Case Name: HIRANI DEVELOPERS V. NEHRU NAGAR SAMRUDDHI CHS LTD.
Petition No.: SLP (C) Nos. 38407-38411 of 2025
Neutral Citation: 2026 INSC 484
Date of Judgement: 13th May 2026
Coram: Honourable Mr Justice Sanjay Kumar & Honourable Mr Justice K. Vinod Chandran
Relevant Provisions: Section 7(5), Section 11 and Section 21 of the Arbitration and Conciliation Act, 1996
INTRODUCTION
The Supreme Court in the present case examined the scope and application of Section 7(5) of the Arbitration and Conciliation Act, 1996, concerning the incorporation of an arbitration clause from one agreement into another by reference. The principal controversy before the Court was whether an arbitration clause in an earlier Development Agreement could be incorporated into subsequent Permanent Alternate Accommodation Agreements executed between the developer and individual society members, even though the later agreements did not contain an arbitration clause.
FACTS
The appellant entered into a Development Agreement with the Nehru Nagar Samruddhi Co-operative Housing Society Limited for the redevelopment of a housing project. Clause 36 of the Development Agreement contained an arbitration clause providing that disputes arising out of the terms and conditions of the agreement would be resolved by arbitration under the Arbitration and Conciliation Act, 1996.
Subsequently, the developer entered into separate Permanent Alternate Accommodation Agreements with individual members of the society, including the respondents. Although the later agreements did not contain an independent arbitration clause, Clause 14 of each agreement expressly stated that all terms and conditions of the earlier Development Agreement would be construed as forming part of the later agreements and that all clauses of the Development Agreement would be binding upon the parties. Disputes subsequently arose between the parties, following which the respondents initiated proceedings before the Consumer Disputes Redressal Commission under the Consumer Protection Act, 2019. Thereafter, the appellant issued notices under Section 21 of the Arbitration Act, invoking Clause 36 of the Development Agreement.
The respondents refused to proceed with arbitration and contended that there existed no arbitration agreement between the appellant and the individual society members. Consequently, the appellant approached the Bombay High Court under Section 11 of the Arbitration Act for the appointment of an arbitrator, which dismissed the applications, holding that the Permanent Alternate Accommodation Agreements did not independently contain an arbitration clause and that there was no specific reference to the arbitration clause contained in the Development Agreement. Aggrieved, the appellant approached the Supreme Court.
ISSUES
1. Whether the arbitration clause contained in the earlier Development Agreement was incorporated into the subsequent Permanent Alternate Accommodation Agreements by virtue of Clause 14 of the later agreements?
- Whether a later agreement must specifically refer to the arbitration clause contained in an earlier agreement in order to constitute a valid arbitration agreement under Section 7(5) of the Arbitration and Conciliation Act, 1996?
- Whether the Bombay High Court was justified in refusing appointment of an arbitrator under Section 11 of the Arbitration Act on the ground that the later agreements lacked an independent arbitration clause?
ARGUMENTS OF THE PARTIES
The appellant-developer contended that Clause 14 of the Permanent Alternate Accommodation Agreements unequivocally incorporated all terms and conditions as well as all clauses of the Development Agreement into the latter agreements. It was argued that such incorporation included Clause 36, which contained the arbitration clause. The appellant submitted that the later agreements clearly demonstrated the parties’ intention to import the earlier agreement in its entirety and therefore the arbitration clause became binding upon the parties to the later agreements as well.
The respondents, on the other hand, argued that the Permanent Alternate Accommodation Agreements did not contain an independent arbitration clause and that there was no specific reference in those agreements to Clause 36 of the Development Agreement. It was contended that a mere reference to an earlier document was insufficient under Section 7(5) of the Arbitration Act to incorporate the arbitration clause.
JUDGEMENT AND ANALYSIS
Addressing the first issue, the Supreme Court answered in the affirmative and held that the arbitration clause contained in the Development Agreement stood validly incorporated into the later Permanent Alternate Accommodation Agreements. The Court observed that Clause 14 of the later agreements clearly provided that all terms and conditions of the Development Agreement would form part of the later agreements and that all clauses of the Development Agreement would be binding upon the parties. According to the Court, there could be no clearer indication of the parties’ intention to incorporate the earlier agreement in its entirety into the later agreements.
The Court relied extensively upon the principles laid down in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited (2009) 7 SCC 696, where the distinction between “mere reference” and “incorporation by reference” was elaborated. The Court reiterated that where parties provide that all terms and conditions of another document shall form part of the contract, the referred document gets bodily incorporated into the later contract, including its arbitration clause.
The Court specifically observed that the present case did not involve a casual or limited reference to another document. Rather, the language used in Clause 14 demonstrated a conscious and complete adoption of the Development Agreement “body and soul” into the Permanent Alternate Accommodation Agreements. Consequently, Clause 36 of the Development Agreement, containing the arbitration clause, automatically became binding upon the parties to the later agreements as well.
Regarding the second issue, the Supreme Court held that a specific reference to the arbitration clause itself was not necessary where the later agreement expressly incorporated all terms and clauses of the earlier agreement in their entirety. The Court found that the High Court had incorrectly interpreted Section 7(5) of the Arbitration Act by insisting upon a separate and specific reference to the arbitration clause.
The Court referred to Section 7(5), which provides that a reference in a contract to another document containing an arbitration clause constitutes an arbitration agreement if the reference is such that the arbitration clause becomes part of the contract. The Court held that the statutory requirement stood fully satisfied in the present case because Clause 14 unequivocally made all clauses of the Development Agreement binding upon the parties to the later agreements.
The Court further relied upon NBCC (India) Limited v. Zillion Infraprojects Private Limited (2024) 7 SCC 174, where it was held that an arbitration clause may be incorporated into a later agreement where the contractual language clearly reflects the intention to adopt the earlier document. However, the Court clarified that a mere general reference to another contract would not suffice. What is required is a clear intention to incorporate the earlier document in its entirety.
For the final issue, the Supreme Court held that the Bombay High Court erred in refusing to appoint an arbitrator under Section 11 of the Arbitration Act. The Court observed that once the arbitration clause stood incorporated into the later agreements, there existed a valid arbitration agreement between the parties, and the High Court ought to have referred the disputes to arbitration. Accordingly, the Court set aside the common order of the Bombay High Court and allowed the appeals. The Court appointed an Arbitrator to adjudicate the parties’ disputes.
CONCLUSION
The Supreme Court’s decision is an important reaffirmation of the doctrine of incorporation by reference under arbitration jurisprudence. The Court clarified that where a later agreement expressly incorporates all terms and clauses of an earlier agreement, the arbitration clause in the earlier agreement automatically binds the parties to the later contract as well.
The judgment draws a clear distinction between a mere reference to another document and its complete incorporation into a later agreement. The Court adopted a commercially pragmatic and pro-arbitration approach. The judgment recognises that parties often structure transactions through interconnected agreements and that arbitration clauses cannot be defeated merely because they are not reproduced verbatim in every subsequent contract. The Court prioritised the contractual intention over technical formalities.
