High Court Finds Society a "Veritable Party" to Flat-Purchase Arbitration, Refers Dispute to Tribunal

A bench of Justice Somasekhar Sundaresan heard Section 11 applications under the Arbitration and Conciliation Act, 1996 filed by a developer and a temple trust seeking constitution of an arbitral tribunal against Veer Tower Co-operative Housing Society Ltd. The core question was whether identical arbitration clauses contained in individual flat sale agreements between the developer and flat purchasers were inherited by the Society formed by those purchasers, and whether the Temple Trust could claim through the developer in arbitration.

The Court allowed the Section 11 petitions and directed reference of the disputes to arbitration, holding prima facie that the arbitration agreement existed and that the Society was a “veritable party” to that agreement. The Court appointed Justice (Retd.) Akil Kureshi as the sole arbitrator and issued procedural directions including service, disclosure under Section 11(8) read with Section 12(1), and initial cost allocation. The Court emphasised that its findings were limited to a prima facie jurisdictional test and that “the arbitral tribunal [would] decide whether the non-signatory party is indeed a party to the arbitration agreement.” The Court, in its reasoning, observed: “Applying the aforesaid prima facie examination standard, to my mind, what is evident is that the arbitration agreement between the constituents of the Society and the Developer is clearly in existence. The very basis of the Society coming into being is the bunch of agreements in each of which, the arbitration agreement is contained. The very formation of the Society is a facet contemplated in these agreements containing the arbitration clause. Prima facie, it is clear to me that the arbitration agreement is in existence and the Society, which is but a creature brought into being as contemplated in the agreements containing the arbitration agreement and whose constituents are parties to the arbitration agreement, is a veritable party to the arbitration agreement. Beyond this threshold, the Section 11 Court must be cautious not to pronounce upon any facet that would erode the sovereignty of the domain of the arbitral tribunal.” The Court further cautioned that “nothing contained herein is an expression of any opinion on the merits of the case” and left all merits and arbitrability challenges to the arbitral tribunal.

Background The dispute arose from development of a building known as Veer Tower. The developer constructed the building, executed sale agreements with individual flat purchasers, and conveyed the building to Veer Tower CHS Ltd after formation of the Society. Each sale agreement expressly recorded a prior registered gift deed of certain land portions and associated development rights in favour of Shree Dev Shasan Jain Shwetambar Murtipujak Trust (the Temple Trust), and each agreement contained an identical arbitration clause naming two potential arbitrators.

After formation of the Society (comprised of the flat purchasers), the Society filed Suit No. 2952 of 2022 in the City Civil Court (Dindoshi) seeking reliefs challenging aspects of the gift and development entitlements. The City Civil Court allowed applications under Section 8 of the Arbitration Act and held that the disputes fell within the arbitration agreements in the individual sale deeds. The Society challenged that Section 8 order by filing WP 7220 of 2023, which remained pending. Separately, a learned single judge allowed a deemed conveyance in WP 211 of 2023 by order dated February 18, 2025.

Following recusal of the two originally named arbitrators, the developer and the Temple Trust invoked arbitration in January 2025 and filed the present Section 11 applications seeking constitution of an arbitral tribunal. The Society resisted, contending it had no privity to the arbitration clause as a corporate body and that issues of arbitrability (including cancellation of gift deeds) fell outside arbitration. The High Court applied the prima facie test drawn from the Supreme Court’s Cox & Kings decision, held that all constituents had privity to identical arbitration clauses and that the Society’s very formation had been contemplated in those agreements; accordingly, the Society prima facie occupied the status of a veritable party. The Court left detailed joinder and arbitrability disputes to the arbitral tribunal under Section 16.

Final result: Both Section 11 applications were allowed; the disputes were referred to arbitration; Justice (Retd.) Akil Kureshi was appointed sole arbitrator; interim procedural directions were issued; parties were given liberty to raise jurisdictional objections before the tribunal.

Case Details: Case No.: Arbitration Application Nos. 103 of 2025 and 360 of 2025 (Bombay High Court, Original Side) Case Title: Shree Dev Shasan Jain Shwetambar Murtipujak Trust & M/s Bhadra Enterprises v. Veer Tower CHS Ltd. Appearances: For the Petitioner(s): Mr. Yogesh Naidu, a/w Eden D.H. Ribeiro & Khushbu Mota (for Applicants); (also appearing) counsel for Bhadra Enterprises as recorded. For the Respondent(s): Dr. Abhinav Chandrachud, a/w Pragya & Mr. Ameya Khot, i/b M/s Legal Vision; Mr. Aadil Parsurampuria, a/w Pragya & Mr. Ameya Khot (for Veer Tower CHS Ltd.)