Arbitration Clauses in Earlier Agreements Become Binding When Later Contracts Incorporate All Terms and Conditions “Body and Soul”

Held: The Supreme Court held that an arbitration clause contained in an earlier agreement becomes binding upon parties to a later agreement when the later contract expressly incorporates all terms and conditions of the earlier agreement in their entirety. The Court clarified that Section 7(5) of the Arbitration and Conciliation Act, 1996 does not require reproduction of the arbitration clause in the subsequent contract if the language of incorporation clearly demonstrates the parties’ intention to adopt the earlier agreement “body and soul.” The Court distinguished between a mere reference to another document and incorporation of that document in entirety, holding that where the later agreement expressly states that all clauses of the earlier agreement shall form part of and bind the parties, the arbitration clause also stands incorporated.

Summary: The appellant-developer entered into a Development Agreement with a cooperative housing society in 2011 for redevelopment of a dilapidated project. Clause 36 of the Development Agreement contained an arbitration clause providing for appointment of a sole arbitrator under the Arbitration and Conciliation Act, 1996. Subsequently, the appellant executed separate Permanent Alternate Accommodation Agreements with individual society members in 2023 and 2024. Clause 14 of these agreements expressly stated that all terms and conditions of the Development Agreement dated 04 July 2012 would form part of the later agreements and all clauses thereof would be binding on the parties. Disputes later arose when certain members initiated consumer proceedings against the developer. The appellant invoked arbitration and issued notices under Section 21 of the Arbitration Act, but the respondents denied existence of any arbitration agreement between them and the developer. The Bombay High Court dismissed applications under Section 11 of the Arbitration Act, holding that the arbitration clause in the Development Agreement had not been specifically incorporated into the later agreements. The Supreme Court examined Section 7(5) of the Arbitration Act along with the principles laid down in M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. and NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. The Court found that Clause 14 unequivocally demonstrated intention to incorporate the Development Agreement in entirety and therefore the arbitration clause also became binding upon the respondent members.

Decision: The Supreme Court allowed the appeals, set aside the Bombay High Court’s common order dated 26 June 2025, and held that a valid arbitration agreement existed between the parties by incorporation under Section 7(5) of the Arbitration and Conciliation Act, 1996. The Court appointed Mr. Vishal Kanade, Advocate, Bombay High Court, as the Sole Arbitrator to adjudicate the disputes and differences between the appellant and the respondent members. The Arbitrator was directed to make the statutory disclosure under Section 12 of the Arbitration Act within fifteen days and was held entitled to fees in accordance with the Fourth Schedule to the Act. Pending applications stood disposed of.