S.9 Application Not Appropriate For Relief Against Non-Signatory When There Is No Dispute Between Parties To Be Referred To Arbitration: Bombay HC

Factual Overview:

The dispute arose regarding a Redevelopment Agreement (RDA) and a Supplementary Agreement (SA) dated 20 July 2022. The agreement was entered between the Developer (Petitioner) and the Co-operative Housing Society Limited (Respondent No. 1), comprising eleven members. The RDA was individually signed by each of the eleven members of the society. The Respondent No. 2 (R-2) is neither a member of the society nor has signed the RDA.

The petition pertains to a plot of land whose development rights were granted to M/s Gulshan Construction vide a deed of assignment by the owner. The company constructed two structures on the plot, namely A-Wing and B-Wing. The A-Wing initially comprised a ground floor and three upper floors, and B-Wing comprised a ground floor and two upper floors. Later, a fourth floor was added to the A-Wing. All the eleven flats in A-Wing were sold, i.e., the eleven members of the society. The flats in B-Wing were kept unsold and later reserved by a partner of M/s Gulshan Construction for personal use. In 1993, the partner sold all flats in B-Wing to R-2, who, since 2001, has been independently assessed from property tax and has independent water and electricity connections. The bills raised for the same are paid by R-2. The two buildings are segregated by a compound wall, with a separate entrance to both.

In 2006, the flat owners of A-Wing formed the society. In 2018, during a Special Body Meeting (SGM), the society resolved to undertake redevelopment. However, according to the petitioner, due to the non-cooperation on the part of R-2, the work did not commence. The society thereafter applied for a unilateral deemed conveyance concerning the land and structure in question, contested by R-2. However, the Competent Authority vide order dated 7 September 2020 granted the deemed conveyance. The said decision was challenged by R-2 by filing a writ petition, which is presently pending.

R-2 rejected the petitioner's offer to the society for the redevelopment, claiming exclusive possession of B-Wing. The R-2 was then notified by the society of the RDA and SA's execution and registration. The R-2 was then asked to approve the redevelopment, which the R-2 declined. The redevelopment plans were later approved by the MCGM after the petitioner received an Intimation of Disapproval (IOD). The society then requested the R-2 sign and registered the Permanent Alternate Accommodation Agreement (PAAA) and hand over the apartment possessions. The petitioner addressed a letter to R-2 stating that R-2 had never applied for membership of the society, and opposed the grant of the deemed conveyance by suppressing the purchase agreements. The R-2 did not comply with the petitioner's request, and therefore, the petitioner filed the petition.

Submissions:

The petitioner made the following submissions:

• The society is the rightful owner of the land under Wing A & B. No legal barrier is present to prevent the society from redeveloping the property. Also, with respect to the challenge to the deemed conveyance by the R-2, no steps were taken by him to expedite the hearing of the petition, and the interim order does not stay with the order of 7 September 2020.
• R-2 not being a member of the society would not have any difference as the Court can grant interim relief against third parties to protect the subject matter of the arbitration agreement. To buttress this, the counsel placed reliance on Choice Developers v. Pantnagar Pearls CHS Ltd. & Ors (2022).
• Minority members/occupants of a co-operative housing society could not hinder the redevelopment project approved by the majority based on any independent right or dispute with the society. To buttress the argument, reliance was placed on Girish Mulchand Mehta & Anr. v. Mahesh S. Mehta & Anr (2010) and M/s Dem Homes LLP v. Taruvel CHSL & Ors. (2024).
• Reliance placed by the R-2 on the agreement for sale is an unregistered agreement and does not create rights pertaining to the land under B-Wing. The agreement also provided for the purchaser of B-Wing to be admitted as a member of the society, and R-2 cannot demand the partition of the property because the said building is indivisible.
• The R-2 was treated at par with the eleven members of the society and was granted an additional area of 22% over and above the existing space occupied by R-2. The R-2 cannot be said to be devoid of any rights or entitlement as a result of the said redevelopment. Furthermore, clause 5(c) of the RDA was amended to incorporate the term 'occupant' in order to ensure that R-2 receives equal shares under the redevelopment plan.

The Respondent No. 1 made the following submissions:

• The writ petition filed by the R-2 became infructuous in light of the order dated 7^th September 2020, and the society executed a unilateral Deed of Assignment and Transfer dated 8^th April 2021.
• Per Section 55(2) of the Transfer of Property Act, any independent claim of R-2 ceased to exist upon executing the Unilateral Deemed Conveyance.
• The Approved sanction plan of the society, the architect's certificate, and the RDA all unequivocally established that Wings 'A' and 'B' are part of a single conjoined structure. Furthermore, Paying independent property taxes does not confer ownership of Wing 'B' upon R-2.
• The present petition aims to facilitate the redevelopment of both Wings, which is the subject matter of the RDA. Per Choice Developers, the Court has the authority to evict non-cooperating non-members/occupants of the society.

The R-2 made the following submissions:

• The R-2 was neither a member of the society nor a signatory to the RDA. Placing reliance on Nissa Hoosain Nensey v. Pali Hill Neptune CHSL & Ors, it was argued that the Court, in similar facts, held that the redevelopment agreement executed by individual members would not bind the non-signatory member of the society.
• The agreement dated 22 July 1993 between the R-2 and M/s. Gulshan Construction specifically granted the exclusive possession of certain common areas to the R-2. The same was acknowledged by the society for the last 30 years. Furthermore, the requirements laid down in the 2004 circular issued by the Government of Maharashtra regarding separate entrances, electricity meters, water tanks, etc., were conformed to by the R-2.
• The challenge to the order granting the Deemed Conveyance was pending before this Court. If the said Conveyance and Unilateral Deed of Assignment were assumed to be valid, they only pertained to the land beneath B-Wing. The R-2 continues to be the owner of the structure of B-Wing itself, and the petitioner has no right to dispose of the R-2 from B-Wing. Furthermore, the ratio in Girish Mulchand Mehta, Dem Homes would not apply to this case since, in both cases, the dispute was between the non-cooperative members of the society and non-members occupant/s. Similarly, the judgment in Choice Developers dealt with opposition to the redevelopment by a person who was not a member of the society but was claiming to be one. Therefore, the petition is devoid of merits and should be dismissed.

Analysis of the Court:

The Court observed that they must be satisfied with the existence of an arbitration agreement before granting relief under Section 9. In the present case, there is no arbitration agreement between the Petitioner and Respondent No.2. The arbitration clause contained in the RDA is between the petitioner and the society, to which Respondent No.2 was not a party. Also, Respondent No.2 was neither a member of the society nor applied for their membership. The Respondent No.2 is not bound by the RDA/Arbitration Agreement.

The Court observed that the interim relief is in nature to aid the final relief. To seek relief u/s 9 of the A&C Act, the parties must intend to refer the dispute to arbitration. There is no dispute between the petitioner and the society, and the intention to ultimately refer the dispute to arbitration and seek final relief is absent.

The judgments rendered in Girish Mulchand Mehta, Dem Homes, Choice Developers pertained to individuals against whom relief was sought who were either members of the concerned Societies or had applied for membership in the society, which had entered into the development agreement forming the basis of the petition u/s 9. Thus, the identity of these members merged with that of the society and were consequently bound by the will of the majority of society's members. Here, the R-2, being an occupant of a property in Wing-B recognised as a "Bungalow," has independent water and electricity connections and is separately assessed for property tax. The parties' conduct clearly shows that the society has consistently treated the 'B' Wings as separate and distinct from themselves.

The Court observed that there is no arbitration agreement between the society and Respondent No.2. In order to pursue legal actions against the R-2, appropriate proceedings are the way forward and not a Section 9 petition. Therefore, the petitioner, having no privity with the R-2, cannot use the mechanism of Section 9 of the A&C Act to seek relief against R-2, which the society could not have obtained.

The Court also observed that the society obtaining a deemed conveyance deed in their favour would not entitle them to evict or bind R-2 to the RDA. The same would not conclusively determine questions of title that R-2 may raise in future. Furthermore, the R-2 challenged the order by which the deemed conveyance was granted in favour of the society. Therefore, the ratios of Girish Mulchand Mehta, Dem Homes, and Choice Developers are not applicable to the facts of the case.

The Court dismissed the petition, labelling it to be a misuse of the Section 9 mechanism, and imposed a cost of Rs. 5 lac on the petitioner.

Case Title: Gulshan Townplanners LLP v. Gulshan Co-operative Housing Society Limited & Anr. (COMMERCIAL ARBITRATION PETITION (L) NO. 34078 of 2023)

Citation: 2024 LiveLaw (Bom) 616

 Counsel for the Petitioner: Mr. Shanay Shah a/w Smit K. Nagda.

Counsel for the Respondent No. 1- Mr. Mayur Khandeparkar a/w Pankaj S. Pandey.

Counsel for the R-2- Mr. Simil Purohit, Senior Advocate a/w Arshil Shah i/by Parisha Shah a/w Smita Durve, Rasesh Shah, Tanmay Gujarathi, Vishal Pattabiraman and Rutwij Bapat.

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