Court’s Decision
The Bombay High Court dismissed a writ petition filed by a cooperative housing society challenging the arbitrator’s jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996. The Court held that the society, though not a signatory to the original Agreements for Sale, could not avoid arbitration since it was enforcing rights derived from those very agreements.
The Court emphasized:
“When a cooperative society seeks to enforce rights created in favour of its members under Agreements for Sale, it cannot claim immunity from the arbitration clause embedded in those agreements.”
Facts
Respondent nos. 2 to 8 were original landowners of Survey Nos. 12/19+20+22+23+29+30+31 in Pune, admeasuring 27,800 sq. mtrs. Development rights were granted to Respondent no. 1, a partnership firm, which constructed five buildings (A-2, B-2, B-3, C-2, and C-3) and sold flats under Agreements for Sale containing arbitration clauses.
Flat purchasers formed the petitioner-society after Respondent no. 1 failed to form one as required under MOFA. When Respondent no. 1 failed to convey title, the society obtained deemed conveyance for 16,280.70 sq. mtrs by order of the Competent Authority dated 28.12.2018, registered on 13.02.2019.
Respondent no. 1 invoked arbitration under Clause 38 of the Agreements for Sale, claiming the society was entitled to only 7,469.39 sq. mtrs. The arbitrator, by order dated 14.05.2025, rejected the society’s Section 16 objection, holding it bound by the arbitration clause. The society filed the present writ petition.
Issues
- Whether a cooperative housing society, not being a signatory to the Agreements for Sale, can be compelled to arbitrate disputes arising from those agreements.
- Whether the absence of an arbitration clause in the Deed of Deemed Conveyance excludes arbitral jurisdiction.
- Whether the arbitrator’s order under Section 16 could be challenged through writ jurisdiction instead of Section 34 proceedings.
Petitioner’s Arguments
The petitioner-society argued that it was not a signatory to the Agreements for Sale and therefore not bound by their arbitration clauses. It contended that the Deed of Deemed Conveyance, which vested title in the society, contained no arbitration clause. Reliance was placed on Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024) and BKS Galaxy Realtors LLP v. Sharp Properties (2024), which held that once conveyance is executed, the Agreement for Sale and its arbitration clause cease to have effect.
The petitioner also argued that writ jurisdiction was justified since this was a case of “patent lack of jurisdiction” where the arbitrator wrongly compelled a non-signatory to arbitrate.
Respondent’s Arguments
Respondent no. 1 contended that the society was formed by individual flat purchasers who were parties to the Agreements for Sale, and the society’s rights flowed directly from those agreements. Since the society was enforcing obligations under the agreements, it could not deny the arbitration clause.
It further argued that under Section 16 of the Arbitration Act, jurisdictional challenges must await the final award and be tested under Section 34. Reliance was placed on Deep Industries Ltd. v. ONGC (2020), Punjab State Power Corp. v. EMTA Coal (2020), and Bhaven Construction v. Executive Engineer (2022), cautioning against writ interference in arbitral proceedings.
Analysis of the Law
The Court reiterated that the Arbitration Act is a self-contained code, limiting judicial intervention (Section 5) and prescribing specific remedies (Section 34). Orders rejecting Section 16 objections cannot ordinarily be challenged in writ jurisdiction unless there is a glaring lack of jurisdiction leaving a party remediless.
On the status of cooperative societies, the Court relied on Daman Singh v. State of Punjab (1985), holding that once individuals form a cooperative society, they lose independent identity qua the society, which alone represents their rights. Thus, a society cannot claim to be a third party to disputes arising from agreements entered into by its members.
Precedent Analysis
- Deep Industries Ltd. v. ONGC (2020) 15 SCC 706 – Writs under Article 227 should be rare, only for orders patently lacking jurisdiction. Applied.
- Punjab State Power Corp. v. EMTA Coal (2020) 17 SCC 93 – Misuse of writ jurisdiction in arbitration matters discouraged. Applied.
- Bhaven Construction v. Executive Engineer (2022) 1 SCC 75 – Judicial review permissible only in cases of bad faith or remedilessness. Applied.
- Daman Singh v. State of Punjab (1985) 2 SCC 670 – Cooperative societies are corporations; members act only through them. Applied.
- Arunkumar H. Shah HUF v. Avon Arcade Premises CHS Ltd. (2025) – Competent Authority’s deemed conveyance order does not bar civil/arbitral proceedings on title. Applied.
- Mazda Construction Co. v. Sultanabad Darshan CHS Ltd. (2012 Bom.) – Deemed conveyance does not conclude title disputes. Applied.
- Radhakrishna Ananta Prabhu v. Giri Construction (1992 Bom.) – Pre-incorporation contracts enforceable by cooperative societies. Applied.
Court’s Reasoning
The Court rejected the petitioner’s reliance on absence of an arbitration clause in the conveyance deed, holding that such deeds are unilateral statutory instruments, not consensual contracts. The arbitration agreement survived through the Agreements for Sale, which created the society’s rights.
Since the society was enforcing those very agreements before the Competent Authority, it could not repudiate their arbitration clauses. By analogy to pre-incorporation contracts, once the cooperative society was formed, it inherited both rights and obligations, including arbitration.
The arbitrator’s order did not suffer from patent lack of jurisdiction. The society had adequate remedies under Section 34. Hence, writ interference was unwarranted.
Conclusion
The High Court dismissed the writ petition with costs, upholding the arbitrator’s jurisdiction. It held that cooperative societies formed by flat purchasers are bound by arbitration clauses in their Agreements for Sale, and disputes over deemed conveyance are arbitrable.
Implications
This judgment reaffirms minimal judicial interference in arbitration and clarifies that housing societies cannot avoid arbitration by invoking non-signatory status. It strengthens the enforceability of arbitration clauses in real estate disputes, ensuring developers and societies resolve disputes through agreed mechanisms. It also underscores that writs cannot substitute statutory remedies under Section 34.
FAQs
1. Can a housing society avoid arbitration by claiming it was not a signatory to the flat buyers’ agreements?
No. The Court held that societies formed by flat buyers inherit rights and obligations, including arbitration clauses.
2. Does absence of an arbitration clause in a deemed conveyance deed bar arbitration?
No. A deemed conveyance is a statutory instrument, not a consensual contract. Arbitration arises from the original Agreements for Sale.
3. When can writ jurisdiction interfere with arbitrator’s orders on jurisdiction?
Only in rare cases of patent lack of jurisdiction or bad faith, not where remedies under Section 34 exist.
