Recently, in Hirani Developers v. Nehru Nagar Samruddhi CHS Ltd. and Ors., 2026 INSC 484, the Supreme Court dealt with a question that looks technical, but is deeply practical. Can a party be sent to arbitration under a clause not found in the agreement it signed, but in another agreement referred to by it?

That is not drafting curiosity. It is a real commercial problem.

The case arose from a redevelopment project. The developer had entered into a Development Agreement with a co-operative housing society. That agreement contained an arbitration clause. Later, the developer entered into Permanent Alternate Accommodation Agreements with individual members. Those later agreements did not reproduce the arbitration clause. But they provided that all terms and conditions and all clauses of the Development Agreement would bind the parties. The Supreme Court held that this was enough. The arbitration clause had travelled into the later agreements.

This matters beyond redevelopment disputes.

Modern transactions rarely live in one document. There may be a master agreement, work order, purchase order, schedule, undertaking or supplementary agreement. One document may contain the arbitration clause. Another may contain the immediate obligation. The dispute may arise under the second document, while the dispute resolution clause sits in the first.

So the real question is simple: when does an arbitration clause move from one document to another? The answer is simple, but with a warning. It can move. But it cannot sneak in.

Section 7(5) of the Arbitration and Conciliation Act, 1996 permits incorporation by reference. It provides that a reference in a contract to a document containing an arbitration clause can constitute an arbitration agreement, if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

The provision recognises how commercial documents are drafted. Parties need not copy the same clause into every connected document if their intention is clear. But Section 7(5) does not dilute consent. Arbitration is still a matter of agreement. A party cannot be pushed into arbitration merely because another transaction document has an arbitration clause.

That is why the distinction between a reference and an incorporation matters. Every incorporation contains a reference. But every reference is not incorporation.

A contract may refer to another document for a limited purpose: drawings, specifications, payment milestones, possession schedules or construction obligations. Such a reference may import only that limited part. It does not automatically bring in the arbitration clause.

An arbitration clause is not like a clause on flooring specifications or delivery timelines. It decides the forum. It shifts the primary forum of adjudication from ordinary courts to a private tribunal. That is why courts look for a clear indication that the parties intended to adopt it.

The foundation lies in M.R. Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696. The Supreme Court drew the line between mere reference and incorporation. A limited reference does not import the arbitration clause. But where the later contract says that another document shall form part of it, or that all terms and conditions of that document are incorporated, the position changes.

Later decisions applied this principle in different settings. In Inox Wind Ltd. v. Thermocables Ltd., (2018) 2 SCC 519, incorporation was recognised where the reference was to standard terms. In Elite Engineering and Construction (Hyd.) Pvt. Ltd. v. Techtrans Construction India Pvt. Ltd., (2018) 4 SCC 281 and NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd., (2024) 7 SCC 174, courts warned that arbitration cannot be presumed merely because one contract mentions another. A commercial connection is not enough.

This is where Hirani Developers becomes important.

The later agreements did not make a passing reference to the Development Agreement. They did not merely say that some obligations would be governed by it. They said that all terms and conditions of the Development Agreement would form part of the later agreements and that all clauses would bind the parties. The Supreme Court treated this as full incorporation. The Court said, in substance, that the Development Agreement had been imported “body and soul” into the later agreements.

That phrase is important. The Court was not persuaded merely because the dispute arose from the same redevelopment project. It was not enough that the documents were commercially connected. What mattered was the language. The later agreements had opened the door wide enough for the arbitration clause to enter.

This is also a drafting lesson.

Consider three formulations. “The parties shall refer to the Development Agreement.” This is weak. “The specifications, payment terms and possession schedule shall be as per the Development Agreement.” This is better, but limited. “All terms and conditions and all clauses of the Development Agreement shall form part of this Agreement and shall bind the parties.” This is strong. It may import the arbitration clause also.

The difference is not cosmetic. It is jurisdictional. One phrase may leave parties before a court or consumer forum. Another may take them to arbitration.

Redevelopment projects make this issue more sensitive. The Development Agreement is usually between the society and developer. Individual members later sign Permanent Alternate Accommodation Agreements. The arbitration clause may be in the society-level document. But the actual dispute may arise between the developer and an individual member.

In such cases, the clause can travel. But only if the member-level agreement clearly carries it forward.

That nuance matters. The judgment should not be read to mean that every flat owner is automatically bound by every arbitration clause in a society-level agreement. The individual agreement must be seen. Its language must be tested. If it clearly incorporates the Development Agreement, the arbitration clause may apply. If it refers to the Development Agreement only for a limited purpose, the answer may be different.

Nor is this a pure non-signatory case. The members were not being bound only because the society had signed the Development Agreement. The stronger point was that the members had themselves signed later agreements which incorporated the Development Agreement in wide terms. Incorporation by reference and non-signatory arbitration may overlap. But they are not the same thing.

There is also a consumer law angle, but it should not be overstated. The members had approached the Consumer Commission. The developer invoked arbitration and moved under Section 11. The Supreme Court appointed an arbitrator after holding that an arbitration agreement existed by incorporation. But the judgment should not be treated as a complete ruling on whether consumer remedies must always yield to arbitration. The immediate issue was narrower: did an arbitration agreement exist?

The decision also says something important about Section 11 courts. Their role is limited. But it is not blind. Where existence is disputed, the court must look at the contract, not to decide the merits, but to see whether there is an agreement to arbitrate.

For lawyers and businesses, the message is clear. If you want the arbitration clause in one document to apply to another, say so directly. Do not rely on lazy cross-references. “As per the earlier agreement” may be convenient drafting, but it may create expensive jurisdictional litigation later. The safest course is to repeat the arbitration clause in every connected agreement. If that is not done, the later agreement should expressly provide that the dispute resolution and arbitration clause of the earlier agreement is incorporated and will apply.

Even then, one more check is necessary. Does the borrowed clause actually work in the later contract? The seat, venue, number of arbitrators, appointment procedure and party descriptions must make sense.

An arbitration clause can be borrowed from another contract. But the borrowing must be deliberate. The law does not treat every cross-reference as consent to arbitrate. It asks whether the later contract made the arbitration clause part of itself, and whether the parties can fairly be said to have agreed to that result.

In arbitration drafting, a cross-reference is not harmless housekeeping. It may decide the forum before the merits are ever argued.

About the author: Dr. Rishabh Gandhi is an Arbitration lawyer and former trial court Judge. Gandhi is also the founder of Rishabh Gandhi and Advocates.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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