Deekshitha Sharmile

The High Court of Karnataka Single Bench of Justice Suraj Govindaraj, exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, allowed three civil miscellaneous petitions arising from construction agreements between a house building co-operative society and an engineering and contracting company. The Court rejected the respondent’s objection that disputes involving a co-operative society must be taken only to the statutory forum under the Karnataka Cooperative Societies Act, 1959, and held that the parties are bound by their contractual arbitration clause. Accordingly, the Court appointed a sole arbitrator under the aegis of the Arbitration Centre attached to the High Court to adjudicate all disputes between the parties, while leaving all substantive and jurisdictional objections, including on arbitrability, to be decided by the arbitral tribunal.

The petitions were filed by a cooperative society against a private engineering company seeking appointment of a sole arbitrator. The disputes arose out of agreements executed between the parties on different dates, each containing an arbitration clause mandating resolution of disputes through arbitral proceedings.

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The petitioner invoked the arbitration clause and issued notices nominating an arbitrator. The respondent received the notices but did not provide any response or concurrence. Consequently, the petitioner approached the Court seeking appointment of an arbitrator under the Arbitration and Conciliation Act, 1996.

The respondent contended that since the petitioner was a cooperative society, disputes could not be referred to arbitration and must instead be adjudicated by the statutory authority under Section 70 of the Karnataka Cooperative Societies Act, 1959. The petitioner relied on a Supreme Court decision to argue that the Arbitration and Conciliation Act, being a special enactment, would prevail where an arbitration clause existed in the agreement. The agreements and notices were submitted as evidence in support of the petitions.

Justice Suraj Govindaraj recorded that the agreements between the parties contained an arbitration clause. The Court reproduced the clause for reference: “17. If any dispute were to arise between the FIRST PARTY and SECOND PARTY it should be got resolved through Arbitration Proceeding under Arbitration and Conciliation Act 1996. The Award under Arbitration Act shall be binding on both the parties.”

The Court noted that disputes had arisen and the petitioner had invoked the arbitration clause. It was stated: “Disputes having arisen between the parties, the petitioner had invoked the arbitration clause and issued notices, nominating his Arbitrator. Notices having been received by the respondent, there have been no response or concurrence, the petitioner has approached this Court in the above petitions.”

The respondent argued that arbitration was not permissible. The Court recorded: “The contention taken by the respondent is that the petitioner being a Cooperative Society, no arbitration proceedings could be initiated and any dispute would have to be referred to the Disciplinary Authority under Section-70 of the Karnataka Cooperative Societies Act, 1959.”

The petitioner relied on a Supreme Court precedent. The Court stated: “Learned counsel for the petitioner by relying on the decision of the Hon'ble Apex Court reported in AIR 2021 SUPREME COURT 4869 : AIRONLINE 2021 SC 798 in the case of JAIPUR ZILA DUGH UTPADAK SAHKARI SANGH LIMITED VS. AJAY SALES AND SUPPLIERS, more particularly at para-7.1, had contended that the Arbitration And Conciliation Act being a Special Enactment, where the agreement were to be governed by an arbitration clause, then the statutory dispute resolution under Section-70 of the Karnataka Cooperative Societies Act, 1959 would not be applicable.”

The Court reproduced the relevant portion of the Supreme Court judgment: “7.1 Now so far as the submission on behalf of the petitioners that in view of Section 58 of the Rajasthan Cooperative Societies Act, 2001, the dispute between the parties is to be resolved by the Registrar only and as per Bye Laws 30 of Rajasthan Cooperative Societies Act, 2001 shall be applicable and therefore no court shall have jurisdiction and therefore the dispute referred to the former District Judge is unsustainable has no substance. It cannot be disputed that Arbitration Act is a special Act. Even Subsection (5) of Section 12 also states with non obstante clause. In the distributorship agreement dated 31.03.2015, there is a provision to resolve dispute through arbitration. Despite Section 58 of the Rajasthan Cooperative Societies Act, 2001, there is an agreement between the parties to resolve the dispute through arbitrator - Chairman. Parties are bound by the agreement and the arbitration clause contained in the Agreement dated 31.03.2015. Therefore, neither Section 58 of the Rajasthan Cooperative Societies Act, 2001 shall not be applicable at all nor the same shall come in the way of appointing the arbitrator under the Arbitration Act.”

The Court observed: “The Hon'ble Apex Court having categorically held that if an arbitration clause were to exist in an agreement between the parties and the dispute were required to be adjudicated by way of arbitration, then the statutory requirement under the Cooperative Societies Act would not apply. As such, the contention of the learned counsel for the respondent would stand rebutted.”

Finally, the Court recorded the respondent’s submission: “At this stage, learned counsel for the respondent would submit that a suitable arbitrator shall be appointed, keeping all other contentions open to be adjudicated.”

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The Court directed: “CMP petitions are Allowed. Hon'ble Sri. Justice K. Sreedhar Rao, former Acting Chief Justice of High Court of Gauhati is appointed as a sole arbitrator in all the aforesaid petitions to arbitrate the dispute between the parties under the aegis of the Arbitration Centre attached to this Court. All contentions including that of arbitrability are left open to be decided by the learned arbitrator.”

“Since the order is passed in the presence of both the counsel, they shall appear before the Director, Arbitration and Conciliation Centre on 27.11.2025 at 2.30 p.m. without requirement of any further notice. Registry is directed to forward a copy of this order to the Director, Arbitration and Conciliation Centre for doing the needful and also to return the originals / certified copies of the documents filed to the counsel for the petitioners after complying with the due formalities.”

Advocates Representing the Parties

For the Petitioners: Sri. Y K Narayana Sharma, Advocate
For the Respondents: Sri. Umesh B N., Advocate

Case Title: SRI. RAMAKRISHNA HOUSE BUILDING CO OPERATIVE SOCIETY AND M/S SKILLETCH ENGINEERS AND CONTACTORS PVT LTD.
Neutral Citation: 2025:KHC:47112
Case Number: CMP No. 4 of 2025 C/W CMP No. 5 of 2025 CMP No. 6 of 2025
Bench: Justice Suraj Govindaraj