Arbitration cannot be invoked by individual society members for disputes with developers arising from development agreement (DA) between the housing society and the Developer, the Bombay High Court has observed.
“In this Court’s opinion, arbitration cannot be invoked by individual members or groups of members of the Society for resolving the disputes emanating from the conduct of the Developer, even if such 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,” Justice Somasekhar Sunderesan said recently.
The HC was hearing a application filed by 11 members of Dahisar Chunabhatti Panchtantra Co-Operative Housing Society Limited seeking to invoke Section 11 of the Arbitration and Conciliation Act, 1996 in relation to disputes under the DA for the re-development of their society.
The society, comprising 40 members, executed a DA on June 29, 2018, with M/s Gauri Associates AOP to redevelop their building.
On March 13, 2023, these members issued a notice to the Society and the developer purporting to invoke arbitration. The court noted that the Society has not provided consent to the members on whose behalf the notice was issued, to invoke arbitration on its (society's) behalf. The developer replied to the notice on April 18, 2023, questioning the authority of those on whose behalf the notice was sent.
As there was no positive response, the members approached the HC.
Advocate for petitioners submitted that the expression “THE SOCIETY” in the title clause of the Development Agreement is deemed to mean and include, among others, all its members.
Justice Somasekhar remarked that he is “unable to be persuaded by this novel argument”.
The court noted that it is an admitted position that the individual members are not signatories to the arbitration agreement. Also, the fundamental requirement under Section 7 of the Arbitration Act, that the arbitration agreement has to be in writing among the parties to the arbitration proceedings, has also not been met, the court added.
The judge referred to an earlier high court order which declared the law on the subject and articulated it threadbare, including facets of how individual members give up their individual desires and identity by submitting to the collective will of a housing society.
The court, accordingly, held that the applicants would not be able to invoke arbitration under the Arbitration & Conciliation Act, and rejected the plea.
