Dispute Resolution & Arbitration Monthly Update | November 2025

DISPUTE RESOLUTION AND ARBITRATION UPDATE

NESCO Limited Vs. State of Maharashtra & Ors.

Writ Petition No. 1018 of 2017

Introduction

• In a significant verdict safeguarding property rights under Article 300A of the Constitution, the Bombay High Court has set aside the State Government's decision to acquire private land belonging to NESCO Limited in Goregaon (East) under Section 14(1) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 ("Slum Act"). The Court held that the acquisition was arbitrary, illegal, and unconstitutional, observing that the authorities had ignored the preferential right of the landowner to undertake redevelopment of its property before resorting to compulsory acquisition.
• The ruling reaffirms judicial disapproval of the mechanical use of acquisition powers under the Slum Act and will likely influence how redevelopment projects on private lands are handled across Mumbai.

Facts of the Case

• NESCO Limited, owner of private land at CTS Nos. 176 (Part) and 184, admeasuring approximately 1,512 sq. meters in Goregaon (East), challenged the State's notification dated April 21, 2016, acquiring its land under Section 14(1) of the Slum Act.
• The land had earlier been declared a slum rehabilitation area based on a proposal from a society of slum dwellers. NESCO contended that as the lawful owner, it had a preferential right to redevelop the property, which was ignored by the Slum Rehabilitation Authority (SRA) and the Housing Department. It alleged that the acquisition was conducted without due notice, proper hearing, or adherence to statutory safeguards.
• The petition also challenged the meagre compensation of INR 12 lakh offered by the SRA and the subsequent possession notice issued by the Deputy Collector in August 2017.

Background facts

• The case arose against the backdrop of recurring disputes under the Slum Act, where private landowners allege misuse of acquisition powers to benefit developers and societies.
• NESCO relied on prior rulings such as:
  • Indian Cork Mills Pvt. Ltd. v. State of Maharashtra (2018), Bishop John Rodrigues v. State of Maharashtra (2004), and the Supreme Court's recent decisions in Tarabai Nagar Co-op. Housing Society (Proposed) v. State of Maharashtra (2025) and Saldanha Real Estate Pvt. Ltd. v. Bishop John Rodrigues (2025).
  • All these cases established that private landowners have a preferential right to redevelop slumdeclared land, and such rights cannot be overridden by automatic acquisition proposals from slum societies or developers.
  • In this case, it was undisputed that NESCO's land was private property protected under Article 300A. The Court noted that the State failed to issue a notice inviting the landowner to submit a redevelopment proposal as required under Section 13(1) of the Slum Act before initiating acquisition under Section 14.
  • Interestingly, during the proceedings, the slum society itself filed an affidavit supporting NESCO, admitting that it had been misled by the earlier developer and now wished to collaborate with NESCO for redevelopment through Gyan Buildtech Pvt. Ltd.

Findings of the Court

• The Division Bench of Justices G.S. Kulkarni and Aarti Sathe allowed NESCO's petition, declaring the acquisition proceedings illegal and unconstitutional.
• The Court held:
  • Preferential Rights Ignored:
    The authorities failed to recognize the landowner's preferential right to redevelop its land, a right firmly recognized in Indian Cork Mills and upheld by the Supreme Court in Tarabai Nagar and Saldanha Real Estate.
  • Procedural Violations:
    No valid notice or opportunity was given to the landowner to submit a redevelopment scheme before initiating acquisition.
  • Abuse of Power:
    The Court strongly criticized the "mechanical and draconian" exercise of acquisition powers by the SRA and the State, observing that such actions were often influenced by unscrupulous developers acting for private gain.
  • Reiteration of Judicial Principles:
    The Bench reaffirmed that acquisition under the Slum Act is not equivalent to acquisition for a public purpose under the Land Acquisition Act. Its purpose is private rehabilitation and must not override constitutional rights.
• Quoting the Supreme Court in Saldanha Real Estate Pvt. Ltd., the Court warned:
  • "The SRA and its CEO appear to have abandoned their public duty to uphold the Rule of Law... Actions of a public authority motivated by extraneous profit interests of private builders are highly depreciable."
  • Ultimately, the Court allowed the petition in terms of prayer clauses as mentioned in the plaint and effectively quashed the acquisition notification, the SRA's award, and possession directions.

HSA Viewpoint

M/s Mukesh Patel & Ors. Vs. Pant Nagar Ganesh Krupa Cooperative Housing Society Limited and Ors.

2025:BHC-OS:18704

Background facts

• M/s. Mukesh Patel ("Applicant") and Pant Nagar Ganesh Krupa Cooperative Housing Society Ltd ("Respondent No.1") entered into a Development Agreement dated October 15, 2010 ("Agreement"). The Agreement contained an arbitration clause.
• Thereafter, Respondent No.1 was merged into Shubham Ambience Co-Operative Housing Society ("Respondent No.3"), thereby transferring any existing privity or obligations under the Agreement to Respondent No.3.
• The Agreement was terminated on February 8, 2019, pursuant to a resolution passed by the member of the Society on December 15, 2018.
• Following such termination, a public advertisement was issued for appointment of a new developer, resulting in the appointment of Avvad Spaces LLP ("Respondent No. 2") on November 8, 2022. The appointment was subsequently ratified by a Special General Body Meeting held on February 19, 2023.
• The Applicant argued that the Agreement continues to subsist even after its termination, as certain members allegedly continued to receive transit rent under the Agreement.
• In view of the above, the Application has filed an Application under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act') seeking appointment of an Arbitral Tribunal in relation to disputes arising from the Agreement executed between the Applicant and Respondent No. 1.
• In the said Application, the Applicant asserts that Respondent No. 2, though a non-signatory to the Agreement, must be included as a party to the proceedings by applying principles governing non-signatory participation in arbitration.

Issue(s) at hand?

• Whether Respondent No. 2 a non-signatory to the Agreement containing the arbitration Clause, can be treated as a veritable party in the arbitration proceedings?

Findings of the Court

• At the outset, the Hon'ble Court reiterated that its inquiry was confined to whether the Respondent No. 2 i.e. subsequent developer could be treated as a veritable party to the arbitration proceedings since its jurisdiction was limited to examination of the existence of an arbitration agreement between the parties. Unless a prima facie basis for binding the nonsignatory was demonstrated, the matter could not be left to the arbitral tribunal for adjudication making Respondent No.2 a party to the arbitration proceeding.
• The Hon'ble Court found no material evidence that the Respondent No.2 had any contractual or legal nexus with the Agreement. The Hon'ble Court held the development agreement entered into between Respondent No.2 and Respondent No. 3 is a completely different agreement and is not connected with the Agreement of the Appellant. Accordingly, the Hon'ble Court held that the Agreement was not assigned or novated to Respondent No.3.
• The Hon'ble Court held that the Applicant's reliance on an isolated passage from the judgement in the case of ASF Buildtech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd.¹ ("ASF Buildtech") was misconceived, as the said judgment merely built upon the law declared in case of Cox and Kings Ltd. v. SAP India Pvt. Ltd.² ("Cox and Kings"), which recognized the limited application of the "group of companies" doctrine. The Hon'ble Court held that the concept of a "veritable party" permits a non-signatory to be treated as a signatory to the arbitration agreement only when there exists clear and demonstrable proximity between the parties, such as through common ownership, management, control, or participation in a composite transaction.
• The Hon'ble Court further held that a long-terminated Agreement cannot be invoked to compel a completely unconnected third party to participate in arbitration proceedings merely because the subject matter of the new agreement happens to be the same. The Hon'ble Court observed that judgments such as Cox and Kings and ASF Buildtech must be read contextually and not in fragments, emphasizing that the doctrines of "group of companies," "alter ego," or "composite transaction" are applicable only when the factual matrix reveals real interdependence between the entities involved. The Hon'ble Court held that in the absence of such relationship, a nonsignatory cannot be regarded as a veritable party under the Act.
• Applying these principles, the Hon'ble Court once again held that Respondent No. 2 was a completely independent developer appointed years after the termination of the Agreement and had no nexus of ownership, control, or privity with either the Applicants or Respondent No.3 under the earlier Agreement.
• Further the Hon'ble Court held that the reliance placed by the Applicant on Section 19(b) of the Specific Relief Act, 1963 was misplaced, as the provision had no relevance to the issue of privity to an arbitration agreement. The Hon'ble Court held that the right to seek specific relief under that provision could not substitute the foundational requirement of consent to arbitrate. The Hon'ble Court reaffirmed that consent either expressed or implied is the cornerstone of arbitration, and that a Court dealing with Section 11 Application under the Act, cannot compel a third party to arbitrate or even leave the issue open to be decided by the arbitral tribunal in the absence of such consent.
• Accordingly, the Hon'ble Court held that Respondent No.2 is not a veritable party and that arbitration could proceed only between the Applicant and the Respondent Nos.1 and 3.
• In view thereof, the Hon'ble Court appointed Mr. Snehal Shah, Senior Advocate, as the Sole Arbitrator to adjudicate the disputes and differences arising out of and in connection with the Agreement, if the Applicant is desirous of initiating arbitration against Respondent Nos. 1 and 3.

HSA Viewpoint

Footnotes

1 2025 SCC OnLine SC 1016

2 (2024) 4 SCC 1

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