Justice Sandeep V. Marne, Bombay High Court 

The Bombay High Court partly allowed an arbitration petition while invoking the Doctrine of Indoor Management and observing that the contractor was fully justified in relying on an office bearer's signature for a project already approved by the General Body.

The Court restrained a cooperative housing federation from obstructing the construction of an advertising hoarding, observing that the structure is temporary and can easily be dismantled if the final arbitral award favors the societies.

The Bench of Justice Sandeep V Marne observed, "Prima-facie, the doctrine of Indoor Management would apply to the facts and circumstances of the present case when it comes to the issue of authority of the Secretary to sign the Agreement. The Federation had invited bids and had conducted competitive bidding process, and the Agreement is executed by the Secretary after adoption of General Body resolution. The Petitioner is therefore justified in assuming that the Secretary had the necessary authority to sign the Agreement."

Advocate Mohammed Zain Khan appeared for the Petitioner, while Advocate Rohit Joshi appeared for the Respondent.

Brief Facts of the Case

The Petitioner, an outdoor advertising agency, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection against the Respondent-Federation. The dispute arose from a commercial agreement for erecting an illuminated advertisement hoarding within the Federation's premises.

Following a competitive bidding process, the Federation’s General Body accepted the Petitioner’s highest commercial proposal. Consequently, the Secretary of the Federation issued a No Objection Certificate (NOC) and executed a formal contract. After paying the requisite fees, the Petitioner obtained necessary statutory clearances from the Traffic Department and the Thane Municipal Corporation (TMC).

However, upon the commencement of excavation work at the designated site, the Federation's Chairman and office bearers obstructed the construction. Citing safety hazards, structural stability, and internal traffic blockage, the Federation directed the Petitioner to halt work and complained to the TMC, which subsequently advised a site relocation. A police report was also filed against the Petitioner for alleged tree damage. Since subsequent settlement talks and joint site visits failed to break the impasse, the Petitioner approached the High Court to restrain the Federation from disrupting construction or terminating the agreement.

Contentions of the Parties

The Petitioner argued that the agreement was valid and binding as it directly flowed from a formal resolution passed by the Federation's own General Body. It was also contended that the Petitioner acted in good faith, secured all regulatory permissions, and incurred heavy capital expenditure on labor, material, and official fees. The Petitioner maintained that the site location was mutually agreed upon under the contract recitals and could not be unilaterally changed, especially since the TMC later confirmed that the advertisement permit remained valid.

The Respondent asserted that the commercial agreement and NOCs were executed unauthorizedly by the Secretary without the approval of the Managing Committee. It was argued that because the underlying contract lacked proper institutional sanction, the arbitration clause was non-binding, making the Section 9 petition non-maintainable.

Observations of the Court

The Court observed that the existence of an arbitration agreement constitutes a foundational jurisdictional fact for entertaining a petition for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996. While evaluating the Respondent-Federation's defence that the underlying commercial agreement was executed unauthorizedly by its Secretary without institutional sanction, the Court non-suited this objection on multiple grounds.

First, it was noted that the General Body of the Federation had formally adopted a resolution selecting the Petitioner's bid, thereby rendering the subsequent execution of the contract a mere ministerial act performed by its designated office bearer.

Second, the Court invoked the Doctrine of Indoor Management, clarifying that any internal lapse by the Managing Committee in omitting to issue a formal authority letter to the Secretary remained an internal administrative matter that could not prejudice a third party acting in good faith after a competitive bidding process.

Third, the Court characterized the Federation’s challenge to the validity of the agreement as a manifest afterthought, observing that the contemporaneous correspondence exchanged between the parties implicitly recognized the contractual arrangement and confined the dispute strictly to the safety of the site location.

The Court held, "The issue is only with regard to the site location. Hoarding structure is not a permanent construction and in the event the arbitral award is in favour of the Federation, the structure can always be removed. Since installation of the hoarding does not prima-facie endanger any building of the Federation or cause any hindrance to free flow of internal traffic, permitting installation of the same during pendency of arbitral proceedings would enure to the benefit of the Federation, who would earn rentals from the Petitioner."

Fourth, the Court found it highly improbable that the Managing Committee was kept in the dark, noting that the copy of the General Body Resolution and the subsequent work commencement directives were signed jointly by both the Chairman and the Secretary over an extended duration.

Fifth, the routine receipt and acknowledgment of the Petitioner's letters by the administrative office of the Federation further belied the plea of ignorance.

Sixth, the Court highlighted that the Federation had failed to initiate any administrative or punitive action against the Secretary under the cooperative societies regulatory framework for his alleged unauthorized acts.

Lastly, the Court underscored that the Federation’s own willingness to accommodate the hoarding at an alternative site logically defeated its baseline argument that no valid contractual relationship existed.

Consequently, the Court recorded a robust prima facie finding as to the existence of a valid arbitration agreement, reserving final adjudication on this jurisdictional fact for the arbitral tribunal.

Turning to the core merits, the Court observed that the operational dispute between the contracting parties was restricted solely to the physical site location of the advertising hoarding, rather than the Petitioner's substantive entitlement to erect it. The Court rejected the Federation's contention that the location was unilaterally or fraudulently fixed by the Petitioner in connivance with the Secretary.

It was observed that the specific site location—situated at the corner of a designated junction facing incoming traffic—was clearly detailed within the initial commercial proposal, replicated inside the subsequent formal No Objection Certificates, and legally incorporated into the explicit recitals of the commercial agreement.

The Court also dismissed the environmental apprehensions raised by the Federation regarding potential damage to trees, noting that no tree felling was necessitated and that a cooperative entity, having consciously decided to commercialize its real estate assets for revenue generation, could not selectively shift blame to avoid its bargain.

In concluding its analysis, the Court found that the three pillars for ad-interim injunctive relief—a strong prima facie case, balance of convenience, and irreparable injury—were overwhelmingly satisfied in favor of the Petitioner.

It was noted that the Petitioner had already sunk considerable capital expenditure into permissions, labor, and construction materials. Since a hoarding structure is temporary in nature and capable of dismantled removal should the final arbitral award favor the Respondent, the balance of convenience clearly tilted towards preservation of the contract.

Allowing the construction would preserve the subject matter of the dispute while securing recurring rental revenues for the Federation.

Accordingly, the Court partly allowed the Arbitration Petition, restraining the Federation from obstructing the construction work, while safeguarding the legal positions of both sides by clarifying that the installation would remain subject to the final outcome of the impending arbitral proceedings.

Cause Title: Adtrack Media LLP v. Happy Valley Homes CHS Federation Ltd. [Neutral Citation: 2026:BHC-OS:12549]

Appearances:

Petitioner: Advocate Mohammed Zain Khan

Respondent: Advocate Rohit Joshi

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