Bombay HC: Housing Societies Bound By Arbitration Clauses In Members' Sale Agreements

Mumbai: A cooperative housing society (CHS) cannot wriggle out of arbitration merely because it was not a signatory to the original agreements for sale, the Bombay High Court has ruled. The court held that a CHS is bound by arbitration clauses contained in the agreements signed by its individual members with the developer.

Petition Against Arbitration

Justice NJ Jamadar was hearing a petition filed by Shivranjan Towers Sahakari Griha Rachana Sanstha Maryadit against the arbitration initiated by the developer Bhujbal Construction.

Court Upholds Arbitrator’s Order

The petition challenged a May 14, 2025 order of a sole arbitrator who had dismissed the society’s jurisdictional objection under Section 16 of the Arbitration and Conciliation Act, 1996. Justice Jamadar upheld the arbitrator’s finding, stressing that when a society enforces rights under the same agreements, it cannot deny being subject to their dispute resolution mechanism.

Court’s Observation

“The Petitioner-society cannot claim that it is not bound by the arbitration clause contained in those Agreements,” the court observed, rejecting the society’s plea that it was non-signatory.

Pashan Land Dispute

The dispute arises from land at Pashan, Pune, where Bhujbal Constructions built five residential blocks — A-2, B-2, B-3, C-2 and C-3. Flat purchasers later formed the petitioner-society. After the builder failed to convey the land as required under the Maharashtra Ownership of Flats Act (MOFA), the society obtained a deemed conveyance in February 2019 for 16,280 sq mtrs.

Builder Invokes Arbitration

Bhujbal Constructions objected, claiming the society was entitled to only 7,469 sq mtrs, and invoked arbitration under clauses in the original sale agreements. The society countered that there was “no arbitration agreement” binding it, since it was not a party to those contracts and the deemed conveyance deed contained no such clause.

Arguments in Court

Senior Advocate Ashutosh Kumbhakoni, appearing for the society, argued that compelling arbitration amounted to a “patent lack of inherent jurisdiction” and urged that the case was one of “exceptional rarity.”

Developer’s Stand

Bhujbal Constructions’ counsel, SC Wakankar, however, submitted that once purchasers formed the society, all contractual rights and obligations “stood vested in the society,” including the arbitration clause.

Court’s Reasoning

The court agreed with the developer's arguments. It explained that cooperative societies, once formed, act as corporate bodies representing their members. Since the society had relied on the same agreements while seeking deemed conveyance, it could not deny being bound by their arbitration clauses.

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Minimal Judicial Interference

The court also reminded that judicial interference in arbitration must remain minimal. “The impugned order (of arbitrator) neither suffers from such a patent inherent lack of jurisdiction nor can be said to be so perverse as to stare in the face,” the judge ruled and dismissed the petition.