Ineligibility of Third Parties Without Privity to Obtain Relief or Intervene in Section 9 Arbitration Proceedings

The Petitioner (Society) entered into a Development Agreement (DA) dated May 2, 2013, with the Respondent (Developer) for property redevelopment

Following defaults by the Developer in paying corpus amounts, transit rent, and statutory dues, the Society filed a Section 9 Petition in 2017

In December 2017, the High Court issued an injunction restraining the Developer and its partners from alienating any assets across all their projects and directed the attachment of various personal assets

Over the years, 31 Interim Applications (IAs) were filed, including many by third-party decree-holders and allottees from unrelated projects of the Developer seeking to claim funds deposited in Court

An Arbitral Tribunal was finally constituted on September 2, 2024, which subsequently passed an order under Section 17 of the Act on February 4, 2026

The court primarily applied Section 9 and Section 17 of the Arbitration and Conciliation Act, 1996.

The court relied on the definition of "party" under Section 2(1)(h) as a party to an arbitration agreement.

Regarding non-signatories, it applied the "veritable parties" doctrine as established in Cox and Kings Ltd. v. SAP India (P) Ltd. [2024], ASF Buildtech v. Shapoorji Pallonji [2025], and Adavya Projects v. Vishal Structurals [2025], requiring demonstrable proximity, consent, or a de facto connection to the dispute to bind non-signatories.

The Court reasoned that Section 9 is not a standalone equity jurisdiction but is limited to protecting the specific subject matter of the arbitration agreement.

Since an Arbitral Tribunal is now seized of the matter, Section 9(3) mandates that the Court shall not entertain such applications unless Section 17 is inefficacious.

The Court found that the third-party applicants (decree-holders from other projects, family members, etc.) lacked privity of contract and did not qualify as "veritable parties" because their disputes were distinct from the Society’s DA.

The Court noted that continuing the Section 9 proceedings for execution of third-party decrees would be coram non judice.

Consequently, the Court determined that the Learned Arbitral Tribunal is the appropriate forum to assess what portion of the deposited funds is necessary to secure the Society's claims (quantified at Rs. 18.65 Crores) and what can be released.

The Court held that all third-party interventions by non-signatories are rejected as they have no nexus to the arbitration agreement.

The Arbitral Tribunal is directed to assess, within three months, the amount required to protect the Society’s interests; any surplus funds deposited in Court shall then be released to the Developer.

The restraint order of December 2017 remains subject to the Tribunal's modification; the Court Commissioner is to hand over charge to an official Commissioner, and the Society is granted liberty to pursue its dues through the Section 17 proceedings.