Pending arbitration, a society may proceed with redevelopment despite disputed termination of its development agreement.

Om Vithal Cooperative Housing Society Limited owned and possessed the property bearing Final Plot No. 275, Sub-Plot No. 30, Town Planning Scheme No. III, Borivali (West), Mumbai, comprising “Vithal Apartments”.

After terminating an earlier developer’s arrangement, the Society appointed Trilogy Infra Private Limited as developer and executed a Development Agreement dated 25 November 2023 and a Power of Attorney dated 11 December 2023.

The developer was required to obtain approvals, execute Permanent Alternate Accommodation Agreements, pay rent and rehabilitation compensation to members, and complete redevelopment within the contractual period.

The Society alleged that the developer failed to obtain requisite approvals, failed to demonstrate financial readiness, failed to execute accommodation agreements, failed to make regular rent payments from November 2025, and made no substantial construction progress.

Although the Society granted a further 24-month extension on 6 December 2025, disputes continued regarding the developer’s proposed additional terms and the project schedule.

Following a cure notice and continued disputes, the Society issued a termination notice dated 18 May 2026 terminating the Development Agreement, Power of Attorney and related documents.

The Society filed Arbitration Petition (L) No. 25010 of 2026 under Section 9 of the Arbitration and Conciliation Act, 1996, seeking protection of possession and permission to proceed with redevelopment.

The developer filed Commercial Arbitration Petition (L) No. 23586 of 2026 seeking a stay of the termination notice and an injunction restraining the Society from appointing another developer or proceeding with redevelopment.

Whether, pending arbitration, the Society should be permitted to proceed with redevelopment through another developer or by self-development, notwithstanding the developer’s challenge to the termination notice?

Whether the Court could finally declare, at the Section 9 stage, that the Development Agreement and Power of Attorney stood validly terminated, or that the termination was illegal and the agreement continued to subsist?

Whether the developer was entitled to interim protection restraining the Society from acting upon the termination notice, appointing another developer, or proceeding with redevelopment?

What safeguards were necessary to preserve the developer’s monetary and legal claims pending arbitral adjudication?

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, under which interim measures may be granted to protect the subject matter of arbitration without finally adjudicating the parties’ contractual rights.

The Court relied on the principle that the validity and consequences of termination must ordinarily be decided by the arbitral tribunal, while the Section 9 Court may make a prima facie assessment and devise an interim arrangement.

Relying principally on Pioneer Constructions v. Sahakarnagar Co-operative Housing Society Ltd., 2026 SCC OnLine Bom 2711, and the authorities referred to therein, including Huges Real Estate Developers LLP and Ison Builders LLP, the Court held that a developer’s profit-making interest is ordinarily subservient to the Society members’ need for safe and habitable homes.

Redevelopment should not be stalled indefinitely merely because the developer claims that termination was wrongful, particularly where monetary compensation can be awarded in arbitration.

The Court also relied on Swashray Co-operative Housing Society Ltd. v. Shanti Enterprises, holding that a Society should not be left at the mercy of a developer who commits repeated defaults without a reasonable prospect of completing redevelopment within a workable period.

The Court accepted that the developer’s explanation concerning the MahaRERA stay, parking construction and statutory permissions could not be disregarded and might be relevant in arbitration.

However, the material also disclosed continuing disputes, alleged non-payment of members’ rent, insufficient construction progress, uncertainty regarding financial closure, and deterioration of the parties’ relationship even after the Society granted an additional 24-month period.

The developer’s offer to clear arrears or deposit funds was insufficient to establish that the project could be completed within a definite and reliable timeframe.

Applying the redevelopment-specific balance-of-convenience principle, the Court held that restraining the Society would indefinitely stall the project and prejudice members who had vacated their homes, whereas the developer could pursue damages or other monetary relief if it ultimately established wrongful termination in arbitration.

Nevertheless, because the legality of termination was a final merits issue, the Court declined to conclusively adjudicate it and instead directed preservation of documents, accounts and records to protect the developer’s arbitral claims.

Pending arbitration, the termination notice dated 18 May 2026 was directed to remain operative for interim purposes, and the developer was restrained from claiming a right to continue redevelopment under the Development Agreement or Power of Attorney.

The developer and persons claiming through it were restrained from interfering with the Society’s possession or obstructing redevelopment, and from creating third-party rights or encumbrances over the property.

The Society was permitted to proceed with self-development or appoint another developer, contractor or agency, subject to applicable law and statutory approvals.

The developer was directed to hand over original project documents and provide copies of approvals, applications, correspondence and professional records within two weeks.

The Court refused to order the Society to deposit Rs. 10 crore and rejected the request for police protection.

The Court expressly clarified that the validity and legal consequences of the termination remained open for determination by the arbitral tribunal and that all observations were prima facie and non-binding in arbitration.

There was no order as to costs.