Authority: High Court of Judicature at Bombay, Commercial Division
Order Date: September 17, 2026 (pronounced)
Case Overview
- Parties: Applicant – Vilas Shidruk, Sole Proprietor of M/s. Balaji Construction (Balaji Construction); Respondents – 1) Supreme Developers, 2) Shree Sadguru Cooperative Housing Society Ltd (Sadguru Society).
- Background: Respondent 1 and Respondent 2 entered into an Agreement for Project Management Consultancy (APMC) dated 13 May 2014, appointing Supreme Developers as project‑management consultant and construction contractor for Sadguru Society’s redevelopment project. Clause 10 of the APMC provides for sole arbitration before Mr Shreekant Ghanekar of M/s. Ghanekar and Co.
- Subsequent MOU: On 12 September 2018, Supreme Developers and Balaji Construction executed a Memorandum of Understanding (MOU). The MOU recorded that Supreme Developers could not raise funds for extending the Collector’s NOC and that Balaji would provide the required funds and “step into the shoes” of Supreme Developers. The MOU stipulated a consideration of Rs 13,72,60,000 payable by Balaji to Supreme Developers and identified payments of Rs 4,01,00,000 made by Balaji between 31 July 2018 and 22 October 2019 for extension‑order charges and other project expenses.
- Dispute: Balaji alleges that Supreme Developers accepted the funds, used them for the project, but later invited other developers, violating the MOU. Balaji issued a legal notice on 2 August 2022 demanding compliance, accounts, and refund. Supreme Developers replied on 22 August 2022 denying the allegations.
- Arbitration Application: Balaji filed an Arbitration Application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator to decide disputes arising from the APMC and the MOU.
- Respondent’s Contentions: Supreme Developers argued that (i) there is no arbitration agreement between Balaji and itself; (ii) Balaji was not a party to the 2014 APMC; (iii) the MOU contains no arbitration clause; (iv) the legal notice did not invoke arbitration; and (v) the reliefs sought, including a declaration on Clause 10 of the APMC, are illegal.
Court’s Reasoning
- The court examined whether a prima‑facie arbitration agreement exists between Balaji and Supreme Developers. While the APMC contains an arbitration clause, Balaji was not a signatory to that agreement.
- The MOU, although connected to the same redevelopment project, does not incorporate the APMC’s arbitration clause, nor does it expressly bind the parties to arbitrate under that clause. Clause 10 of the MOU merely provides for Supreme Developers to act as a mediator and, in a specific circumstance, as an arbitrator between Balaji and the Society; it does not create an arbitration agreement between Balaji and Supreme Developers.
- The court referenced Supreme Court precedents (S.N. Prasad v. Monnet Finance Ltd., Cox & Kings Ltd. v. SAP India (P) Ltd., ASF Buildtech (P) Ltd. v. Shapoorji Pallonji & Co. (P) Ltd.) emphasizing that an arbitration agreement must exist between the parties and that consent cannot be inferred merely from commercial connection.
- The court found no material showing Balaji’s consent to be bound by the APMC’s arbitration clause, and the MOU’s wording does not satisfy the requirement of a clear intention to arbitrate under Section 7 of the Act.
- Consequently, the basic jurisdictional requirement for invoking Section 11 is not met; there is no prima‑facie arbitration agreement between the applicant and Respondent 1.
Final Outcome
- The Arbitration Application is rejected. No arbitrator will be appointed under the APMC’s Clause 10.
- The rejection does not preclude Balaji Construction from pursuing other legal remedies available to it in a competent forum for recovery of the amounts paid or other claims.
Topics: Arbitration, Construction Dispute