The Supreme Court of India has held that an arbitration clause from a primary agreement can be incorporated into subsequent agreements by reference if the later contract demonstrates a clear intention to import the earlier document in its entirety. Setting aside an order of the Bombay High Court, the Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran observed that a specific clause stating all terms of a previous agreement “shall be binding” constitutes a firm commitment to arbitration.
Background
The appellant, Hirani Developers, a real estate proprietary concern, entered into a Development Agreement on December 10, 2011 (registered in July 2012) with Nehru Nagar Samruddhi Co-operative Housing Society Ltd. for a redevelopment project. Clause 36 of this Development Agreement provided for a dispute resolution mechanism through a sole arbitrator.
Subsequently, between September 2023 and January 2024, the appellant entered into separate Permanent Alternate Accommodation Agreements (PAAA) with the society and individual members. Clause 14 of these individual agreements stated: “It is clarified that all the terms and conditions of the Development Agreement dated 04/07/2012 shall be construed to form a part of these presents and all the clauses of the same shall be binding on the parties hereto.”
When disputes arose and members filed complaints under the Consumer Protection Act, 2019, the appellant invoked Clause 36 and sought the appointment of an arbitrator.
Proceedings before the High Court
The High Court of Judicature at Bombay dismissed five applications filed by the appellant under Section 11 of the Arbitration and Conciliation Act, 1996. The High Court reasoned that while the Development Agreement contained an arbitration clause, the PAAAs did not. It held that under Section 7(5) of the Act, a “mere generic reference” to an earlier document was inadequate to incorporate an arbitration clause, as it failed to demonstrate a “firm commitment” to arbitration in the later document.
Court’s Analysis and Cited Precedents
The Supreme Court examined the scope of Section 7(5) of the Arbitration Act, which provides that a reference to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the contract.
The Court referred to its previous ruling in M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited (2009), distinguishing between a “reference to another document” and “incorporation by reference.” The Court noted: “…when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions…”
The Court also highlighted NBCC (India) Limited vs. Zillion Infraprojects Private Limited (2024), which clarified that while a general reference is insufficient, a clear reference indicating an intention to incorporate the arbitration clause makes it applicable to the new contract.
Applying these principles, the Supreme Court observed that Clause 14 of the PAAAs was not a mere reference but an unequivocal recording that all terms of the Development Agreement “shall be binding.” The Court stated:
“This was, thus, not a case of mere reference to an earlier agreement but a case where the parties to the later contract clearly intended to import the Development Agreement, body and soul, into the later agreements.”
Decision
The Apex Court concluded that the High Court erred in its understanding of Section 7(5). It held that an arbitration agreement existed between the parties by incorporation.
The Court set aside the High Court’s common order dated June 26, 2025, and appointed Mr. Vishal Kanade, Advocate, as the Sole Arbitrator to resolve the disputes. The arbitrator is required to make a declaration under Section 12 of the Act within fifteen days and is entitled to fees as per the Fourth Schedule.
Case Details:
- Case Title: Hirani Developers v. Nehru Nagar Samruddhi CHS Ltd. and another Etc.
- Case No.: Civil Appeal Nos. ___ of 2026 (@SLP (C) Nos. 38407-38411 of 2025)
- Bench: Justice Sanjay Kumar, Justice K. Vinod Chandran
- Date: May 13, 2026
