An arbitration clause contained in an earlier agreement stands incorporated into a later agreement where the later contract expressly provides that all terms and conditions of the earlier agreement shall form part of and bind the parties to the later agreement.

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Facts

Hirani Developers entered into a Development Agreement dated 20.12.2011 with a cooperative housing society for redevelopment of a dilapidated project.

Clause 36 of the Development Agreement contained an arbitration clause providing that disputes would be resolved through arbitration under the Arbitration and Conciliation Act, 1996.

Subsequently, the developer executed separate Permanent Alternate Accommodation Agreements with individual society members. Clause 14 of these later agreements stated that all terms and conditions of the Development Agreement “shall be construed to form a part” of the later agreements and “all clauses” thereof would bind the parties.

Disputes later arose and the society members initiated proceedings under the Consumer Protection Act, 2019. The developer invoked arbitration under s. 21 Arbitration Act and sought appointment of an arbitrator under s. 11 Arbitration Act.

The Bombay High Court dismissed the applications holding that the later agreements did not independently contain an arbitration clause and that a mere reference to the earlier Development Agreement was insufficient under s. 7(5) Arbitration Act.

Issues Framed

Whether Clause 14 of the Permanent Alternate Accommodation Agreements validly incorporated the arbitration clause contained in the earlier Development Agreement.

Court’s Reasoning

(a) Scope of s. 7(5) Arbitration Act

The Court analysed s. 7(5) Arbitration and Conciliation Act, 1996, which recognises incorporation of arbitration clauses by reference where the reference makes the arbitration clause part of the contract (Para 8).

The Court relied extensively on M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696, particularly the distinction between:

(a) a mere reference to another document; and
(b) incorporation of another document in entirety (Paras 9–11).

The Court reproduced the principle that where a contract provides that another document shall “form part and parcel” of the contract or that “all terms and conditions” thereof shall apply, the incorporated document is bodily lifted into the later contract, including its arbitration clause.

(b) Intention to incorporate entire Development Agreement

The Court held that Clause 14 of the later agreements unequivocally demonstrated the parties’ intention to incorporate the Development Agreement “body and soul” into the Permanent Alternate Accommodation Agreements (Paras 11–12).

The Court observed that Clause 14 did not merely refer to the Development Agreement for a limited purpose but expressly stated:

“all the terms and conditions” and “all clauses” of the Development Agreement would bind the parties. (Para 11)

Accordingly, the arbitration clause contained in Clause 36 stood incorporated into the later agreements.

(c) Error by the High Court

The Court held that the High Court misapplied s. 7(5) Arbitration Act by treating the case as one of mere reference rather than incorporation by assimilation (Para 13).

The Court clarified that the respondent members became bound by the arbitration clause because the later agreements expressly imported the earlier agreement in entirety.

Held

The Supreme Court allowed the appeals and set aside the Bombay High Court’s order.

The Court held that a valid arbitration agreement existed between the parties through incorporation by reference under s. 7(5) Arbitration Act.

Mr. Vishal Kanade, Advocate, Bombay High Court, was appointed as Sole Arbitrator to adjudicate disputes between the parties.

Ratio

Under s. 7(5) Arbitration and Conciliation Act, 1996, an arbitration clause contained in an earlier agreement becomes binding through incorporation where the later contract expressly provides that all terms, conditions, and clauses of the earlier agreement shall form part of and bind the parties to the later agreement

Case Details

Citation: 2026 INSC 484
Decided on: 13 May 2026
Case Title: Hirani Developers v. Nehru Nagar Samruddhi CHS Ltd. and Another
Court: Supreme Court of India
Bench: Justice Sanjay Kumar and Justice K. Vinod Chandran