-OS:9401
5.ARBP.175.2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.175 OF 2025
Pranav Constructions Limited ....Petitioner
Versus
Priyadarshini Co-operative Housing
Society Limited & Ors. ...Respondents
Adv. Harsh L. Behany a/w. Ms Prachi Sanghvi i/b. HN Legal,
Advocates for Petitioner.
Mr. Yash Dhakad, Advocate for Respondent No.1-Society.
Mr. Rajiv Narula i/b. Jhangiani Narula & Associates, Advocate
for Respondent No.2.
Mr. Allen Mathew i/b. Jamshed Ansari, Advocate for
Respondent Nos.3 & 4.
CORAM: SOMASEKHAR SUNDARESAN, J.
DATE : JUNE 20, 2025
ORAL JUDGMENT :
Context and Background:
1. This is a Petition under Section 9 of the Arbitration and
Conciliation Act, 1996 ("the Act") seeking certain reliefs, primarily in
the nature of seeking the exercise of the Court's power to ensure that
Digitally
signed by
AARTI
AARTI GAJANAN
GAJANAN
PALKAR
PALKAR
Date:
certain members vacate their premises and hand over the same to the
2025.06.25
15:37:06
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5.ARBP.175.2025.doc
Petitioner ("Developer") in connection with the redevelopment of the
building of Respondent No. 1 ("Society").
2. The Developer and the Society have executed a development
agreement dated March 12, 2025 ("Agreement"). The Developer was
selected in 2022, and the parties have eventually executed the
Agreement. Overall, the Society has 23 members, who amongst them,
own 16 residential flats, 6 garages, with one member owning
commercial premises. Commercial activity has been carried out in
some of the garages for very long. In fact, their membership in the
Society is identified by their commercial names - for instance, 1) Photo
Studio; and 2) PAL Dairy.
3. Respondent No2. is entitled to Garage No.6, which was last run
as a travel agency. Prior to that, the business carried out was of a milk
dairy. Respondent Nos.3 and 4 are entitled to commercial premises on
the ground floor, which were being used as a branch of a bank and
thereafter, a shop carrying out a bridal store. Respondent Nos. 5 and 6
are entitled to Flat No.8. It is common ground that these are the
Respondents who are holding out. They have refused to sign the
Agreement and consequently, do not have privity to the arbitration
agreement contained therein.
4. Further, Respondent Nos.3 and 4 have gifted their premises to
their son and the granddaughter, both adults, as long ago, as
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September 21, 2023. In other words, the persons entitled to the
commercial premises are these two giftees, who have admittedly not
been made party to the Petition.
5. What makes the Agreement in this Petition stand out in stark
contrast to other development agreements that are usually brought to
Court under Section 9 of the Act is that it does not entail homogenous
and pari passu treatment of all members. The Agreement is a
structured one and proposes to treat different classes of members
differently:-
a) The owners of all residential flats are being provided an
enhanced area of 39% of the current size of the flats -
Respondents No. 5 and 6 fall in this category;
b) The owners of the commercial premises (in which the bank, and
now a bridal store, have been validly run) i.e. Respondent Nos.3
and 4, who are a unique class of members in their own right, are
being given an enhancement of only 19% in the floor area;
c) The owners of the garages are being given a 20% reduction in
their floor area - Respondent No. 2 falls in this category.
Flat Owners:
6. Respondent Nos.5 and 6, who are flat owners, have no grievance
about the redevelopment proposal per se. However, they have a
fundamental difference about the manner of computing the area that
they are entitled to, and about the stamp duty payable for the
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redevelopment and their share of such duty. They insist that the
Society should challenge the computation and not charge them their
share since it is purported to be wrong. They are willing to vacate their
flat if they are protected from the claim towards their share of the
allegedly wrongly computed stamp duty.
Garages:
7. The ownership of the garage involves a controversy of its own.
On behalf of the Developer and the Society, it is vehemently argued that
the usage of the garage for commercial activity is per se illegal. Yet, it is
seen from the very records of the Society appended to the Developer's
Petition and submissions by Learned Counsel for the Developer (ably
instructed and supported by Learned Counsel for the Society), that the
very membership of the Society appears to be in the names of the
businesses run in the garages, indicating that the Society accepted their
nature as commercial premises for all the years of their operations.
8. Learned Counsel for Respondent No. 2 submits that not being a
signatory to the Agreement, which, in any case, does not afford him
pari passu treatment with other members but positively discriminates
against him as a garage owner, the Agreement cannot be forced upon
him. In fact, the garages are purportedly being given some space in the
redeveloped premises and are not being told that they are totally illegal
and will get nothing. However, the garages are being shrunk by 20% in
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the redeveloped premises, when the flat owners affected by the
redevelopment are being given an enhancement of area by 39%.
9. In other words, in the course of redevelopment, the flat owners
would like to squeeze the garage owners - the flats would grow in size
while the garage owners' entitlements would shrink in size. The record
also shows that while the garage owners were presented with such
adverse terms, the Society also gave them an offer to be bought out. A
choice between shrinking in size or being bought out - essentially, a
Hobson's Choice or a squeeze-out proposition.
Commercial Premises:
10. Respondent Nos.3 and 4 raise a fundamental objection. Since
the premises are no longer owned by them - they had been gifted two
years ago to their adult son and adult granddaughter, the Society is
conscious that such giftees are new owners of interest in these
commercial premises but the Developer has chosen not to make them a
party and hopes to squeeze out these Respondents and somehow visit
that upon the giftees.
11. Learned Counsel for the Society submits that the gift has not
been recognised by the Society and the premises are in the name of
these Respondents in the records of the Society. However, it is also
apparent that the Society was put to notice about the gift and there is a
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stand-off about changing the name. However, that there is a claimant
to an ownership interest is well known to the Society, which is speaking
in one voice with the Developer but they have chosen not to make such
persons a party when invoking an equitable jurisdiction. Learned
Counsel for these Respondents would submit that the giftees being
adults, although related to them, would need to be heard before any
directions can be issued in respect of premises owned by them.
Analysis and Findings:
12. We have heard Learned Counsel for the parties at length and
with their assistance, examined the record and considered the detailed
Notes on Submissions tendered by them. The jurisdiction under
Section 9 of the Act is an equitable jurisdiction and is essentially meant
to enable the Court to preserve the subject matter of the agreement
containing the arbitration clause.
Conventional Approach:
13. It is indeed true that in a number of cases, an intervention under
Section 9 may have the effect of obviating the need for the parties to
actually proceed to dispute resolution by way of arbitration. In a
number of cases, after hearing the parties in the course of the Section 9
proceedings, the parties have arrived at terms in Court and the disputes
tend to get resolved, or even if they do not get resolved, the parties
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reach a stage where holding out from vacating the premises is an
approach that is given up by the dissenting members once their
concerns are addressed in Court.
14. There is now a long line of judgments by this Court, across
various benches of varying strength, making interventions in the form
of directing members to vacate their premises and not hold up
redevelopment. These are cases where a wider and larger collective will
is sought to be protected from being undermined by (a few or even one)
members, who may refuse to sign the redevelopment agreement that a
the wider majority wants. Such interventions may end up going beyond
protecting the subject matter of a potential dispute in an arbitration,
and addressing the wider good of a vast majority of members. This is
effective when all members are treated alike but just a few decide to
hold up the wider contract.
15. Equally, there are judgements where such interventions under
Section 9 of the Act may affect third parties (those who are not parties
to the arbitration agreement). In such cases, the third parties are also
given an opportunity of being heard by the Section 9 Court, so that
their interests too could be factored in and considered, when the Court
formulates protective measures.
Differentiation in Framework:
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16. None of this can be quarreled with. Conventionally, members
who hold out from signing the agreement have also been asked to
vacate their premises (even with police force), when it seen that all
members are given pari passu treatment. However, in the facts of this
case, evidently, the Agreement does not treat all members in a like
manner. The Respondents referred to above (other than Respondents
No. 5 and 6) are not parties who are holding out from executing the
Agreement despite being given the same terms and pari passu
treatment with all other members.
17. In the instant case, upon a review of the record, it is evident that
the scheme of Development Agreement, which these Respondents have
not accepted, seeks to positively discriminate among the members.
Indeed, the discrimination may be said to be sought among classes of
members, ensuring pari passu treatment within the respective class of
members i.e. treating all garage owners alike and all residential flat
owners alike. The members with commercial premises are a class of
their own - different from garages since there is no accusation of their
commercial activity being illegal as is the case with garages. However,
for a layered and structured bargain to be struck, there has to be a
contractual bargain struck among the classes of members. This is not a
simple matter of the larger collective will where all members of the
collective are given the same treatment is being obstructed by one of
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the members. This is a case where a wider majority of the collective is
seeking to decide to impose a discriminatory bargain without the
consent of those discriminated against. Such a contractual framework
does not lend itself to the conventional approach that has been used in
such cases.
18. The jurisdiction of this court being an equitable one, it would be
most inequitable for this Court to enforce a contract that treats a class
or classes of members adversely with discrimination (commercial
premises get a much smaller enhancement while garage owners get a
reduction), on the parties that are at the receiving end of such
discrimination. The Developer is said to have been chosen in 2022 and
the Agreement has been signed in 2025 - indicating that potentially the
parties were negotiating in this period and having failed to strike a
bargain, the Section 9 Court is being requested to force the contract on
them.
Analysis of the Agreement and its Effect:
19. Effectively, no rationale or basis for the differentiation has been
explained during the proceedings. Although the classification may be
based on whether the members are entitled to residential premises,
commercial premises and garages, evidently, the treatment of different
classes of members differently, would mean these Respondents'
interests do not lend themselves to being written away by the wider
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collective majority community view. Therefore, if the Developer and
the Society cannot convince these members to agree to differential
treatment, it would not automatically follow that using the jurisdiction
of the Section 9 Court, a contract they had not agreed to can be forced
upon them.
20. Be that as it may, for such a differentiated and nuanced bargain
to be struck, it would be fundamental that the parties negotiate with
one another and arrive at a mutually agreed consensual scheme of
arrangement and compromise. That consensual arrangement is simply
absent in the instant case, because the differences among these
members have not been negotiated and reduced to writing with
consensus among the members on effecting a differentiated and
layered treatment being given to different classes of members.
21. Had there been a consensus reached for this nuanced
arrangement, after which one or a few of the members backtracked and
violated the agreed consensus, this Court could have examined how to
protect the contract from being violated. Far from a party to an
arbitration agreement reneging on its contract, the Petition represents
the desire to enforce a contract against a person who has chosen not to
accept the discriminatory contract being forced on him.
22. In this light, requesting for interference from this Court,
exercising jurisdiction under Section 9 of the Act, to use the power of
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the State, with the coercive power of the Court Receiver and the
executive power of the police, to force out members who are being
discriminated against, and have not signed the Agreement, is not an
approach that appeals to me. It must be remembered that the
jurisdiction under Section 9 is not only an equitable jurisdiction but
also a discretionary jurisdiction. The Court has to exercise its
discretion reasonably and may arrive at a view that the larger public
good is being subserved by the intervention, since that would speak to
the equity jurisdiction of the Court. What is seen in the matter at hand,
of course on a prima facie basis, is that the garage owners are being
forced to shrink the entitlement to area that they currently enjoy by
20% or sell out and leave. The owners of the commercial premises are
being asked to get only a 19% increase to the floor space occupied by
them as opposed to the constituents of the majority class i.e. the
residential unit owners getting a 39% increase to the floor space
occupied by them. Such a layered scheme of arrangement and
compromise is not unknown to bodies corporate, but those are
statutorily implemented under stipulated procedures that take great
care to protect the wider interests of the community of stakeholders,
with safeguards for the vulnerable minority. The attempt to use the
Section 9 jurisdiction to enforce such a bargain that the Developer and
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Society have not managed to achieve for three years after the Developer
was selected, is simply inappropriate to my mind.
23. I have been invited to examine case-law on the law governing
garages and acknowledge the purported illegality in the use of garages
for commercial purposes. However, I find that exercise to be wholly
unnecessary, particularly in the context of the jurisdiction in which this
Court is examining the matter. The Section 9 Court, which is meant to
take measures to preserve the subject matter of arbitration, has to
examine if it is equitable to exercise its jurisdiction to make an
intervention of the nature sought, and not make any conclusive
pronouncement upon the law and return findings that would require a
deeper trial and examination of evidence. As stated earlier, the
Society's own records show the garages as member with their
commercial names as identity of these members. That four garage
owners may accepted such a choice cannot impact the garage owner
who stands up for his claims.
24. If this Court were to direct Respondent No. 2 and more
importantly, Respondent No. 3 and 4 to cause their premises to be
vacated, when they have consciously chosen to maintain their dignity
by not accepting the discriminatory treatment proposed to be meted
out to them, in my opinion, it would be an inequitable intervention and
worse, forcing a bargain that they never signed up for. The
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implications can indeed be that the majority can squeeze out the
minority in the name of a redevelopment and get from the Section 9
Court what they could not manage to get commercially.
No Disputes under Arbitration Agreement:
25. Most importantly, the Section 9 jurisdiction is meant to protect
the subject matter when the parties to the arbitration agreement have a
dispute. In the instant case, there is not even an illusion or a
semblance of a dispute or even a potential dispute between the parties
to the arbitration agreement. The Developer and the Society have no
dispute. The grievances being raised against the owners of the garage
and the commercial premises are disputes with those who are not party
to the arbitration agreement.
26. In fact, Learned Counsel representing the Developer and Society
have extensively collaborated with each other in Court, with
instructions and information being supplied by one to enable the other
to make a presentation, on facts and on law. This is not to say that a
Developer and a Society cannot have a joint and several right to a cause
of action to pursue against third parties, but the remedy for that would
not lie in a Section 9 proceeding invoking the arbitration agreement
between the two non-disputing parties. Indeed, other appropriate
forums including Civil Courts would be available to such parties.
Merely by executing an arbitration agreement, two parties cannot
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purport to get what they both want from third parties to be enforced at
the hands of a Section 9 Court. Manifest intention to arbitrate is a sine
qua non for invoking this jurisdiction. Far from the intention to
arbitrate, the collaboration between them is manifest.
27. As regards the commercial premises, the giftees from
Respondent Nos.3 and 4 are entitled to the premises and they are not
even made a party to this Petition. Their enhancement is truncated to
19% and understandably even the original members had not agreed to
such a skewed bargain before the gift. The Agreement was executed
after the gift was made and the Society was informed.
Conclusions:
28. This is a conscious and specific scheme of arrangement and
compromise, intended to operate in rem against multiple members and
classes of members, which cannot be fitted into a framework applied to
contracts entailing uniform treatment across members. To conceive
and implement such a scheme of arrangement or compromise would
necessitate a forum other than a Section 9 Court, which exercises
jurisdiction on a temporary basis, and that too to protect the subject
matter of the arbitration when there are disputes among parties to the
arbitration agreement, who have a manifest intention to arbitrate.
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29. One other facet stands out. There exist legal proceedings
between the Society and Respondents No. 3 and 4 over the commercial
premises in which a bank (and now a shop) is being run. The relevant
authorities administering co-operative law have heard submissions and
have reserved judgement way back in June 2022. Meanwhile, even
while pronouncement of a decision is pending, a Section 9 forum has
been approached to unalterably vary the respective positions of the
parties involved in terms of an agreement such parties never reached.
The redevelopment through the Agreement cannot be a device to
circumvent and undermine the entitlements over which these parties
are litigating.
30. There is a range of other objections raised by these Respondents,
including complaints about the manner in which the Developer was
selected. None of this needs consideration in view of what is stated
above. If the Respondents are aggrieved about the quality of
governance of the Society and the conduct of its office bearers, they
have other forums available to them to agitate their grievances. In fact,
Respondents No. 3 and 4 are actually in litigation in such forums
against the Society.
31. Likewise, Respondent Nos.5 and 6 have made submissions,
about manner of computing stamp duty and seeking insulation from
the financial liability in consideration of which they would be willing to
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vacate. These are not facets that I need to deal with in view of the
decision I have arrived at, namely, that a case has not been made out
for exercise of equitable discretionary jurisdiction to intervene in the
manner the Court conventionally does, where all members are given
pari passu treatment.
32. Suffice it to say when a member has consciously chosen to refrain
from agreeing to a bargain that treats him differently from other
members, the objection of such member to the redevelopment terms is
evidently not an obtuse one. The objections are based on empirical
reasonable factors such as feeling oppressed, being coerced, or being
squeezed out by being presented with a Hobson's Choice.
33. Such a factual matrix does not appeal to me to exercise the
jurisdiction under Section 9 of the Act to throw out such members
discriminated against, in the name of an arbitration agreement
between the Developer and the Society, who have no dispute at all
between them, and who, in fact, appear fully aligned and acting in
concert.
34. Consequently, this Petition is disposed of without any
intervention being made. The parties are at liberty to litigate their
grievances in such forum as advised.
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35. Nothing in this judgement is meant to comment upon the quality
or the merits of the cause of action asserted by any of these parties
against any other party. This judgement is solely meant to convey my
reasons as to why the equitable discretionary jurisdiction under Section
9 of the Act is not appropriate to have these Respondents removed
from their premises by the force of the judicial and executive machinery
invoked by the Developer and the Society.
36. All actions required to be taken pursuant to this order shall be
taken upon receipt of a downloaded copy as available on this Court's
website.
[SOMASEKHAR SUNDARESAN, J.]
June 18, 2025
Aarti Palkar
