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 FactsMulund 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 SubmissionsThe 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 SubmissionsThe 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 FindingsThe 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...

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

Dushyant Krishnan

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Dushyant Krishnan

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

Dushyant Krishnan

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Dushyant Krishnan

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