20 June 2025 Arbitration Law >> Business & Commercial Law  

The High Court in Pranav Constructions Limited v/s Priyadarshini Co-operative Housing Society Limited & Others, has rejected a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, which sought to compel certain members of a cooperative housing society to vacate their premises for a redevelopment project. The Developer and the Society had entered into a development agreement in March 2025, but a few members, including owners of garages and commercial premises, refused to sign, primarily due to discriminatory terms.

The court noted that unlike typical redevelopment agreements, this one proposed varied treatment for different classes of members:

• Residential flat owners were offered a 39% increase in area.
• Commercial premises owners were offered only a 19% increase.
• Garage owners faced a 20% reduction in their floor area.

Respondents, including those owning garages and commercial premises, argued that the agreement was being forced upon them without their consent and that the differential treatment was inequitable. Owners of commercial premises also highlighted that the property had been gifted to their adult son and granddaughter two years prior, and these new owners were not even parties to the petition. The Society, while acknowledging the gift, had not formally recognized the new ownership.

The court emphasized that its jurisdiction under Section 9 is equitable and discretionary, primarily intended to preserve the subject matter of an arbitration agreement between disputing parties. In this case, there was no dispute between the Developer and the Society, both of whom were aligned in their objective to remove the dissenting members.

Justice Sandeep V. Marne observed that it would be "most inequitable" to use the court's coercive powers to enforce a contract that discriminates against a class of members, particularly when they had not consented to such terms. The court further stated that a differentiated and nuanced agreement requires mutual negotiation and consensus, which was absent here. The attempt to use Section 9 jurisdiction to force out members who were being discriminated against and had not signed the agreement was deemed "inappropriate."

The court also refrained from making conclusive pronouncements on the legality of using garages for commercial purposes, stating it was unnecessary for the current equitable jurisdiction. It concluded that the petition failed to demonstrate a valid case for intervention under Section 9, especially when the dissenting members' objections were based on "empirical reasonable factors such as feeling oppressed, being coerced, or being squeezed out by being presented with a Hobson's Choice."

Ultimately, the petition was dismissed, leaving the parties at liberty to pursue their grievances in other appropriate forums. The judgment underscored that the Section 9 jurisdiction cannot be used as a device to circumvent negotiations or enforce a discriminatory bargain against unwilling parties.

Section 9, Arbitration and Conciliation Act - 1996  

Arbitration and Conciliation Act, 1996