Rajia Begum vs Barnali Mukherjee

Held: When an allegation of fraud is made with regard to arbitration agreement itself, such a dispute is generally recognised as a dispute, which is in the realm of non-arbitrability and the court will examine it, as a jurisdictional issue only to enquire whether the dispute has become non-arbitrable due to one or the other reason – In the present case, admission Deed is not genuine – There exists substantial and cogent material which casts serious doubt on the genuineness of the Admission Deed – Arbitration clause does not exist independently but is embedded in the document whose existence is seriously disputed – The dispute relating to the Admission Deed involves serious allegations going to the root of the arbitration agreement itself and is not amenable to arbitration at this stage – Arbitration is founded upon consent – A party may be bound by the arbitral process only if it is first shown, even at a prima facie level, that such a party had agreed to submit disputes to arbitration – Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes cease to be merely contractual and strikes at the very root of arbitral jurisdiction – A controversy of this nature falls squarely within the category of disputes that are generally recognized as non-arbitrable – Order passed by the High Court allowing the respondent no.1’s application u/s.8 of the Act referring the dispute in Suit to be resolved through arbitration is unsustainable and is quashed and set aside – Order of the High Court rejecting the respondent no.1’s application u/s.11 of the Act for the appointment of arbitrator warrants no interference and is affirmed. [Paras 15, 16, 20, 24]

Fraud – Arbitration and Conciliation Act, 1996 – Impact of fraud on arbitrability of a dispute:

Held: Mere allegation of fraud simpliciter may not be a ground to nullify the arbitration agreement between the parties, but where the court finds that there are serious allegations of fraud which make a case of criminal offence or where the allegations of fraud are so complicated, which need to be decided on the basis of voluminous evidence, the court can sidetrack the arbitration agreement and proceed with the suit – Court can proceed with the suit in cases where the fraud is alleged against the arbitration provision itself or is of a such a nature which permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself which contains an arbitration clause or the validity of the arbitration clause itself. [Para 12]

Constitution of India – Article 227 – Arbitration and Conciliation Act, 1996:

Held: Both the Trial Court and the First Appellate Court had concurrently held that the allegations of fraud in the present case were serious and that the respondent no.1 had failed to produce the original Admission Deed or a certified copy thereof, as required u/s.8(2) of the Act – The aforesaid findings were not perfunctory, but were grounded in the material on record and in the statutory requirements – Supervisory jurisdiction of the High Court under Article 227 of the Constitution is not an appellate jurisdiction in disguise, and it does not permit reappreciation of evidence – High Court, while exercising jurisdiction under Article 227 of the Constitution, was not justified in dislodging the concurrent findings and directing reference of the dispute to arbitration, particularly when the very existence of the arbitration agreement was under serious doubt – Conversely, the High Court was correct in dismissing the respondent no.1’s application u/s.11 of the 1996 Act – When the existence of the arbitration agreement itself is in serious dispute and requires adjudication, appointment of an arbitrator would be premature and legally impermissible. [Paras 21-23]

Arbitration and Conciliation Act, 1996 – s.9 – Appellant (in CA No.675 of 2026), respondent no.2 and respondent no.3, constituted a partnership firm – Respondent no.1 issued notice to the appellant and relied upon an Admission Deed as the source of her induction into the firm and as foundation of arbitration agreement – Appellant denied the execution of the Admission Deed and stated that Admission Deed is a forged and fabricated document – Respondent no.1 applied to the Trial Court u/s.9, 1996 Act, allowed by Trial Court – Appeal filed by the appellant, allowed by High Court – Appeal filed by respondent no.1, dismissed by Supreme Court and the order of the High Court rejecting the application of the respondent no.1 u/s.9 of the Act, attained finality – Appellant filed civil suit inter alia seeking a declaration that the ‘Admission Deed’ is a forged document; respondent no.1 filed application u/s.8 to refer the suit to arbitration – Application dismissed by Trial Court – Appeal thereagainst also dismissed – Revision filed by respondent no.1 – Allowed by High Court, orders of the Trial Court and First Appellate Court set aside, and the dispute in Suit was referred to be resolved through arbitration – Parallelly, respondent no.1 had filed petition u/s.11 for the appointment of an arbitrator – Dismissed by High Court:

Held: Findings in s.9 proceedings are undoubtedly prima facie in nature, such findings, when they attain finality, cannot be ignored in subsequent proceedings founded on the very same issue – The prima facie satisfaction recorded by the High Court regarding the doubtful existence of the arbitration agreement was, therefore, a relevant consideration while examining applications u/ss.8 and 11 of the Act. [Para 19]