The dispute arose from a redevelopment project involving Hirani Developers and members of a housing society. The original development agreement of 2011 contained an arbitration clause. Subsequently, individual society members entered into permanent alternate accommodation agreements with the developer in 2023 and 2024 regarding accommodation arrangements during redevelopment. These later agreements did not contain a separate arbitration clause, however clause 14 provided that all terms and conditions of the earlier development agreement shall be construed to form a part of the agreements and all clauses thereof would be binding on the parties. Subsequently, disputes arose between the parties and some members approached the Consumer Disputes Redressal Commission under the Consumer Protection Act, 2019. The developer invoked arbitration and issued notices seeking the appointment of an arbitrator. The respondents refused, arguing that no arbitration agreement existed between the developer and individual members. The Bombay High Court accepted the argument and dismissed applications filed u/s. 11 of the Arbitration and Conciliation Act, 1996. Againat that order, the developer approached the Supreme Court.

A 2-Judges Bench of the Supreme Court cited s.7(5) and held –

“8. Section 7 of the Arbitration Act is titled ‘Arbitration agreement’. Section 7(5) therein provides that the reference in a contract to a document containing an arbitration clause would constitute an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”

Referring to clause 14, the Bench further held –

            “12. This was, thus, not a case of mere reference to an earlier agreement but a case where the parties to the later contract clearly intended to import the Development Agreement, body and soul, into the later agreements. Therefore, there can be no doubt as to the incorporation of Clause 36 of the Development Agreement, i.e., the arbitration clause, into the Permanent Alternate Accommodation Agreements.

13. Viewed thus, the High Court was in error in its understanding of the legal position obtaining under Section 7(5) of the Arbitration Act, as explained by this Court in the aforestated decisions. This was a fit case for the High Court to have accepted the plea of the appellant that there was an arbitration agreement between the parties by incorporation.”

and set aside the impugned order, allowed the appeal and appointed a sole arbitrator to resolve the disputes and differences between the appellant and the respondent members.