M/S RAREARTH PROJECTS PRIVATE LIMITED vs M/S INFANT DEVELOPERS

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 15 DAY OF OCTOBER, 2026


BEFORE

THE HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

CIVIL MISC. PETITION NO. 115 OF 2025

BETWEEN:

M/S RAREARTH PROJECTS PRIVATE LIMITED
ND
HAVING ITS OFFICE ADDRESS 2 FLOOR
RITWIK PLAZA, 2386/2387, 60 FEET RD
NEXT TO CAUVERY PUBLIC SCHOOL
ABOVE TITAN EYE PLUS AND
MITHUN'S FITNESS FACTORY
E BLOCK, SAHAKAR NAGAR
BENGALURU, KARNATAKA- 560092
REP. BY ITS MANAGING DIRECTOR
SRI. PRATHIST KEMPEGOWDA
…PETITIONER
(BY MS. LEKHA JAIN, ADVOCATE FOR
SRI. SIDDHARTH SUMAN., ADVOCATE)










AND:

1. M/S INFANT DEVELOPERS
AGED ABOUT 70 YEARS OLD
R/AT NO. 335, 5TH CROSS
TH
7 A MAIN ROAD, NEXT TO PARK
TH
4 BLOCK, KORAMANGALA
BANGALORE - 560077
REP. BY ITS AUTHORIZED SIGNATORY
MR. P.K CHERIAN KOSHY.

2. SRI. SHIBU KURIEN
AGED ABOUT 44 YEARS
S/O K.K. MATHEW
R/AT NO. 29 EBENEZER VILLA'
MAPLE GREEN PHASE 3


Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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NEAR VIJAYA VITTLA COLLEGE
CHIKKA GUBBI, DODDAGUBBI
BENGALURU-560077.

3. M/S UNITED ESTATES
A PARTNERSHIP FIRM
REGISTERED UNDER THE
INDIAN PARTNERSHIP ACT
HAVING OFFICE AT NO.2, KHB LAYOUT
OLD MADRAS ROAD, HUSKUR VILLAGE
MANDUR PANCHAYATH BIDARAHALLI HOBLI
BANGALORE - 560049
REP. BY ITS MANAGING PARTNER
SRI. GANGADHARA.R
…RESPONDENTS
(BY SRI. GEORGE PHILIP., ADVOCATE FOR R1 & R2:
SRI PRASHANTH MURTHY S.G., ADVOCATE FOR R3 APPEARED
THROUGH VC)
THIS CIVIL MISC. PETITION FILED UNDER SECTION
11(5) OF ARBITRATION AND CONCILIATION ACT., PRAYING
THAT THIS HONBLE COURT BE PLEASED TO APPOINT SHRI.
JUSTICE B. VEERAPPA, RETIRED JUDGE OF THE KARNATAKA
HIGH COURT, AS THE SOLE ARBITRATOR TO ENTER UPON
REFERENCE AND PASS AWARD IN THE MATTER OF DISPUTES
BETWEEN THE PETITIONER ON THE ONE SIDE AND THE
RESPONDENT NO.1 AND 2 ON THE OTHER SIDE AS PER
CLAUSE 12.3 OF PAGE NO.7 IN THE MEMORANDUM OF
UNDERSTANDING DATED 26.12.2022 I.E., ANNEXURE - B.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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ORAL ORDER


1. This petition is filed under Section 11(5) of the
Arbitration and Conciliation Act, 1996 (for short, “the
Act”), seeking appointment of a sole Arbitrator for
adjudication of the disputes that have arisen between the
parties under the Memorandum of Understanding (for
short ‘MOU’) dated 26.12.2022, particularly in terms of
Clause 12.3 thereof, produced at Annexure-B.


2. The brief facts of the case are that the petitioner is a
company engaged in the business of real estate
development, marketing and allied activities. The
petitioner entered into an MOU dated 26.12.2022
(Annexure-B) with respondent Nos.1 and 2, who are the
owners of the properties bearing Sy.No.18, measuring 6
guntas, Sy. No.21, measuring 21 guntas; Sy. No.47,
measuring 4 acres and 29 guntas; Sy. No.49/2, measuring
3 acres and 6 guntas; Sy. No.50/6, measuring 1 acre and
20 guntas; and Sy. No.51/1, measuring 1 acre and 4
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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guntas, for the development of the said properties by
forming a residential layout. As disputes arose between
the parties in relation to the MOU, the petitioner invoked
the arbitration clause contained in Clause 12.3 thereof by
issuing a notice dated 18.11.2023 to respondent Nos.1
and 2, vide Annexure-D. Respondent Nos.1 and 2
submitted their reply to the said notice. It is the further
case of the petitioner that, subsequent to the execution of
the MOU, respondent Nos.1 and 2 sold the very same
properties in favour of respondent No.3 under a sale deed
dated 10.11.2023, produced at Annexure-E. Consequently,
the petitioner impleaded respondent No.3 in the present
petition on the ground that the properties forming the
subject matter of the MOU had been transferred in his
favour.


3. Learned counsel appearing for respondent No.3
contended that respondent No.3 is neither a signatory to
the MOU nor a necessary party to the present
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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proceedings. It was submitted that his presence is not
required for adjudicating the disputes between the
petitioner and respondent Nos.1 and 2 and that
respondent No.3 cannot be impleaded in a petition under
Section 11 of the Act merely because he has subsequently
acquired the properties in question. In support of the said
contention, learned counsel placed reliance on the
judgment of the Hon’ble Supreme Court in Hindustan
Petroleum Corporation Limited v. BCL Secure
Premises Private Limited , Civil Appeal No. 14647 of
2025, decided on 09.12.2025 .


4. Per contra, learned counsel appearing for the
petitioner placed reliance on the judgment of the Hon’ble
Supreme Court in Ajay Madhusudan Patel and others
v. Jyotrindra S. Patel and Others , reported in (2025) 2
SCC 147 , and contended that a person who has not
signed an arbitration agreement may nevertheless be
bound by it where the conduct of such person, the
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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relationship with the signatory parties, the mutual
intention of the parties and the surrounding circumstances
indicate an intention to be bound by the agreement.
Learned counsel further submitted that the MOU contains
a clause stipulating that the agreement shall be binding
upon the successors-in-title. It was therefore contended
that, having regard to the subsequent transfer of the
properties forming the subject matter of the MOU in favour
of respondent No.3, his impleadment in the arbitral
proceedings would be necessary for an effective
adjudication of the disputes.


5. Learned counsel appearing for respondent Nos.1 and
2 submitted that, in view of subsequent events, the
petitioner had given up the MOU and that the same was
no longer in force.


6. Heard learned counsel for the parties and perused
the petition and the documents annexed thereto.

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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7. It is not in dispute that the petitioner and respondent
Nos.1 and 2 entered into the MOU dated 26.12.2022 in
respect of the properties mentioned hereinabove. It is also
not in dispute that the MOU contains an arbitration clause
under Clause 12.3 thereof and that respondent Nos.1 and
2 subsequently executed a sale deed dated 10.11.2023 in
favour of respondent No.3 in respect of the said
properties.


8. The principal question that arises for consideration is
whether, in the facts and circumstances of the present
case, respondent No.3, who is not a signatory to the MOU,
can be brought within the ambit of the arbitration
proceedings and whether the disputes between the parties
warrant the appointment of a Sole Arbitrator.


9. In Ajay Madhusudan Patel v. Jyotrindra S. Patel
and Others (supra), the Hon’ble Supreme Court has held
that mere fact that a party has not signed the arbitration
agreement does not, by itself, exclude the possibility of
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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such party being bound by it. The intention of a non-
signatory to be bound by the arbitration agreement must
be determined by examining its conduct, its relationship
with the signatory parties, the commonality of the subject
matter, the composite nature of the transactions, and its
participation in the performance of the underlying
contract. The relevant observations contained in
paragraphs 81 and 82 of the said judgment read as
follows:
“81. The fact that a non-signatory did not put pen to
paper may be an indicator of its intention to not assume
any rights, responsibilities or obligations under the
arbitration agreement. However, the courts and tribunals
should not adopt a conservative approach to exclude all
persons or entities who intended to be bound by the
underlying contract containing the arbitration agreement
through their conduct and their relationship with the
signatory parties. The mutual intent of the parties,
relationship of a non-signatory with a signatory,
commonality of the subject matter, composite nature of
the transactions and performance of the contract are all
factors that signify the intention of the non-signatory to
be bound by the arbitration agreement.

82. An important factor to be considered by the Courts
and Tribunals is the participation of the non-signatory in
the performance of the underlying contract. In this
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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regard, it was observed in Cox and Kings (supra) as
follows:
“123. […] The intention of the parties to be
bound by an arbitration agreement can be gauged
from the circumstances that surround the
participation of the non-signatory party in the
negotiation, performance, and termination of the
underlying contract containing such agreement. The
UNIDROIT Principle of International Commercial
Contract, 2016 provides that the subjective
intention of the parties could be ascertained by
having regard to the following circumstances:

(a) preliminary negotiations between the parties;
(b) practices which the parties have established
between themselves;
(c) the conduct of the parties subsequent to the
conclusion of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and
expressions in the trade concerned; and
(f) usages.
xxx xxx xxx

126. Evaluating the involvement of the non-
signatory party in the negotiation, performance, or
termination of a contract is an important factor for
a number of reasons. First, by being actively
involved in the performance of a contract, a non-
signatory may create an appearance that it is a
veritable party to the contract containing the
arbitration agreement; second, the conduct of the
non-signatory may be in harmony with the conduct
of the other members of the group, leading the
other party to legitimately believe that the non-
signatory was a veritable party to the contract; and
third, the other party has legitimate reasons to rely
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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on the appearance created by the non-signatory
party so as to bind it to the arbitration agreement.
xxx xxx xxx

127. […] The nature or standard of involvement of
the non- signatory in the performance of the
contract should be such that the non-signatory has
actively assumed obligations or performance upon
itself under the contract. In other words, the test is
to determine whether the non-signatory has a
positive, direct, and substantial involvement in the
negotiation, performance, or termination of the
contract. Mere incidental involvement in the
negotiation or performance of the contract is not
sufficient to infer the consent of the non-signatory
to be bound by the underlying contract or its
arbitration agreement. The burden is on the party
seeking joinder of the non-signatory to the
arbitration agreement to prove a conscious and
deliberate conduct of involvement of the non-
signatory based on objective evidence.”
(Emphasis supplied)



10. Respondent No.3 has also relied upon the judgment
of the Hon’ble Supreme Court in Hindustan Petroleum
Corporation Limited (supra), wherein, the Apex Court
relying upon Cox and Kings Case (2024) 4 SCC 1 (supra),
observed that while considering an application under
Section 11 of the Arbitration and Conciliation Act, 1996,
the Court must prima facie examine whether a non-
signatory is a veritable party to the arbitration agreement.
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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The Court must consider the nature of the transaction, the
relationship between the parties and their conduct to
ascertain whether the non-signatory can be bound by the
arbitration agreement. The relevant paragraphs 23 and 24
are extracted below:
“23. The question that arises for consideration is whether
the High Court, on facts, was justified in referring the
parties to arbitration by allowing the Section 11(4)
petition filed by the respondent?

24. The scope of jurisdiction of the referral court hearing
a Section 11-Petition when faced with an issue of joinder
of a non-signatory to the arbitration agreement has been
lucidly set out by the five-judge Bench of this Court in
Cox and Kings Limited vs. Sap India Private Limited and
Another1. Though said in the context of considering the
Group of Companies doctrine, the said judgment has a
great bearing for the present case. This Court, speaking
through Chief Justice D.Y. Chandrachud, held as under:-
“84. It is presumed that the formal
signatories to an arbitration agreement are parties
who will be bound by it. However, in exceptional
cases persons or entities who have not signed or
formally assented to a written arbitration
agreement or the underlying contract containing
the arbitration agreement may be held to be bound
by such agreement. As mentioned in the preceding
paragraphs, the doctrine of privity limits the
imposition of rights and liabilities on third parties to
a contract. Generally, only the parties to an
arbitration agreement can be subject to the full
effects of the agreement in terms of the reliefs and
remedies because they consented to be bound by
the arbitration agreement. Therefore, the decisive
question before the Courts is whether a non-
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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signatory consented to be bound by the arbitration
agreement. To determine whether a non- signatory
is bound by an arbitration agreement, the Courts
and tribunals apply typical principles of contract law
and corporate law. The legal doctrines provide a
framework for evaluating the specific contractual
language and the factual settings to determine the
intentions of the parties to be bound by the
arbitration agreement. [Gary Born, International
Arbitration Law and Practice, (3rd Edn., 2021) at p.
1531.]

101. A formalistic construction of an arbitration
agreement would suggest that the decision of a
party to not sign an arbitration agreement should
be construed to mean that the mutual intention of
the parties was to exclude that party from the
ambit of the arbitration agreement. Indeed,
corporate entities have the commercial and
contractual freedom to structure their businesses in
a manner to limit their liability. However, there
have been situations where a corporate entity
deliberately made an effort to be not bound by the
underlying contract containing the arbitration
agreement, but was actively involved in the
negotiation and performance of the contract. The
level of the non-signatory party's involvement was
to the extent of making the other party believe that
it was a veritable party to the contract, and the
arbitration agreement contained under it.
Therefore, the Group of Companies doctrine is
applied to ascertain the intentions of the parties by
analysing the factual circumstances surrounding the
contractual arrangements. [Gary Born,
International Arbitration Law and Practice, (3rd
Edn., 2021) at p. 1568.]

126. Evaluating the involvement of the non-
signatory party in the negotiation, performance, or
termination of a contract is an important factor for
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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a number of reasons. First, by being actively
involved in the performance of a contract, a non-
signatory may create an appearance that it is a
veritable party to the contract containing the
arbitration agreement; second, the conduct of the
non-signatory may be in harmony with the conduct
of the other members of the group, leading the
other party to legitimately believe that the non-
signatory was a veritable party to the contract; and
third, the other party has legitimate reasons to rely
on the appearance created by the non-signatory
party so as to bind it to the arbitration agreement.

169. In case of joinder of non-signatory parties to
an arbitration agreement, the following two
scenarios will prominently emerge : first, where a
signatory party to an arbitration agreement seeks
joinder of a non-signatory party to the arbitration
agreement; and second, where a non- signatory
party itself seeks invocation of an arbitration
agreement. In both the scenarios, the referral court
will be required to prima facie rule on the existence
of the arbitration agreement and whether the non-
signatory is a veritable party to the arbitration
agreement. In view of the complexity of such a
determination, the referral court should leave it for
the Arbitral Tribunal to decide whether the non-
signatory party is indeed a party to the arbitration
agreement on the basis of the factual evidence and
application of legal doctrine. The Tribunal can delve
into the factual, circumstantial, and legal aspects of
the matter to decide whether its jurisdiction
extends to the non-signatory party. In the process,
the Tribunal should comply with the requirements
of principles of natural justice such as giving
opportunity to the non-signatory to raise objections
with regard to the jurisdiction of the Arbitral
Tribunal. This interpretation also gives true effect to
the doctrine of competence-competence by leaving
the issue of determination of true parties to an
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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arbitration agreement to be decided by the Arbitral
Tribunal under Section 16.

170.12. At the referral stage, the referral court
should leave it for the Arbitral Tribunal to decide
whether the non-signatory is bound by the
arbitration agreement.”



11. In the present case, the petitioner and respondent
Nos.1 and 2 entered into the MOU dated 26.12.2022 in
respect of the properties in question. Subsequently,
respondent Nos.1 and 2 sold the said properties to
respondent No.3 under a sale deed dated 10.11.2023.
Since the disputes arising out of the MOU directly relate to
the very properties transferred in favour of respondent
No.3, his presence is necessary for the effective and
complete adjudication of the disputes. Therefore,
respondent No.3 is a necessary party to the arbitration
proceedings, and the disputes are required to be referred
to arbitration.


12. Accordingly, the following:

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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ORDER

a) Civil Miscellaneous Petition is allowed .


b) Hon’ble Mr.Justice R.B.Budihal, Former Judge,
High Court of Karnataka, is appointed as the
Sole Arbitrator in the present case to arbitrate
the disputes between the parties at the
Arbitration and Conciliation Centre (Domestic &
International), Bengaluru, as per the Rules
governing the said Arbitration Centre.


c) All the claims and contentions of the parties are
left open.


d) Registry is directed to communicate this order
via e-mail to the Arbitration and Conciliation
Centre (Domestic & International), Khanija
Bhavan, Bengaluru, and also to Hon’ble
Mr.Justice R.B.Budihal .


e) Registry is directed to return all the original
documents produced by any of the parties after
obtaining Photostat copies of the same.

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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f) Parties are directed to appear before the
Director, Arbitration and Conciliation Centre,
Bengaluru, on 20.11.2026 at 11:30 a.m.


Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

(H.T. NARENDRA PRASAD)
JUDGE


DM
LIST NO.: 1 SL NO.: 5