Facts: The Applicant, a developer, entered into a Redevelopment Agreement (DA) with Respondent No. 1, a cooperative housing society. Respondent No. 2, a member of the society, opposed the redevelopment and refused to sign the DA. After being evicted through court-ordered interim measures, Respondent No. 2 executed a Permanent Alternate Accommodation Agreement (PAAA) with the developer to secure his rights to a new flat and transit rent. The PAAA contained an arbitration clause and referred to the DA. The developer later invoked the arbitration clause of the DA against Respondent No. 2, seeking over Rs. 13 crore in damages for delays caused by his dissent. Respondent No. 2 resisted the application, arguing he was not a signatory to the DA and thus not bound by its arbitration agreement.
Procedural Posture: The developer filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, before the Bombay High Court, seeking the appointment of an arbitrator to resolve disputes with the non-signatory member arising from the DA.
Issue: Whether a developer can compel a dissenting member of a cooperative society, who is a non-signatory to the primary Development Agreement, to submit to arbitration based on the arbitration clause in that agreement or the subsequent PAAA?
Holding: No, the application for appointment of an arbitrator was dismissed.
Reasoning: The Court reasoned that arbitration is founded on party autonomy and express consent. While a member's individual rights are subservient to the society's decision for redevelopment, this "loss of individuality" does not automatically make the member a party to the society's private arbitration agreement. The "veritable party" doctrine requires positive, direct, and substantial involvement in the contract, whereas Respondent No. 2’s involvement was involuntary and forced by legal circumstances. Furthermore, the PAAA is a distinct document for particularizing benefits; its execution does not imply consent to the arbitration clause of the DA. Mere status as a third-party beneficiary of a contract is insufficient to force a non-signatory into arbitration. The Court concluded that the developer failed to demonstrate even a prima facie existence of an arbitration agreement with the dissenting member regarding DA-related disputes.