HSA | Dispute Resolution & Arbitration Monthly Update | June 2026

DISPUTE RESOLUTION AND ARBITRATION UPDATE

The Supreme Court of India Hirani Developers Vs. Nehru Nagar Samruddhi CHS Ltd. & Ors. 2026 INSC 484

Background facts

• Appellant entered into a Development Agreement dated 20.12.2011 with Respondent No. 1 for the redevelopment of a housing project. Clause 36 of the Development Agreement contained an arbitration clause providing that disputes between the parties would be resolved through arbitration under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
• Subsequently, Respondent No. 1 executed separate Permanent Alternate Accommodation Agreements (“PAAA”) with the other Respondents being the individual members of the Society.
• Clause 14 of each PAAA expressly provided: “It is clarified that all the terms and conditions of the Development Agreement dated 04/07/2012 shall be construed to form a part of these presents and all the clauses of the same shall be binding on the parties hereto.”
• Disputes subsequently arose between the parties and certain Respondents/Society members initiated proceedings under the Consumer Protection Act, 2019.
• Appellant invoked arbitration under Section 21 of the Arbitration Act by relying upon Clause 36 of the Development Agreement and sought the nomination of an arbitrator. However, the Respondents refused to participate in arbitration and contended that the PAAAs did not contain an independent arbitration clause.
• Applications were filed under Section 11 of the Arbitration Act before the Bombay High Court seeking appointment of an arbitrator.
• The High Court dismissed the applications holding that the arbitration clause contained in the Development Agreement had not been incorporated into the subsequent PAAAs and that no arbitration agreement existed between the parties.
• Aggrieved by the said order, Appellant approached the Supreme Court.

Issue(s) at hand?

• Whether the arbitration clause contained in the Development Agreement stood incorporated into the subsequent PAAAs by virtue of Clause 14 thereof?
• Whether the requirements of Section 7(5) of the Arbitration and Conciliation Act, 1996 were satisfied?
• Whether the case involved a mere reference to an earlier agreement or incorporation of the earlier agreement by reference?
• Whether a valid arbitration agreement existed between the parties warranting the exercise of powers under Section 11 of the Arbitration Act?

Findings of the Court

• The Court examined how Section 7(5) of the Arbitration Act should be interpreted and when a reference in a contract to another document containing an arbitration clause constitutes an arbitration agreement.
• Reliance was placed on M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited¹, wherein the Supreme Court distinguished between a mere reference to another document and incorporation of that document by reference. The Court held that where parties intend to incorporate a document in its entirety into a contract, all terms of the referred document, including the arbitration clause, become part of the later contract. It is important to understand whether there is conscious acceptance of such arbitration clause from another document, by the parties as part of their contract. As the Act itself does not contain any directions or conditions for interpretation of such intention, normal rules of construction of contract have to be followed.
• The Court also particularly relied on the following observations of M. K. Engineers case:
  • When there is a reference to another document, it is necessary to ascertain whether particular terms and conditions of the contract will be governed by the document referred or if all clauses of referred document will wholly get incorporated into the contract.
  • For example, if a contract states that document ‘x’ shall form part and parcel of the contract, it is deemed that the contract will be governed entirely by document ‘x’. Whereas, if a contract provides particular clauses to be governed by document ‘x’, for example - specification of supplies will be as provided in document ‘x’, then the Court can turn to document ‘x’ only to determine the specification of goods to be supplied and no other terms.
• The Court also quoted with approval the portion from M. K. Engineers judgment which relied upon NBCC (India) Limited v. Zillion Infraprojects Private Limited², wherein it was held that an arbitration clause would stand incorporated if:
  1. the contract contains a clear reference to the document containing the arbitration clause;
  2. the intention to incorporate such clause is evident;
  3. the clause is capable of application to disputes arising under the subsequent contract;
  4. the clause is not inconsistent with the terms of the subsequent contract.
• Applying the aforesaid principles, the Court noted that Clause 14 of the PAAAs expressly stipulated that all terms and conditions of the Development Agreement would form part of the subsequent agreements and that all clauses thereof would be binding upon the parties.
• The Court held that the language employed in Clause 14 left no room for doubt regarding the intention of the parties to incorporate the Development Agreement in its entirety into the PAAAs.
• Rejecting the High Court's interpretation, the Supreme Court held that the case did not involve a mere reference to the Development Agreement. Rather, it constituted incorporation by reference within the meaning of Section 7(5) of the Arbitration Act.
• The Court accordingly held that a valid arbitration agreement existed between the parties by incorporation and exercising its jurisdiction under Section 11 of the Arbitration Act, the Court set aside the Bombay High Court's order and appointed a Sole Arbitrator to adjudicate the disputes between the parties.

HSA Viewpoint

This Judgement clarified the legal scope of Section 7(5) of the Arbitration and Conciliation Act, 1996.

It is a significant reaffirmation of the doctrine of incorporation by reference under Section 7(5) of the Arbitration Act. The Supreme Court has clarified that the existence of an arbitration agreement is not dependent upon repetition of an arbitration clause in every subsequent agreement. Where parties clearly express an intention to incorporate an earlier agreement in its entirety, the arbitration clause contained therein may also become binding upon the parties.

The ruling is particularly significant for redevelopment projects, infrastructure contracts and complex commercial transactions involving multiple interconnected agreements. Such transactions frequently involve a principal agreement followed by several ancillary agreements executed with different stakeholders at different stages. The judgment reduces the risk of fragmented dispute resolution mechanisms arising merely because an arbitration clause is not repeated verbatim in each subsequent agreement.

From a procedural standpoint, the decision is equally important because it also clarifies the approach to be adopted at the Section 11 stage. Once the Court is satisfied that a valid arbitration agreement exists by incorporation, appointment of an arbitrator is a must.

Footnotes

1 (2009) 7 SCC 696

2 (2024) 7 SCC 174

The Supreme Court of India Parvinder Singh Vs. Directorate of Enforcement 2026 INSC 519 Criminal Appeal No. 2678 of 2026 (Arising out of SLP (Crl.) No. 12055 of 2025)

Background facts

• The present appeal arose from proceedings initiated by the Directorate of Enforcement (“ED”) against the Appellant under the Prevention of Money Laundering Act, 2002 (“PMLA”).
• An Enforcement Case Information Report (“ECIR”) was registered against the Appellant in July 2023. Subsequently, the Appellant was arrested on 27.04.2024 in connection with the alleged commission of offences under Sections 3 and 4 of the PMLA.
• Thereafter, the ED filed a prosecution complaint before the Special Court on 24.06.2024 seeking prosecution of the Appellant under the provisions of the PMLA.
• On the same day i.e. on 24.06.2024, the Special Court directed that the complaint be registered as a miscellaneous case and fixed the matter for further consideration of cognizance on 28.06.2024. When the matter was taken up on 28.06.2024, the Presiding Officer was on recess. Consequently, the matter was adjourned and posted for consideration of cognizance on 02.07.2024.
• In the meantime, the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) came into force with effect from 01.07.2024, replacing the Code of Criminal Procedure, 1973 (“CrPC”).
• One of the significant changes introduced under the BNSS was the insertion of the first proviso to Section 223(1), which requires a Court to provide an opportunity of hearing to the accused before taking cognizance of an offence on a complaint.
• On 02.07.2024, after the BNSS had come into force, the Special Court took cognizance of the prosecution complaint filed by the ED without granting any hearing to the Appellant.
• Aggrieved thereby, the Appellant challenged the cognizance order before the Uttarakhand High Court, contending that the requirement of a pre-cognizance hearing under Section 223(1) of the BNSS was mandatory and ought to have been complied with before cognizance was taken.
• The Uttarakhand High Court dismissed the challenge and upheld the cognizance order, following which the Appellant approached the Hon’ble Supreme Court.

Issue(s) at hand?

• Whether the Section 223 (1) of the BNSS applies to complaints filed under the Prevention of Money Laundering Act, 2002?
• Whether the requirement of a pre-cognizance hearing under Section 223(1) of the BNSS would apply to a complaint filed prior to 01.07.2024, or whether such application would amount to giving retrospective effect to the provision?
• Whether non-compliance with the requirement of granting a hearing before taking cognizance renders the cognizance order invalid?

Findings of the Court

• The Hon’ble Supreme Court held that the first proviso to Section 223(1) of the BNSS confers a statutory right upon an accused person to be heard before cognizance is taken on a complaint. The Court also took note of its earlier decision in Kushal Kumar Agarwal v. Directorate of Enforcement¹.
• The Court observed that the legislature has consciously employed the expression “shall” in the proviso, making the requirement mandatory and not directory in nature.
• It was further held that the safeguard introduced under Section 223(1) is not merely procedural but is closely linked to the principles of natural justice and the constitutional guarantee of fair procedure under Article 21 of the Constitution.
• Rejecting the contention that the PMLA is a complete code excluding the operation of the BNSS, the Court held that procedural provisions contained in the general criminal law continue to apply to PMLA proceedings unless there is a clear inconsistency between the two enactments. In this regard, the Court relied upon Tarsem Lal v. Enforcement Directorate², Yash Tuteja v. Union of India³ and Kushal Kumar Agarwal v. Directorate of Enforcement.
• The Court examined the scheme of the PMLA, particularly Sections 44, 46, 65 and 71, and concluded that the procedure governing complaint cases under the BNSS would apply to prosecutions under the PMLA.
• On the issue of transition from the CrPC to the BNSS, the Court held that mere filing of a complaint prior to 01.07.2024 does not amount to commencement of an inquiry.
• The Court observed that an inquiry commences only when the Court applies its judicial mind to the allegations for the purpose of proceeding further in the matter. While arriving at this conclusion, the Court considered and relied upon the principles laid down in Hardeep Singh v. State of Punjab4.
• Since cognizance in the present case was taken on 02.07.2024, after the BNSS had come into force, the Special Court was required to comply with the mandate of Section 223(1) of the BNSS.
• The Supreme Court further held that denial of a mandatory hearing at the pre-cognizance stage cannot be treated as a curable procedural irregularity. Such non-compliance strikes the root of the proceedings and cannot be justified on the ground that no prejudice has been caused to the accused.

Accordingly, the Supreme Court set aside the judgment of the Uttarakhand High Court as well as the cognizance order passed by the Special Court. The matter was remanded to the Special Court with a direction to proceed from the stage of taking cognizance and afford an opportunity of hearing to the Appellant in terms of the first proviso to Section 223(1) of the BNSS.

HSA Viewpoint

This judgment is one of the first significant decisions dealing with the procedural changes introduced under the BNSS. While the transition from the CRPC to the BNSS has given rise to several practical questions, the present case specifically addresses the stage at which the new procedural safeguards become applicable.

It clarifies that the applicability of the first proviso to Section 223(1) depends on the date of cognizance and not merely on the date of filing of the complaint. By holding that mere filing of a complaint does not amount to commencement of an inquiry, the Court has provided useful guidance for matters that were pending during the transition from the CRPC to the BNSS.

The judgment is significant for its recognition of the accused's right to be heard before cognizance is taken on a complaint. The Court has treated this requirement as a mandatory safeguard and not just a procedural formality that can be dispensed with under the guise of convenience.

Although the present case arose under the PML Act, the principles laid down by the Supreme Court are likely to be relevant in proceedings under other special statutes that contemplate prosecution through complaint cases. The ruling may therefore have a wider impact on criminal and regulatory prosecutions where cognizance is taken after the commencement of the BNSS.

From a practical standpoint, the decision serves as a reminder that procedural safeguards introduced by the legislature must be adhered to strictly. The judgment reinforces that fairness at the threshold stage of criminal proceedings is an important component of the criminal justice system and cannot be overlooked even in cases involving serious economic offences.

Footnotes

1 2025 SCC Online SC 1221

2 (2024) 7 SCC 61

3 (2024) 8 SCC 465

4 (2014) 3 SCC 92

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