Bombay High Court Appoints Arbitrator Against Original Owners in Redevelopment Dispute; Holds Subsequent Leasehold Assignee Not Bound by Arbitration Clause Absent Assignment, Adoption or Consent
Bombay High Court Appoints Arbitrator in 2007 Redevelopment Dispute; Keeps Limitation Open but Excludes Later Property Assignee From Arbitration
Facts
Shree Satguru Developers, Umesh Pravinchandra Bhatt and Mohd. Zahid Abdul Samad Mukhi filed a Section 11 application seeking appointment of an arbitrator in disputes arising from a registered Assignment of Development Rights/Development Agreement dated 12 November 2007. The applicants were developers appointed by the original owners, while Respondent No.1, Chandrashekhar Champalal Hingarh, subsequently acquired leasehold rights in the property.
Under the 2007 agreement, consideration payable to the owners was fixed at ₹5.5 crore, of which the applicants claimed to have ultimately paid approximately ₹5.21 crore. The owners were also required to assist the developers in securing cooperation and vacation of premises by tenants. Clause 39 contained the dispute-resolution and arbitration mechanism.
The redevelopment encountered prolonged difficulties due to tenant demands, changes concerning fungible FSI, restrictions on TDR and subsequent regulatory developments. The applicants submitted revised plans and obtained permissions from time to time.
On 18 December 2015, Respondent Nos.3 and 4 issued a notice terminating the development arrangement. The applicants disputed the termination and subsequently sought its withdrawal. In 2017, during later discussions, the owners allegedly demanded further money to demonstrate the developers’ bona fides and accepted an additional ₹10 lakh.
The applicants nevertheless continued taking steps concerning redevelopment. They obtained, among other permissions, a Civil Aviation NOC, Fire NOC, revised IOD and AAI NOC.
On 13 August 2024, Respondent Nos.2 to 4 executed an assignment in favour of Respondent No.1, under which Respondent No.1 acquired leasehold rights in the property. The applicants later discovered that Respondent No.1 had submitted its own redevelopment proposal. They therefore invoked Clause 39 on 30 April 2026 against the respondents.
Respondent No.1 denied being bound by the arbitration agreement, while Respondent Nos.2 to 4 contended that the development agreement had long stood terminated and that the developers’ claims were barred by limitation.
Issues
The principal issues before the Bombay High Court were:
- whether Respondent No.1, having subsequently acquired leasehold rights in the property, became bound by Clause 39 of the 2007 Development Agreement;
- whether a person acquiring an interest in property automatically becomes an “assignee” of contractual rights and obligations under an earlier Development Agreement;
- whether the Court could refer a non-signatory to arbitration merely because it had knowledge of the existing development rights or intended to redevelop the property;
- whether the applicants’ claims against the original owners were barred by limitation because the Development Agreement had been terminated in 2015 and arbitration was invoked only in 2026; and
- whether limitation should be finally decided by the Section 11 Court or left to the arbitral tribunal under Section 16.
Applicants’ Arguments
The applicants relied principally on SBI General Insurance Co. Ltd. v. Krish Spinning to contend that detailed questions of limitation should not be adjudicated by the referral court under Section 11.
They argued that Respondent No.1 was an assignee of Respondent Nos.3 and 4, and therefore stood in their shoes and was bound by Clause 39 of the Development Agreement.
They further relied upon their substantial performance and continuing assertion of rights: payment of approximately ₹5.21 crore, additional payment of ₹10 lakh after the alleged termination, procurement of redevelopment approvals, dealings with tenants and consent terms recognising them as developers.
According to them, these subsequent events showed that the contractual relationship did not simply come to an end upon the 2015 termination notice and therefore the limitation objection required adjudication on evidence by the arbitrator.
Respondent No.1’s Arguments
Respondent No.1 argued that it had no Development Agreement or arbitration agreement with the applicants.
Its case was that the 2007 Development Agreement created personal contractual rights between its original signatories. Such contractual obligations did not automatically run with the land.
Respondent No.1 had acquired only the leasehold rights in the property under the Indenture of Assignment dated 13 August 2024; it had not taken an assignment of the Development Agreement itself.
It further argued that the Development Agreement had already been terminated in 2015/2016 and that the applicants had failed to challenge the termination within limitation.
Analysis of the Law
1. Section 11 Inquiry Is Limited
Justice Amit Borkar reiterated that after Section 11(6-A), the referral court ordinarily confines itself to the existence of an arbitration agreement and does not undertake a full trial.
Relying on Ajay Madhusudan Patel v. Jyotrindra S. Patel and Duro Felguera, the Court recognised that extensive factual adjudication belongs to the arbitral tribunal.
However, a distinct question arises when arbitration is sought against a person who was not a signatory to the underlying contract.
In such cases, the Court must at least examine whether there is a prima facie legal foundation for treating the non-signatory as bound.
2. Clause 39 Was Expressly Between “Parties Hereto”
Clause 39 first contemplated resolution through a three-member committee and, if unresolved, referral to a sole arbitrator jointly nominated by the “parties hereto.”
The clause expressly dealt with disputes between the contractual parties and did not state that every future person obtaining an interest in the property would automatically become bound.
The Court therefore held that the clause could not automatically extend to every subsequent lessee or transferee.
3. Lease Is Not the Same as Assignment of Contract
This was the central legal holding.
The Court drew a clear distinction between:
- assignment of an interest in property, and
- assignment of contractual rights and obligations under a Development Agreement.
A lease or assignment of leasehold rights transfers an interest in property. It does not, merely for that reason, transfer the earlier Development Agreement or its arbitration clause.
A subsequent holder may become bound where there is evidence of:
- assignment of contractual rights and obligations;
- express incorporation of the Development Agreement;
- written consent;
- novation;
- acceptance of contractual obligations; or
- unequivocal conduct adopting the agreement and arbitration clause.
Thus, the expressions “lessee” and “assignee” are not interchangeable.
4. Mere Acquisition of Property Rights Was Insufficient
The Court found no document showing that Respondent No.1 had taken an assignment of the 2007 Development Agreement.
Nor was there any subsequent agreement under which Respondent No.1 accepted Clause 39 or assumed the rights and obligations of the original owners under that agreement.
The applicants relied essentially upon Respondent No.1’s acquisition of leasehold rights in the property, but the Court held that this was insufficient because acquisition of property rights and acquisition of contractual rights are separate matters.
5. Knowledge Is Not Consent to Arbitration
The applicants argued that Respondent No.1 knew of their asserted development rights and had itself sought redevelopment permission.
The Court rejected this as a basis for arbitration.
Knowledge that another party claims contractual rights is materially different from consent to arbitration.
Likewise, the fact that Respondent No.1’s redevelopment proposal was allegedly affected by the applicants’ subsisting claims established the existence of a dispute over the property—but the existence of a dispute does not itself create an arbitration agreement.
6. Consent Terms With Tenants Could Not Bind Respondent No.1
The applicants also relied upon consent terms entered into with tenants, under which they were recognised as developers.
The Court held that such consent terms could not create privity between the applicants and Respondent No.1 because Respondent No.1 was not a party to those arrangements.
Precedent Analysis
Ajay Madhusudan Patel v. Jyotrindra S. Patel
The Supreme Court reiterated that Section 11(6-A) confines the referral court principally to the existence of an arbitration agreement.
However, where a non-signatory is sought to be joined, the court must still prima facie examine whether that person can legitimately be treated as a party to the arbitration agreement.
Cox & Kings Ltd. v. SAP India Pvt. Ltd.
The High Court recognised that a non-signatory is not automatically excluded merely because it did not sign the contract.
Where there is sufficient prima facie material suggesting that the non-signatory became a veritable party, detailed questions can be left to the arbitral tribunal.
But here, there was no corresponding assignment of the Development Agreement, no adoption of Clause 39 and no material establishing consent by Respondent No.1.
SBI General Insurance Co. Ltd. v. Krish Spinning
This authority governed the limitation question.
The Supreme Court held that at the Section 11 stage, the referral court ordinarily examines only whether the Section 11 application itself has been filed within limitation. It should not undertake an intricate evidentiary inquiry into whether individual substantive claims are time-barred.
That detailed question belongs to the arbitral tribunal.
Limitation
The original owners relied heavily upon the termination notice dated 18 December 2015, whereas arbitration was invoked only on 30 April 2026.
The Court expressly acknowledged the significant lapse of time.
However, the applicants relied upon subsequent events including:
- their reply to termination;
- negotiations in 2017;
- the additional ₹10 lakh payment allegedly demanded and accepted by the owners;
- continuing redevelopment permissions;
- dealings with tenants;
- the 2024 assignment; and
- continued assertion of development rights.
Whether those events legally affected accrual of the cause of action, subsistence of contractual rights or limitation required consideration of documentary and factual evidence.
Accordingly, the High Court refused to finally determine limitation under Section 11.
The objection was expressly left open for decision by the arbitral tribunal under Section 16.
Court’s Reasoning
The Court divided the respondents into two materially different categories.
As against Respondent Nos.2 to 4, there was no dispute that they were parties to the 2007 Development Agreement and therefore parties to Clause 39.
Their principal defence was limitation. That objection was appropriate for adjudication by the arbitrator.
As against Respondent No.1, however, the defect went to the existence of an arbitration agreement itself.
Respondent No.1 had only acquired leasehold rights. The applicants could not produce any document showing:
- assignment of the Development Agreement;
- contractual novation;
- adoption of Clause 39;
- acceptance of the original owners’ contractual obligations; or
- independent consent to arbitrate.
Accordingly, there was no prima facie basis to compel Respondent No.1 to arbitration.
The Court therefore held that a person does not become bound by an arbitration clause simply because it subsequently acquires an interest in the property to which the underlying contract relates.
Conclusion
The Bombay High Court partly allowed the Section 11 application.
The disputes between the applicants and Respondent Nos.2 to 4 arising from the Development Agreement dated 12 November 2007 were referred to arbitration.
Mr. Amrut Joshi, Advocate, was appointed Sole Arbitrator. The tribunal was authorised to determine all claims, counterclaims, jurisdictional objections and, importantly, the entire limitation controversy.
However, the prayer seeking arbitration against Respondent No.1 was rejected, because Respondent No.1 had not been shown to be a party to Clause 39 merely by acquiring leasehold rights in the property.
Case Details
Case: Shree Satguru Developers & Ors. v. Chandrashekhar Champalal Hingarh & Ors.
Citation: 2026:BHC-OS:19815.
Court: High Court of Judicature at Bombay, Ordinary Civil Jurisdiction.
Case Number: Arbitration Application (L) No. 27816 of 2026.
Judge: Justice Amit Borkar.
Reserved on: 2 September 2026.
Pronounced on: 7 September 2026.
Subject: Section 11 Arbitration and Conciliation Act; redevelopment agreement; non-signatory assignee; leasehold rights; assignment of contract; arbitration consent; limitation; Section 16 jurisdiction.
Result: Application partly allowed. Arbitration directed against Respondent Nos.2 to 4 with Mr. Amrut Joshi appointed Sole Arbitrator; limitation left open to the tribunal. Arbitration against Respondent No.1 rejected because acquisition of leasehold rights did not make him a party to the Development Agreement or its arbitration clause.
