Cooperative Society Is A “Veritable Party” To Arbitration Clause In Flat Agreements, Temple Trust Entitled To Arbitrate As Non-Signatory: Bombay High Court

“The very existence of the Society is rooted in the agreements containing the arbitration clause” – In a significant ruling reaffirming the doctrine of "persons claiming through or under" and clarifying the obligations of Cooperative Housing Societies formed by flat purchasers, the Bombay High Court held that the Veer Tower Cooperative Housing Society Ltd., although not a signatory, is a “veritable party” to the arbitration clause contained in the individual flat purchase agreements entered into between its members and the Developer, Bhadra Enterprises.

Justice Somasekhar Sundaresan, sitting on the Ordinary Original Civil Jurisdiction, also held that the Temple Trust, a non-signatory to the agreements but recipient of gifted land from the Developer as disclosed in every flat agreement, is entitled to invoke arbitration as a person claiming through the Developer under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996.

The Court allowed both Arbitration Applications and appointed Justice (Retd.) Akil Kureshi as the Sole Arbitrator, while leaving all jurisdictional objections to be determined by the Arbitral Tribunal under Section 16 of the Act.

“Each Flat Agreement Contained Arbitration Clause And Referred To Temple Trust’s Rights – Society Cannot Evade Arbitration”

Emphasising the continuity between individual contracts and the collective formation of the Society, the Court observed:

“Each and every member of the Society clearly had notice of what rights had been granted to the Temple Trust... the very constitution of the Society is contemplated in the bilateral agreements... which contain the arbitration agreement.”

Rejecting the Society’s claim of being a third party with no privity to the arbitration agreements, the Court held:

“This is not a reasonable stand. It would be a classic example of the Society being a veritable party to the collective arbitration agreement.”

It further added:

“The very cause of the Society’s existence is rooted in the agreements containing the arbitration clause.”

The Society had filed Suit No. 2952 of 2022 challenging the gift deeds in favour of the Temple Trust. This suit was rejected by the City Civil Court at Dindoshi via an order under Section 8, referring parties to arbitration. A writ petition against that order (WP No. 7220/2023) remains pending, but the High Court made it clear that under Section 8(3), such pendency cannot obstruct the appointment of an arbitrator under Section 11.

Non-Signatory Temple Trust Entitled To Arbitrate: Applying “Cox and Kings” Doctrine

The Temple Trust, a religious trust gifted land by the Developer and Original Owner via registered gift deeds in 2014 and 2022, sought to invoke arbitration against the Society. The Court applied the Supreme Court’s Constitution Bench ruling in Cox and Kings v. SAP India Pvt. Ltd., (2023) 10 SCC 1, stating:

“The Temple Trust falls into the category of a person claiming through the Developer, who is a party to the arbitration agreement.”

Justice Sundaresan clarified:

“It is loud and clear that the subject matter commonality and the denial of the Temple Trust’s entitlements lie at the heart of the Society’s Suit... these are disputes that ought to be addressed in arbitration.”

Referring to the Cox and Kings ratio, the Court affirmed:

“The referral court must prima facie rule on the existence of an arbitration agreement and whether the non-signatory is a veritable party. The final determination lies within the domain of the arbitral tribunal.”

Scope Of Section 11 Court Is Limited – Doctrine of Competence-Competence Affirmed

In line with the evolving jurisprudence post Vidya Drolia, Cox and Kings, and Cheran Properties, the Court reiterated the limited scope of a Section 11 Court:

“The Section 11 Court must resist the temptation to pronounce upon arbitrability or jurisdictional objections. These fall within the exclusive domain of the Arbitral Tribunal under Section 16.”

On the Society’s objection that the disputes involve cancellation of gift deeds and issues of deemed conveyance – allegedly non-arbitrable – the Court responded:

“This would fall within the ambit of what can be called “subject matter” arbitrability... the Section 11 Court must not tread upon the tribunal’s domain.”

Invocation Valid – Disputes Clearly Evident From Record

Rejecting the Society’s contention that the invocation of arbitration was defective, the Court observed:

“There is full clarity and notice of the stance of the Applicants... the objective of invocation is to put the counterparty to notice, which stands satisfied.”

It also found no merit in the Society’s claim that a Section 11 appointment would render their writ petition infructuous:

“Under Section 8(3), even when an application under Section 8 is pending, an arbitration may be commenced, continued and concluded.”

Court’s Directions – Justice (Retd.) Akil Kureshi Appointed As Sole Arbitrator

The Court directed the constitution of the arbitral tribunal in the following terms:

• Justice (Retd.) Akil Kureshi appointed as Sole Arbitrator

• All parties directed to appear before the Arbitrator as per directions

• All costs to be borne equally at first instance

• Tribunal to decide all jurisdictional and arbitrability objections under Section 16

• No expression of opinion on merits; parties free to file appropriate applications before the Tribunal

A Precedent On “Veritable Party” Doctrine And Joinder Of Non-Signatories

This judgment sets a precedent on several critical arbitration law issues:

• Housing Societies formed post flat purchases cannot evade arbitration clauses in flat agreements merely by virtue of juristic personality.

• Non-signatories, like the Temple Trust, may invoke arbitration if they are "claiming through or under" a signatory, especially when their rights were acknowledged in the base agreements.

• The Section 11 Court’s role is strictly limited to a prima facie examination; all deeper issues of arbitrability and jurisdiction must be left to the Arbitral Tribunal.

By holding the Cooperative Housing Society as a “veritable party”, the Court has upheld commercial intent and party autonomy embedded within standard housing development arrangements and reinforced the finality and binding nature of arbitration agreements.

Date of Decision: 10 February 2026