Forgery plea no bar to arbitration, but two brothers who never signed the Indore land deal stay out
Justice Vinay Saraf referred a developer and the one brother who signed a 2.358-hectare development agreement to arbitration, but refused to rope in his two co-owner brothers, finding nothing on record, not even the invocation notice, that connected them to the deal.
A company that signed a development agreement with one of three brothers who jointly own 5.67 hectares of farmland on the edge of Indore will get its arbitrator, but only against the brother who signed. The Indore bench of the Madhya Pradesh High Court has refused to pull the other two into the arbitration, holding that nothing on record, not even the company’s own notice invoking the arbitration clause, showed that they were ever part of the bargain. The forgery allegation raised by the signing brother, the court held, is a matter for the arbitrator and does not stop the reference.
One signature on a deal for half the land
Sam Industries Ltd, acting through its authorised representative Rajendra Kumar Pasari, moved the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator. The three respondents, Mahesh, Brijlal and Mukesh Dangi, are real brothers and joint owners of an undivided 5.67 hectares in Survey No. 242/2 of village Tillor Bujurg, Tehsil Bicholi Hapsi, District Indore.
On 4 February 2025 the company and Mahesh signed an agreement for the development of 2.358 hectares of that land. Brijlal’s name appeared in the document as one of the executants, but his signature did not. The agreement itself recorded that a separate development agreement would be entered into for the balance land. Clause 14 provided for the resolution of disputes under the 1996 Act.
After signing, the company served notice on Mahesh to carry out demarcation, partition and measurement of the land, so that the portion covered by the agreement could be identified. Its case was that Mahesh neglected his side of the contract, which led to the notice and then to a second notice invoking the arbitration clause. In the meantime, on 20 May 2025, Brijlal executed a registered relinquishment deed giving up his rights in the land equally in favour of Mahesh and Mukesh. According to the company, that left Mahesh and Mukesh with half the land each, and the agreement Mahesh had signed covered exactly his half, 2.358 hectares.
When the company proposed names for an arbitrator, the reply was a denial that any development agreement had been executed at all, together with allegations of forgery and fraud. No name was agreed.
Three suits, two injunctions and a newspaper notice
The dispute had already spread across several courts by the time Justice Vinay Saraf heard it on 1 October 2026.
The company had filed an application under Section 9 of the 1996 Act before the Commercial Court, Indore, seeking a temporary injunction after a public notice dated 22 September 2025 appeared in the daily Agniban, which it read as an attempt by the brothers to sell the land. The Commercial Court allowed that application on 5 March 2026 and restrained the brothers from alienating, encumbering or transferring the land to any third party. That order is under challenge in an arbitration appeal pending before a division bench.
Mukesh, the third brother, filed Civil Suit RCS No. 1372-A/2025 before the XXXth District Judge, Indore, for a declaration that the development agreement does not bind him and was prepared through fraud and forgery, along with a permanent injunction. In that suit the company applied under Order 7 Rule 11 of the Code of Civil Procedure read with Section 8 of the 1996 Act for rejection of the plaint and reference to arbitration. The trial court dismissed that application on 5 March 2026. The company’s Arbitration Appeal No. 86/2026 against that order was heard along with the Section 11 application and decided by a separate order the same day.
Brijlal’s daughters opened a third front. In RCSA-1481/2025 before the I Civil Judge, Junior Division, Indore, they sought declaration, partition, separate possession and a perpetual injunction on the strength of a will dated 28 March 2015 by which, they say, their grandfather arranged for Brijlal’s one-third share to pass to them, since Brijlal has no male child. They treat the relinquishment deed of 20 May 2025 as null and void. On 2 March 2026 the trial court granted them a temporary injunction under Order 39 Rules 1 and 2, restraining the brothers from transferring, encumbering, mortgaging or alienating the land while the suit is pending.
What each brother told the court
Vijay Kumar Assudani, for the company, argued that although the agreement was signed by Mahesh alone and covered only 2.358 hectares, it stipulated that development permission would be obtained for the whole land and a separate agreement executed for the rest. All three brothers, he said, had consented. Brijlal’s relinquishment deed was executed in furtherance of the development agreement and the company bore its expenses. The brothers were acting jointly, the public notice was a joint effort to sell, and the Commercial Court’s injunction ran against all of them. Since Brijlal and Mukesh were not just real brothers of Mahesh but joint co-owners of the land, they could not wriggle out of the contract merely because they had not signed. Whether a non-signatory is bound, he said, is for the arbitral tribunal, and the referral court must refer once the existence of the clause is not in dispute. He relied on the Supreme Court’s decisions in Cox and Kings Ltd v. SAP India Pvt Ltd (2024) 4 SCC 1 and ASF Buildtech Pvt Ltd v. Shapoorji Pallonji and Company Pvt Ltd 2025 SCC OnLine SC 1016, and on two orders of coordinate benches of the Indore seat, Santosh Patidar v. Smt Ayodhya Bai (Arbitration Case No. 37/2023, 15 April 2024) and Prateek Dixit v. Anil Madan (Arbitration Case No. 90/2023, 19 July 2024), in which non-signatory family members had been sent to arbitration.
Ramesh Kumar Chandrawade, for Mahesh, said no such agreement was ever executed by his client. Mahesh had taken some loan, and by practising fraud a forged document styled a souda chitti had been prepared, on which the whole application rested. With forgery and fraud in issue, he argued, the matter was not referable, relying on the Supreme Court’s order of 2 February 2026 in Rajia Begum v. Barnali Mukherji 2026 INSC 106.
Lokesh Kumar Bhatnagar, for Brijlal, pointed out that his client had not signed, that the agreement did not cover the complete land, and that Mahesh had no right to contract for 2.358 hectares of undivided property. Without a signature or a contract there was not even a prima facie arbitration agreement between the company and Brijlal. His daughters’ suit on the will was pending with an injunction in force. He leaned heavily on Hindustan Petroleum Corporation Ltd v. BCL Secure Premises Pvt Ltd 2025 INSC 1401, where the Supreme Court held that a non-signatory’s involvement in negotiation or performance must be positive, direct and substantial, not merely incidental, before a referral court can treat it as a veritable party. Brijlal, he said, was involved in none of it.
Dattatray Kale, for Mukesh, said his client was a complete stranger to the document: neither a signatory nor the owner of any land covered by it. With no partition among the co-owners, any agreement between the company and Mahesh over an undivided share was illegal and void and could not found a reference. He too relied on Hindustan Petroleum and sought dismissal.
In rejoinder Mr Assudani said the fraud allegations do not invalidate the arbitration clause, citing Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, and that the pending civil suits create no bar to reference where a valid arbitration agreement exists.
Forgery goes to the arbitrator
Justice Saraf framed the question as whether, at the pre-referral stage, the forgery allegation and the request to refer non-signatories could be considered by the referral court, or had to be left to the arbitrator. Since the 2015 insertion of Section 11(6A), he observed, non-arbitrability has to be examined at the referral stage, and both issues had to be decided prima facie.
On fraud, the judge went to Vidya Drolia, where the Supreme Court overruled N. Radhakrishnan v. Maestro Engineers and held that fraud allegations relating to a civil dispute can be arbitrated, subject to the caveat that fraud which would vitiate the arbitration clause itself goes to non-arbitrability. He also noted the Supreme Court’s explanation in Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd (2021) 5 SCC 671 that the referral court looks only for the prima facie existence of the agreement and leaves deeper examination to the arbitrator.
Applied here, the company and Mahesh were both signatories to the souda chitti, under which the company agreed to develop part of Survey No. 242/2, and some amounts had been transferred by the company to Mahesh’s bank account. Clause 14 contained the arbitration clause. The forgery allegation, the judge held, was connected to the civil dispute and “not having any larger impact on the society”. The execution of the agreement and the fraud plea could both be examined by the arbitrator on the pleadings. The dispute between the company and Mahesh was therefore referable.
Where the referral court must stop
The second issue took up most of the 29-page order. Justice Saraf set out the Supreme Court’s treatment of non-signatories at length: the five-judge decision in Cox and Kings on the group of companies doctrine, which asks whether a non-signatory consented to be bound and tells referral courts to leave the complex question of who is a veritable party to the tribunal under Section 16; SBI General Insurance Co Ltd v. Krish Spinning (2024) 12 SCC 1 and the decision in In re Interplay between Arbitration Agreements and the Stamp Act (2024) 6 SCC 1, both confining the Section 11(6A) enquiry to a prima facie examination of existence; Ajay Madhusudan Patel v. Jotinder S. Patel (2025) 2 SCC 147, listing mutual intent, the relationship between signatory and non-signatory, commonality of subject matter, the composite nature of the transaction and performance of the contract as the factors that signal an intention to be bound; and ASF Buildtech, which told referral courts to refrain from deciding the veritable-party question even if they had the discretion, leaving the non-signatory to Section 16 and costs if it was impleaded vexatiously.
He also noted Vinod Kumar Sachdeva v. Ashok Kumar Sachdeva (2023) 20 SCC 190, where the Supreme Court set aside a Section 8 reference because a company and a bank sued alongside the signatory were not parties to the memorandum of understanding.
The decisive authority, in the judge’s reading, was Hindustan Petroleum. There the Supreme Court, after considering Cox and Kings, Interplay, SBI General Insurance, Ajay Madhusudan Patel and ASF Buildtech, held that the prima facie examination of the existence of an arbitration agreement includes whether a non-signatory is a veritable party. It does not follow, the Supreme Court said, that a referral court which finds prima facie that someone is not a veritable party must still send them to the tribunal; that would reduce the referral court to a mere automaton and let absolute strangers walk in and demand a reference. If one contracting party engages third parties and there is nothing even prima facie to show a relationship between the other side and those third parties, the matter cannot be referred and the question cannot be left to the arbitrator.
The company had cited Hemant D Shah HUF v. Chittaranjan D Shah HUF 2026 SCC OnLine 2125, where the Supreme Court found two non-signatory respondents to be veritable parties because the dispute over a partnership asset would substantially affect their rights. Justice Saraf noted that Hemant D Shah was decided with Hindustan Petroleum in view and itself held that the veritable-party question must be decided prima facie. The law, he concluded, required him to consider first whether Brijlal and Mukesh were veritable parties.
No whisper of the other two in the notice
On the facts, the judge found no such connection. Brijlal’s name appeared in the agreement, but it was admitted he had not signed, and his complete share in the land was not included. The land is ancestral, and his daughters’ suit raised serious questions that a civil court will have to decide: whether their grandfather executed a will in their favour, whether he was competent to do so given that Brijlal has no male issue, whether Brijlal could execute the relinquishment deed to defeat his daughters’ interest, and whether that deed covers his whole share. The company is not a party to that suit.
Mahesh, the judge reasoned, had executed the agreement for 50 per cent of the land, apparently in the hope that Brijlal would relinquish in his favour. That showed that at the time of execution Brijlal had no intention of joining; otherwise two-thirds of the land would have been included and some amount paid to Brijlal, which was not the company’s case.
Mukesh’s position was weaker still. Neither his name nor his share figured in the agreement. The only recital was that development permission would be obtained for the complete land and a further agreement executed later for the remainder. Development permission, the judge observed, cannot be obtained for part of a holding without a partition, and there was none among the brothers. The agreement itself contemplated Mahesh applying for measurement, demarcation and partition, which showed there was no intention to bring the complete land within it; otherwise no partition would have been needed. Mukesh’s own suit to have the agreement declared void was pending, and the company’s Section 8 application in it had been dismissed.
The company’s notice of 18 September 2025 settled the point. In it the company proposed one Sumit Gupta to act as mediator between Mahesh and the company. There was, the judge said, no whisper of Brijlal or Mukesh being involved in the transaction, no allegation that the agreement covered the entire land, and no demand that they act under its terms. After carrying out the exercise Hindustan Petroleum requires, the court found that even prima facie there was no material to treat the two as veritable parties, and that in the absence of any privity of contract they could not be referred.
Order
The application was allowed in part. The dispute between Sam Industries Ltd and Mahesh is referable to arbitration under the 1996 Act; the application was dismissed as against Brijlal and Mukesh Dangi. The court proposed to appoint Justice J.K. Maheshwari, former Judge of the Supreme Court of India, as arbitrator, and directed the Principal Registrar to obtain his consent and declaration and place them before the court. The matter is listed for further consideration on 16 November 2026. The order was reserved on 1 October 2026 and pronounced on 23 October 2026. The company’s Arbitration Appeal No. 86/2026 against the dismissal of its Section 8 application in Mukesh’s civil suit was decided by a separate order the same day.