The Managing Director Bihar State Food and Civil Supply Corporation Limited & Anr. vs Sanjay Kumar

Court

Supreme Court of India

Date

5 August 2025

Case No.

Civil Appeal No. 10116 of 2025

Result

Dismissed

Bench

Pamidighantam Sri Narasimha, Manoj Misra

Citation

[2025] 8 S.C.R. 1551 : 2025 INSC 933

Acts & Sections

Arbitration and Conciliation Act, 1996 IPC Bihar and Orissa Public Demands Recovery… Constitution

Issue for consideration

Whether the dispute between the respondents and the appellant arising out of the agreement incorporating the arbitration clause has become non-arbitrable in view of the initiation and pendency of the criminal cases; whether invocation of the Recovery Act by the appellant-Corporation bars initiation of proceedings under the Arbitration and Conciliation Act, 1996; whether the application u/s.11(6), Arbitration Act is barred by limitation; whether the issue relating to legality and validity of invocation of arbitral proceedings u/s.11(6) is conclusively decided by the High Court in Sadhna Kumari v. Bihar State Food & Civil Supplies Corporation Ltd, against which SLP was dismissed; whether the decision in the order of Bihar Public Works Contracts Disputes Arbitration Tribunal operates as res judicata; whether issues no.1 to 5 should be left to the arbitral tribunal to decide in view of sub-section (6A) of s.11, Arbitration Act.

Headnote

Arbitration and Conciliation Act, 1996 – s.11 – Penal Code, 1860 – ss.420, 409 – PDS scam in the State of Bihar; misappropriation of more than a thousand crores by the accused rice-millers, 600 FIRs filed – High Court allowed s.11 petitions filed by the respondents-rice-millers and appointed arbitrators in several cases – As regards the objection of non-arbitrability of dispute due to allegations of criminality, High Court held that the allegations are simple accusations as against serious allegation of forgery or fabrication and as such there is no bar – Challenge to – Whether the dispute between the respondents and the appellant-Corporation arising out of the agreement incorporating the arbitration clause became non-arbitrable in view of the initiation and pendency of the criminal cases:

Held: No – Mere fact that criminal proceedings can or have been instituted in respect of the same incident(s) would not per se lead to the conclusion that the dispute which is otherwise arbitrable ceases to be so – There is a distinction between “serious fraud” and “fraud simpliciter” to segregate and exclude disputes involving serious fraud from arbitrability – Furthermore, Courts exercising jurisdictions u/s.11(6) and s.8 must follow the mandate of sub-section (6A) to s.11 and their scrutiny must be “confine(d) to the examination of the existence of the arbitration agreement” – In the present case, there is an arbitration agreement – All the issues raised by the appellant are kept open for being raised and contested before the arbitral tribunal – Appeals dismissed – Bihar and Orissa Public Demands Recovery Act, 1914. [Paras 21, 27-30]

Arbitration and Conciliation Act, 1996 – s.11(6), 8, 11 (6A) – Application u/s.11(6), if opposed on grounds of serious fraud – Enquiry by referral court – Scope:

Held: Courts exercising jurisdictions u/s.11(6) and s.8 must follow the mandate of sub-section (6A) to s.11 and their scrutiny must be “confine(d) to the examination of the existence of the arbitration agreement”. [Para 27]

Arbitration and Conciliation Act, 1996 – s.11 – Arbitrability in cases of serious fraud – Principles governing, stated. [Para 21]

Judgment Pamidighantam Sri Narasimha, J. Contents* I. Introduction. ........................................................................... 11 II. Facts. .................................................................................... 12 III. Issue. .................................................................................... 25 IV. Submissions. ......................................................................... 26 V. Principles governing arbitrability in cases involving allegations of serious fraud. .................................................................... 2

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