A non-signatory dissenting member of a cooperative society is not a veritable party to a development agreement’s arbitration clause.

The Applicant (Developer) entered into a Redevelopment Agreement (DA) dated July 2, 2021, with Respondent No. 1 (Society)

Respondent No. 2, a member of the Society, refused to sign the DA and opposed the redevelopment

Following a Section 9 petition, the Applicant obtained possession of Respondent No. 2's flat through a Court Receiver

Subsequently, Respondent No. 2 executed a Permanent Alternate Accommodation Agreement (PAAA) with the Applicant on November 14, 2024, which contained its own arbitration clause (Clause 32)

The Applicant invoked the arbitration clause in the DA (Clause 38) against Respondent No. 2, claiming damages for delays caused by his dissent

Respondent No. 2 resisted the Section 11 application, arguing he was not a signatory to the DA and thus not bound by its arbitration clause

1. Whether a developer can seek appointment of an arbitrator by invoking an arbitration clause in a Development Agreement against a member of a cooperative society who is not a signatory to said agreement

2. Whether the execution of a PAAA by a dissenting member, or his status as a third-party beneficiary of the DA, makes him a "veritable party" to the arbitration agreement in the DA

3. Whether the DA and PAAA constitute a composite transaction allowing a single reference to arbitration for disputes arising under the DA against a non-signatory to the DA

The Court applied Section 7 of the Arbitration and Conciliation Act, 1996, which requires an arbitration agreement to be in writing and reflects the principle of party autonomy

It relied extensively on the "Group of Companies" and "Veritable Party" doctrines as expounded by the Constitution Bench in *Cox and Kings Ltd. v. SAP India Pvt. Ltd.*, which requires a "positive, direct, and substantial involvement" in the performance of a contract to bind a non-signatory

It further applied the principle from *Daman Singh v. State of Punjab*, identifying that while a member loses individuality *vis-à-vis* the society for contractual obligations, this does not automatically extend to the specific, distinct agreement to arbitrate

Finally, it distinguished *Adityaraj Builders v. State of Maharashtra*, noting that the "composite transaction" principle there applied to stamp duty liability, not to the creation of an arbitration agreement against a non-consenting party

The Court reasoned that an arbitration agreement is a distinct and separate contract from the underlying commercial agreement

While Respondent No. 2 is bound by the *obligations* of the DA as a member of the Society (third-party beneficiary), being bound by the sub-contract of arbitration requires specific consent

The Court found Respondent No. 2 was not a "veritable party" because his involvement was not voluntary; he was a "dissenting member" whose participation in the redevelopment (executing the PAAA) was a result of the majority will and legal compulsion (Section 9 order), rather than a manifestation of intent to arbitrate the DA

Regarding the PAAA, the Court noted the Applicant invoked Clause 38 of the DA, not the PAAA clause, and that a reference to the DA in the PAAA for context does not constitute a valid "incorporation by reference" of an arbitration clause under Section 7(5), as it lacked clear intent to adopt the DA’s adjudicatory mechanism

The Court answered the primary issue in the negative, ruling that the Applicant failed to demonstrate the existence of an arbitration agreement between itself and Respondent No. 2 regarding disputes arising out of the DA

The Section 11 Application was dismissed with no order as to costs