Consent Cannot Be Constructed: A Review Of M Space Master Realtors v Mulund Sandhyaprakash

Redevelopment disputes in Mumbai have long exposed a fault line in arbitration law. On one side lies the collective nature of a cooperative housing society, whose decisions bind even dissenting members; on the other lies arbitration, whose foundation remains consent. The two do not always sit comfortably together. The Bombay High Court's recent decision in M Space Master Realtors v Mulund Sandhyaprakash CHS Ltd. & Anr (M Space)^[1]is important because it squarely addresses that issue and, in my view, gets the law right.

The importance of M Space lies not merely in the fact that it rejects a developer's attempt to arbitrate against a dissenting society member. It lies in something more fundamental: it refuses to let the practical compulsions that a non-cooperating member of a redevelopment may face be construed as consent to arbitrate disputes with the developer. That clarification was badly needed. For some time now, redevelopment disputes have generated arguments that blur the distinction between being bound by a development agreement and being bound by an arbitration clause. M Space crystallises the distinction between the two.

Brief Facts

Mulund Sandhyaprakash CHS appointed M Space Master Realtors to redevelop its building. Nine out of ten society members supported the project and signed the Development Agreement (DA). One member, however, opposed the redevelopment, refused to sign the DA, and declined to vacate his premises. The developer moved the Court under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act), and eventually obtained possession. The member later executed a Permanent Alternate Accommodation Agreement (PAAA), which contained an arbitration clause, though not without protest and separate proceedings challenging it.

The dispute before the Court arose when the developer sought to invoke arbitration against that dissenting member, alleging that his obstruction had delayed the project and caused losses. The question was whether a member who had never signed the DA could be referred to arbitration under it, and whether the subsequent execution of the PAAA could make up for the absence of consent to the DA.

Developer's Submissions

The developer's case rested on a broad and commercially attractive proposition: that the dissenting member could not remain outside the arbitral framework once he took part in the redevelopment process.

The first argument was that the member was a beneficiary of the redevelopment and therefore could not deny the binding force of the DA's arbitration clause, especially once he participated in the process. The second was that, even as a non-signatory, he had become a “veritable party” to the redevelopment arrangement because he eventually vacated, participated in the redevelopment process, and executed the PAAA. The contention was that the DA and the PAAA were inextricably linked and formed part of the same transaction. Once the member signed the PAAA with an arbitration clause pursuant to the DA, arbitration could be invoked under either agreement. This, however, was a submission made across the bar since the developer invoked arbitration only under the DA.

The developer relied on Harshad B. Shah v A V S Realtors^[2] (Harshad) to submit that the absence of a physical signature is not always fatal if the contract and the parties' conduct otherwise show that they intended for the arbitration agreement to bind them. It further relied on Cox and Kings Limited v SAP India Private Limited & Anr^[3] (Cox and Kings) to argue that arbitration law no longer requires a narrow, formalistic understanding of who may be bound by an arbitration agreement. Finally, it urged the Court to adopt a restrained approach at the referral stage and leave issues of arbitrability to the arbitral tribunal under Section 16 of the Act.

Member's Submissions

The dissenting member's argument was essentially that the developer was attempting to turn his forced participation in the redevelopment into consent to arbitrate. He had never signed the DA and consistently opposed the project. The subsequent execution of the PAAA, according to him, did not amount to consent, because it took place after he lost possession and in circumstances where refusal would have jeopardised his rights.

He relied on earlier Bombay High Court judgments in Ketan Champaklal Divecha v DGS Township Pvt Ltd (Ketan Champaklal)[4] and Shankar Vithoba Desai v Gauri Associates[5] (Shankar Vithoba) to contend that signing the DA, or even participation in redevelopment, did not by itself amount to consent to be bound by the arbitration clause.

Court's Analysis and Findings

The Court's reasoning in M Space is persuasive because it brings the focus back to first principles. The real question was not whether the dissenting member benefited from the DA, or even whether he later became part of its implementation. The question was whether he had agreed to arbitrate under the DA. The Court held, correctly in my view, that the answer to this question still turns on consent and on the language of the arbitration agreement.

The Court first considered the judgments already delivered in similar factual situations. In Ketan Champaklal, the Court held that even when the members are signatories to the DA, an individual member cannot invoke arbitration when the arbitration clause does not permit it. In Shankar Vithoba, the Court held that members cannot invoke arbitration unless they are signatories to the DA.

At first glance, Harshad appeared to support the developer's case. In Harshad, the Court referred disputes between individual society members and the developer to arbitration even though the applicant members had not physically signed the development agreement. However, the Court distinguished Harshad on the facts. It noted that in Harshad, the development agreement and the PAAA were part of a tripartite arrangement. Further, the applicants therein had not signed only because they were physically outside India, and their conduct made their intention to arbitrate evident.

Having analysed the existing judgments, the Court dealt with M Space's submissions.

First, the Court considered whether rights and obligations under the DA were sufficient to impute consent to arbitrate based on the 'third-party beneficiary' doctrine. Referring to Cox and Kings, the Court found that merely having obligations and enjoying the benefits under the DA would not constitute consent to submit to the agreement's arbitration clause, which is a separate agreement, especially in the facts of the case in hand.

The Court then decided whether the dissenting member became a 'veritable party' to the DA, having subsequently participated in the redevelopment process. The Court once again referred to Cox and Kings, observing that for a non-signatory to be a 'veritable party', its level of performance of the agreement must be positive, direct, and substantial, not incidental. Since the member actively opposed the redevelopment, the Court held that he was not a veritable party to the DA.

The Court also rejected the developer's submission that the DA and the PAAA formed part of a single transaction, and that by executing the latter, the dissenting member became bound by the arbitration clause in the former. It further rejected the argument that, merely because an arbitration clause existed, the Court should adopt a “hands off” approach and leave the issue entirely to the tribunal. The Court therefore refused to refer the dispute to arbitration against the dissenting member, though it observed that the arbitration clause bound the nine members who signed the DA.

In a sense, M Space does more than resolve one redevelopment dispute. It makes clear that doctrines for impleading non-signatories are meant to identify genuine consent, not to create it where none existed.

Why M Space is Right

The judgment in M Space distinguishes a member's rights and obligations under a DA from those arising from an arbitration clause. The society's decision to redevelop binds a member, and he must vacate. He may even ultimately execute a PAAA and take possession of his new premises. None of that, however, means that he has agreed to arbitrate disputes under a DA he refused to sign.

The judgment also harmonises the ratios of the earlier decisions on the issue and, more importantly, stops the law from drifting toward a position where inevitability is mistaken for consent. By making clear that in such cases, arbitrability depends on consent and the language of the arbitration agreement, M Space provides much-needed clarity on the arbitrability of member-developer disputes in redevelopment projects.

The importance of the M Space judgment goes beyond redevelopment disputes. Doctrines under which non-signatories can be impleaded, such as composite transaction, non-signatory participation, third-party beneficiary status, and “veritable party,” were never meant to erase the requirement of consent. They are tools for identifying consent where it is real but imperfectly documented. They are not devices for constructing consent where it never existed. M Space is a timely reminder that arbitration depends on consent irrespective of other considerations.

1. 2026 LLBiz HC(BOM) 117

2. CARAP 372 of 2025 ↑

3. 2024 (4) SCC 1 ↑

4. ARBITRATION PETITION (L) NO.20483 OF 2023↑

5. COMM. ARBITRATION APPLICATION (L.) NO. 21070 OF 2023↑

Author is an Advocate practicing at Bombay High Court. Views are personal.