Arbitration Clause in Development Agreement Binds Individual Owner Despite Party’s Status as Co-operative Society

The Petitioners (a Co-operative society and its director) entered into a registered Development Agreement with Respondent No. 1 (landowner) on 06.01.2022 for a construction project

A tripartite agreement was later signed on 09.11.2022 involving Respondent No. 2 as an investor, though Respondent No. 2 subsequently exited the project

Disputes arose regarding accounting of sale proceeds, excess remittances, and Respondent No. 1’s unilateral revocation of a registered Power of Attorney on 18.06.2025

The Petitioners invoked the arbitration clause in the 2022 Agreement via a Section 21 notice

Respondents failed to appoint an arbitrator, leading the Petitioners to approach the High Court under Section 11 of the Arbitration and Conciliation Act, 1996

Respondent No. 1 challenged maintainability citing statutory bars under the West Bengal Co-operative Societies Act, 1961

1. Whether the dispute is non-arbitrable due to the statutory bar under Sections 108 and 109 of the West Bengal Co-operative Societies Act, 1961

2. Whether Respondent No. 2, a non-signatory to the original Development Agreement, can be compelled to join the arbitration proceedings

Section 11(6) of the Arbitration and Conciliation Act, 1996, regarding the appointment of auditors

Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, which defines the limited scope of judicial interference at the referral stage and the categories of non-arbitrable disputes

Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. v. Ajay Sales & Supplies (2021) 17 SCC 248, and Sri Ramakrishna House Building Co-operative Society v. M/s Skilltech Engineers & Contractors Pvt. Ltd., which establish that commercial disputes between a society and third parties are arbitrable

Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2008) 4 SCC 755, clarifying that special statutory forums only exclude arbitration if the dispute arises directly under that specific statute

The Court rejected Respondent No. 1's maintainability objection, noting that the dispute did not touch upon the "constitution, management, or business" of a Co-operative Society, but was a purely commercial contractual dispute between the Petitioners and Respondent No. 1 in his individual capacity as a landowner

The Court held that the West Bengal Co-operative Societies Act does not bar arbitration for commercial transactions with third parties

Regarding Respondent No. 2, the Court found that the tripartite agreement did not incorporate the original arbitration clause

The Court determined that Respondent No. 2 was not a necessary party because the dispute (accounting and POA revocation) was personal to the Petitioners and Respondent No. 1 and did not meet the "composite transaction" test where performance is inextricably linked

The Court allowed the petition against Respondent No. 1 and dismissed it against Respondent No. 2; Justice Pranab Kumar Chattopadhyay (Retd.) was appointed as the Sole Arbitrator

The petition against Respondent No. 2 failed due to the absence of an arbitration agreement and the lack of a valid Section 21 notice addressed to it