Full Judgment Text
REPORTABLE
2026 INSC 106
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2026
(@ SLP (C) NO.6013 OF 2021)
RAJIA BEGUM ... APPELLANT
VERSUS
BARNALI MUKHERJEE … RESPONDENT
WITH
CIVIL APPEAL NO. OF 2026
(@ SLP (C) NO.20262 OF 2021)
BARNALI MUKHERJEE ... APPELLANT
VERSUS
RAJIA BEGUM AND OTHERS … RESPONDENTS
J U D G M E N T
ALOK ARADHE, J.
Leave granted.
2. The present appeals arise from a partnership dispute in which
appellant claims entry into the firm by virtue of a document
whose execution is stoutly denied and is alleged to be forged.
The High Court on the same factual foundation involving the
Signature Not Verified
Digitally signed by
KAPIL TANDON
Date: 2026.02.02
17:37:04 IST
Reason:
same alleged arbitration agreement, has in one proceeding
1
directed the parties to resolve their disputes through arbitration
and whereas in another proceeding, declined to appoint an
arbitrator on the ground, that the existence of an arbitration
agreement is itself in serious doubt. A common issue namely,
whether the disputes can be referred to arbitration or an
arbitrator can be appointed when the very existence of
arbitration agreement itself is seriously disputed on the
allegations of forgery and fabrication, arises for consideration in
these appeals.
(i) NARRATION OF FACTS
3.
The appellant, Barnali Mukherjee, in the appeal @ SLP (C) No.
20262 of 2021 (appellant), Aftabuddin (respondent no.2) and
Raihan Ikbal (respondent no.3), constituted a partnership firm
styled as ‘M/s RDDHI Gold’ (firm) by virtue of partnership deed
dated 01.12.2005. Rajia Begum (respondent no.1) claims that
the respondent nos.2 and 3 executed a power of attorney on
17.04.2007 empowering her to manage the affairs of the firm on
their behalf pursuant to which she executed a deed of admission
and retirement (Admission Deed) by which respondent nos.2
and 3 retired from the firm.
2
4. The appellant contends that the business of the reconstituted
partnership firm was absorbed and taken over by a company
named ‘RDDHI Gold Pvt. Ltd.’ (company) pursuant to the
absorption deed dated 27.02.2011. On 02.10.2016, the
respondent no.1 issued a notice to the appellant asserting that,
on the basis of the aforesaid Admission Deed dated 17.04.2007,
she had acquired an interest to the extent of 50.33% in the
erstwhile partnership firm and that respondent nos.2 and 3 had
retired as partners in 2007 itself. The appellant by reply dated
21.11.2016, categorically denied the execution of the Admission
Deed by her or by the other respondents and further denied the
very induction of the respondent no.1 in the firm as a partner at
any point in time. Thus, the appellant took a stand that the
Admission Deed is a forged and fabricated document, concocted
by the respondent no.1.
(ii) APLICATION UNDER SECTION 9 OF THE ACT
5. The respondent no.1 applied to the Trial Court under Section 9
of the Arbitration and Conciliation Act, 1996 (Act), for
preservation of the subject matter of dispute and for
appointment of receiver for the Company which came to be
allowed by the Trial Court. The High Court, by an order dated
3
04.05.2018, allowed the appeal filed by the appellant inter alia
finding that the very existence/execution of the ‘Admission
Deed’ is in dispute and, in view of the availability of cogent
material which would indicate the non-existence of the
Admission Deed, it would not be prudent on the part of the
Court exercising jurisdiction under Section 9 of the Act, to
accord interim protection to the respondent no.1 who has failed
to demonstrate the existence of an arbitration agreement in a
prima facie manner. Aggrieved by the order of the High Court
dated 04.05.2018, the respondent no.1 preferred an Appeal to
this Court which came to be dismissed. Thus, the said order of
the High Court dated 04.05.2018, rejecting the application of
the respondent no.1 under Section 9 of the Act, attained finality
between the parties.
(iii) APPLICATION UNDER SECTION 8 OF THE ACT
6. The appellant, on 16.05.2018, filed a civil suit bearing
No.71/2018 before the competent civil court seeking the relief of
declaration and injunction against the respondent no.1 inter alia
seeking a declaration that the ‘Admission Deed’ is a forged
document. The respondent no.1, in the said suit, preferred an
application to the Trial Court under Section 8 of the Act, to refer
4
the suit to arbitration, owing to the existence of an arbitration
agreement between the parties in respect of disputes concerning
the ‘Admission Deed’. The said application preferred by the
respondent no.1, under Section 8 of the Act, came to be
dismissed by the Trial Court vide order dated 06.09.2018 which
inter alia held that the allegations of fraud relating to the validity
of the impugned Admission Deed were complicated in nature
and that the respondent no.1 had failed to produce either the
original Admission Deed or a certified copy thereof.
7. The respondent no.1 preferred an appeal against the said Order
dated 06.09.2018, before the Additional District Judge, who also
dismissed the appeal in terms of the order dated 25.09.2020.
Being aggrieved, the respondent no.1 further preferred a revision
under Article 227 of the Constitution to the High Court, which
by order dated 24.09.2021 set aside the orders of the Trial Court
and the First Appellate Court, and allowed the revision filed by
the respondent no.1 by referring the dispute in Suit No.71/2018
to be resolved through arbitration.
5
(iv) APPLICATION UNDER SECTION 11 OF THE ACT
8. Parallelly, when the aforesaid proceedings under Sections 8 and
9 were ongoing, the respondent no.1 had also filed a petition
under Section 11 of the Act before the High Court, seeking
appointment of an arbitrator for resolving the disputes between
the parties which had arisen in terms of the arbitration clause
contained in the ‘Admission Deed’. The High Court dismissed
the petition filed by the respondent No.1, under Section 11 of
the Act, by order dated 11.03.2021, inter alia holding that it
would not be expedient to appoint an arbitrator till such time
that the issue regarding the existence of an arbitration
agreement between the parties has been answered finally. In the
appeal @ SLP (c) No.6013 of 2021, the respondent no.1 has
challenged the judgment and order dated 11.03.2021 by which
her application under Section 11 of the Act has been dismissed.
In the appeal @ SLP (C) No.20262 of 2021, the appellant has
assailed the judgment dated 24.09.2021 by which petition filed
by the respondent no.1 under Article 227 was allowed and the
title suit filed by the appellant was referred to arbitration.
6
(v) SUBMISSIONS
9. The learned counsel for respondent no.1 submitted that the
observations made by the High Court while deciding an appeal,
arising out of an order under Section 9 of the Act, are only for
the purposes of deciding the appeal and it has been clarified
that the views expressed in the order are tentative and should
not prejudice the respondent no.1 in any other proceeding.
Alternatively, it is contended that prima facie observation on the
existence of arbitration agreement made in an appeal, arising
out of an order under Section 9 of the Act, cannot affect the
jurisdiction of the Court under Section 11 of the Act. It is urged
that the dispute pertains to allegations of fraud challenging the
arbitration agreement itself, is arbitrable and well within the
jurisdiction of the arbitrator. It is submitted that the High
Court, in exercise of supervisory powers under Article 227, has
rightly set aside the orders passed by the Trial Court and the
Appellate Court. It is, therefore, contended that the dispute be
referred to the arbitration by appointing an arbitrator and the
order dated 24.09.2021 passed by the High Court under Article
7
227 be maintained. In support of the aforesaid submissions,
1
reliance has been placed on the decisions of this Court .
10. On the other hand, learned senior counsel for the appellant
submitted that the Admission Deed is forged and fabricated
document and there is no privity of contract between the parties.
It is submitted that the High Court in its order dated 04.05.2018
has categorically recorded a finding that the Admission Deed is
not a genuine document. It is submitted that the material on
record does not indicate that the respondent no.1 has acted as a
partner since 2007 till date. It is contended that the Admission
Deed is a manufactured and a forged document. It is argued that
the High Court erred in interfering with the orders passed by the
Trial Court and the Appellate Court in exercise of powers under
Article 227 of the Constitution of India. In support of the
aforesaid submissions, reliance has been placed on the decisions
2
of this Court .
1
A. Ayyasamy v. A Paramasivam & Others, (2016) 10 SCC 386; Rashid Raza v. Sadaf Akhtar, (2019) 8
SCC 710; Vidya Drolia & Ors. v. Durga Trading Corporation, (2021) 2 SCC 1; N.N. Global Mercantile
Pvt. Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379; Avitel Post Studioz Ltd. & Ors. v. HSBC PI
Holdings (Mauritius) Ltd., (2021) 4 SCC 713; Sushma Shivkumar Daga & Anr. v. Madhurkumar
Ramkrishnaji Bajaj & Ors., (2024) 12 SCC 253; K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr.,
(2025) 8 SCC 299; ITI Ltd. v. Siemens Public Communications Network Ltd., (2002) 5 SCC 510; Nirma
Ltd. v. Lurgi Lentjes Energietechnik GMBH, (2002) 5 SCC 520; Deep Industries Ltd. v. Oil and Natural
Gas Corporation Ltd. & Anr., (2020) 15 SCC 706 and Bhaven Construction v. Executive Engineer,
Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75.
2
A. Ayyasamy (supra); Vidya Drolia & Ors. (supra); SBP & Co. v. Patel Engineering Ltd. and Anr. (2005)
8 SCC 618 and Deep Industries Ltd. (supra).
8
(vi) ISSUE
11. We have bestowed our consideration upon rival submissions
and have carefully traversed the record placed before us. The
central question which emerges for our determination is whether
in the factual matrix of the case, the disputes between the
parties could have been referred to the arbitration under Section
8 of the Act and correspondingly whether the High Court was
justified in declining the appointment of an arbitrator under
Section 11 of the Act.
(vii) IMPACT OF FRAUD ON ARBITRABILITY
12.
The legal position with regard to the impact of fraud on
arbitrability of a dispute under the Act is well delineated by
3
decisions of this Court. A two-Judge Bench of this Court held
that 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. It has further been held
3
A. AYYASAMY v. A. PARAMASIVAM AND OTHERS, (supra)
9
that the 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.
13. The aforesaid principle was referred to with approval, by another
4
two-Judge Bench of this Court and two working tests were laid
down for determining serious allegations of fraud, which would
render the subject matter of an agreement non-arbitrable
namely, (1) does this plea permeate the entire contract and
above all, the agreement of arbitration, rendering it void, or (2)
whether the allegations of fraud, touch upon the internal affairs
of the parties, having no implication in the public
inter se
domain. It was further held that the first test is satisfied only
when it can be said that the arbitration clause or agreement
itself cannot be said to exist in a clear case in which the court
finds that the party against whom breach is alleged cannot be
said to have entered into the agreement relating to arbitration at
4
AVITEL POST STUDIOZ LIMITED AND OTHERS v. HSBC PI HOLDINGS (MAURITIUS) LTD. (supra)
10
all. Thus, in a case where plea is taken with regard to non-
existence of an arbitration clause or agreement, the same would
amount to serious allegation of fraud and would render the
subject matter of an agreement non-arbitrable.
14. Recently, a two-Judge Bench of this Court in Managing
Director Bihar State Food and Civil Supply Corporation
5
Limited (to which one of us P.S. Narasimha, J. was a party)
6
took note of the previous decisions of this Court and restated
the principles governing arbitrability in cases involving
allegations of serious fraud. The relevant extract of para 21
of the decision in Managing Director (supra) is extracted
below:-
“ 21. In view of our decision, it is unnecessary to
delve deep on this issue, but sufficient to restate
the law on the subject. The position of law as it
applies to initiation of arbitral proceedings in the
teeth of allegations of criminality involved in the
dispute, where criminal proceedings are either
pending or to be initiated is considered in several
decisions of this Court. In A. Ayyasamy v. A.
Paramasivam , this Court has considered the
matter in detail and laid down certain principles.
As the relevant portions of the decision
in Ayyasamy (supra) have been extracted in the
5
Managing Director Bihar State Food and Civil Supply Corporation Limited and Another v. Sanjay
Kumar, (2025) SCC OnLine SC 1604
6
A. Ayyasamy (supra), Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678, Rashid Raza v.
Sadaf Akhtar, (2019) 8 SCC 710 and Avitel Post Studioz Limited And Others (supra)
11
subsequent decisions of this Court in Ameet
Lalchand Shah v. Rishabh Enterprises , Rashid
Raza v. Sadaf Akhtar , and Avitel Post Studioz
Limited v. HSBC PI Holdings (Mauritius) Limited , we
are of the opinion that our judgment need not be
burdened by extracting excerpts from the judgment
all over again. Instead, we seek to restate the
principles as follows:—
XXX XXX XXX
VI. “Serious allegations of fraud” is to be
understood in the context of facts. In Rashid
Raza (supra) this Court laid down two tests. The
first test is satisfied only when it can be said that
the arbitration clause or agreement itself cannot be
said to exist in a clear case in which the court finds
that the party against whom breach is alleged
cannot be said to have entered into the agreement
relating to arbitration at all. The second test can be
said to have been met in cases in which allegations
are made against the State or its instrumentalities
of arbitrary, fraudulent, or mala fide conduct, thus
necessitating the hearing of the case by a writ
court in which questions are raised which are not
predominantly questions arising from the contract
itself or breach thereof, but questions arising in the
public law domain.
XXX XXX XXX
IX. However, the allegations of fraud with respect to
the arbitration agreement itself stand on a different
footing. This position is generally recognized as a
dispute which is in the realm of non-arbitrability.
In such cases, the arbitral tribunal will not
examine the allegation of fraud but will consider
the submission only for the purpose of examining
exclusion of jurisdiction. This principle, in its
application, can be seen in the judgment of this
Court in Avitel.”
15. Thus, it is evident that when an allegation of fraud is made with
regard to arbitration agreement itself, such a dispute is
12
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.
(viii) ANALYSIS
16. In the backdrop of the aforesaid well settled legal position, we
may advert to the facts of the case in hand. At the heart of the
controversy lies the Admission Deed which is relied upon by
respondent no.1 as the source of her induction into the firm and
as foundation of arbitration agreement. On a prime facie
consideration of the material placed on record, we find that
there exists substantial and cogent material which casts serious
doubt on the genuineness of the Admission Deed. The following
circumstances are of particular relevance: -
“(i) Respondent No.2, Aftabuddin, is the
husband of the respondent no. 1. While the
Admission Deed records that Respondent
Nos.2 and 3 retired from the partnership on
17.04.2007, the respondent No.1 herself
admits that her husband continued to function
as a partner of the firm from 2005 till 2010.
This admission is wholly inconsistent with the
recitals of the document relied upon by the
respondent No.1.
(ii) The Admission Deed does not find mention
in any contemporaneous documentary record
for nearly nine years and surfaced for the first
time only on 02.10.2016, when the respondent
13
No.1 issued a legal notice asserting a 50.33%
stake in the firm. The complete absence of the
document from the documentary trail prior
thereto is a circumstance that cannot be lightly
brushed aside.
(iii) The record further discloses that even
after 17.04.2007, the respondent no.1 role in
relation to the firm was not that of a partner
but was confined to that of a guarantor for
financial facilities availed by the firm. This is
evident from several contemporaneous
documents, including banking correspondent,
promissory notes, hypothecation agreements,
and letters addressed to Allahabad Bank
between 2009 and 2010, all of which
consistently portray Respondent Nos.2 and 3
as continuing partners of firm.”
17. It is also of significance that, in proceedings under Section 9 of
the Act, the High Court, by order dated 04.05.2018, had
recorded a prima facie finding that the existence of the
Admission Deed was doubtful and declined to grant interim
protection. The relevant extract of the order reads as under: -
“Even without considering such aspect of the
matter, the order impugned cannot be
sustained on the simple ground that it was the
admitted case of the respondent herein that for
a period of more than ten years after the
purported execution of the document of April
17, 2007 she had not been allowed any access
to the partnership business or its books of
accounts or given a share of its profits. If a
party had not been diligent enough to protect
her interest for a period of ten years, the party
could not have come to court and expected any
positive order by way of interim measure.
14
Since it is evident that the court of the
first instance in the present case failed to take
relevant considerations into account while
coming to an unreasoned tentative finding
that the purported deed of April 17, 2007 had
been executed by the parties, such order
cannot be sustained.”
18. The Special Leave Petition filed against the said order was
dismissed by this Court, thereby lending finality to the said
prima facie assessment between the parties, in the absence of
any subsequent change in circumstances.
19. While findings in Section 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 under Sections 8 and 11 of the Act.
20. The cumulative effect of the aforesaid circumstances lends
considerable credence to contention of the appellant that the
Admission Deed is not genuine. At the very least, the Admission
Deed is under grave cloud of doubt, requiring a detailed and
full-fledged inquiry. In the present case, arbitration clause does
not exist independently but is embedded in the document whose
15
existence is seriously disputed. Arbitration, it bears reiteration,
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 ceases 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.
21. 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 under Section 8(2) of the Act. The aforesaid findings
were not perfunctory, but were grounded in the material on
record and in the statutory requirements.
22. The 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. The High
Court, while exercising jurisdiction under Article 227 of the
Constitution, was not justified in dislodging the concurrent
16
findings and directing reference of the dispute to arbitration,
particularly when the very existence of the arbitration agreement
was under serious doubt.
23. Conversely, the High Court was correct in dismissing the
respondent no.1’s application under Section 11 of the 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.
(ix) CONCLUSION
24. For the reasons aforesaid, we hold as follows:
(i) The dispute relating to the Admission Deed dated
17.04.2007 involves serious allegations going to the
root of the arbitration agreement itself and is not
amenable to arbitration at this stage.
(ii) The order dated 24.09.2021 passed by the High Court
allowing the respondent no.1’s application under
Section 8 of the Act is unsustainable and is hereby
quashed and set aside.
(iii) The order dated 11.03.2021 passed by the High Court
rejecting the respondent no.1’s application under
17
Section 11 of the Act warrants no interference and is
accordingly affirmed.
25. In the result, the appeal @ SLP (C) No. 6013 of 2021 is
dismissed whereas the appeal @ SLP (C) No. 20262 of 2021 is
allowed. There shall be no order as to costs.
…..…….……………….………….……….J.
[PAMIDIGHANTAM SRI NARASIMHA]
.……………………………….….……..….J.
[ALOK ARADHE]
NEW DELHI;
FEBRUARY 2, 2026.
18
2026 INSC 106
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2026
(@ SLP (C) NO.6013 OF 2021)
RAJIA BEGUM ... APPELLANT
VERSUS
BARNALI MUKHERJEE … RESPONDENT
WITH
CIVIL APPEAL NO. OF 2026
(@ SLP (C) NO.20262 OF 2021)
BARNALI MUKHERJEE ... APPELLANT
VERSUS
RAJIA BEGUM AND OTHERS … RESPONDENTS
J U D G M E N T
ALOK ARADHE, J.
Leave granted.
2. The present appeals arise from a partnership dispute in which
appellant claims entry into the firm by virtue of a document
whose execution is stoutly denied and is alleged to be forged.
The High Court on the same factual foundation involving the
Signature Not Verified
Digitally signed by
KAPIL TANDON
Date: 2026.02.02
17:37:04 IST
Reason:
same alleged arbitration agreement, has in one proceeding
1
directed the parties to resolve their disputes through arbitration
and whereas in another proceeding, declined to appoint an
arbitrator on the ground, that the existence of an arbitration
agreement is itself in serious doubt. A common issue namely,
whether the disputes can be referred to arbitration or an
arbitrator can be appointed when the very existence of
arbitration agreement itself is seriously disputed on the
allegations of forgery and fabrication, arises for consideration in
these appeals.
(i) NARRATION OF FACTS
3.
The appellant, Barnali Mukherjee, in the appeal @ SLP (C) No.
20262 of 2021 (appellant), Aftabuddin (respondent no.2) and
Raihan Ikbal (respondent no.3), constituted a partnership firm
styled as ‘M/s RDDHI Gold’ (firm) by virtue of partnership deed
dated 01.12.2005. Rajia Begum (respondent no.1) claims that
the respondent nos.2 and 3 executed a power of attorney on
17.04.2007 empowering her to manage the affairs of the firm on
their behalf pursuant to which she executed a deed of admission
and retirement (Admission Deed) by which respondent nos.2
and 3 retired from the firm.
2
4. The appellant contends that the business of the reconstituted
partnership firm was absorbed and taken over by a company
named ‘RDDHI Gold Pvt. Ltd.’ (company) pursuant to the
absorption deed dated 27.02.2011. On 02.10.2016, the
respondent no.1 issued a notice to the appellant asserting that,
on the basis of the aforesaid Admission Deed dated 17.04.2007,
she had acquired an interest to the extent of 50.33% in the
erstwhile partnership firm and that respondent nos.2 and 3 had
retired as partners in 2007 itself. The appellant by reply dated
21.11.2016, categorically denied the execution of the Admission
Deed by her or by the other respondents and further denied the
very induction of the respondent no.1 in the firm as a partner at
any point in time. Thus, the appellant took a stand that the
Admission Deed is a forged and fabricated document, concocted
by the respondent no.1.
(ii) APLICATION UNDER SECTION 9 OF THE ACT
5. The respondent no.1 applied to the Trial Court under Section 9
of the Arbitration and Conciliation Act, 1996 (Act), for
preservation of the subject matter of dispute and for
appointment of receiver for the Company which came to be
allowed by the Trial Court. The High Court, by an order dated
3
04.05.2018, allowed the appeal filed by the appellant inter alia
finding that the very existence/execution of the ‘Admission
Deed’ is in dispute and, in view of the availability of cogent
material which would indicate the non-existence of the
Admission Deed, it would not be prudent on the part of the
Court exercising jurisdiction under Section 9 of the Act, to
accord interim protection to the respondent no.1 who has failed
to demonstrate the existence of an arbitration agreement in a
prima facie manner. Aggrieved by the order of the High Court
dated 04.05.2018, the respondent no.1 preferred an Appeal to
this Court which came to be dismissed. Thus, the said order of
the High Court dated 04.05.2018, rejecting the application of
the respondent no.1 under Section 9 of the Act, attained finality
between the parties.
(iii) APPLICATION UNDER SECTION 8 OF THE ACT
6. The appellant, on 16.05.2018, filed a civil suit bearing
No.71/2018 before the competent civil court seeking the relief of
declaration and injunction against the respondent no.1 inter alia
seeking a declaration that the ‘Admission Deed’ is a forged
document. The respondent no.1, in the said suit, preferred an
application to the Trial Court under Section 8 of the Act, to refer
4
the suit to arbitration, owing to the existence of an arbitration
agreement between the parties in respect of disputes concerning
the ‘Admission Deed’. The said application preferred by the
respondent no.1, under Section 8 of the Act, came to be
dismissed by the Trial Court vide order dated 06.09.2018 which
inter alia held that the allegations of fraud relating to the validity
of the impugned Admission Deed were complicated in nature
and that the respondent no.1 had failed to produce either the
original Admission Deed or a certified copy thereof.
7. The respondent no.1 preferred an appeal against the said Order
dated 06.09.2018, before the Additional District Judge, who also
dismissed the appeal in terms of the order dated 25.09.2020.
Being aggrieved, the respondent no.1 further preferred a revision
under Article 227 of the Constitution to the High Court, which
by order dated 24.09.2021 set aside the orders of the Trial Court
and the First Appellate Court, and allowed the revision filed by
the respondent no.1 by referring the dispute in Suit No.71/2018
to be resolved through arbitration.
5
(iv) APPLICATION UNDER SECTION 11 OF THE ACT
8. Parallelly, when the aforesaid proceedings under Sections 8 and
9 were ongoing, the respondent no.1 had also filed a petition
under Section 11 of the Act before the High Court, seeking
appointment of an arbitrator for resolving the disputes between
the parties which had arisen in terms of the arbitration clause
contained in the ‘Admission Deed’. The High Court dismissed
the petition filed by the respondent No.1, under Section 11 of
the Act, by order dated 11.03.2021, inter alia holding that it
would not be expedient to appoint an arbitrator till such time
that the issue regarding the existence of an arbitration
agreement between the parties has been answered finally. In the
appeal @ SLP (c) No.6013 of 2021, the respondent no.1 has
challenged the judgment and order dated 11.03.2021 by which
her application under Section 11 of the Act has been dismissed.
In the appeal @ SLP (C) No.20262 of 2021, the appellant has
assailed the judgment dated 24.09.2021 by which petition filed
by the respondent no.1 under Article 227 was allowed and the
title suit filed by the appellant was referred to arbitration.
6
(v) SUBMISSIONS
9. The learned counsel for respondent no.1 submitted that the
observations made by the High Court while deciding an appeal,
arising out of an order under Section 9 of the Act, are only for
the purposes of deciding the appeal and it has been clarified
that the views expressed in the order are tentative and should
not prejudice the respondent no.1 in any other proceeding.
Alternatively, it is contended that prima facie observation on the
existence of arbitration agreement made in an appeal, arising
out of an order under Section 9 of the Act, cannot affect the
jurisdiction of the Court under Section 11 of the Act. It is urged
that the dispute pertains to allegations of fraud challenging the
arbitration agreement itself, is arbitrable and well within the
jurisdiction of the arbitrator. It is submitted that the High
Court, in exercise of supervisory powers under Article 227, has
rightly set aside the orders passed by the Trial Court and the
Appellate Court. It is, therefore, contended that the dispute be
referred to the arbitration by appointing an arbitrator and the
order dated 24.09.2021 passed by the High Court under Article
7
227 be maintained. In support of the aforesaid submissions,
1
reliance has been placed on the decisions of this Court .
10. On the other hand, learned senior counsel for the appellant
submitted that the Admission Deed is forged and fabricated
document and there is no privity of contract between the parties.
It is submitted that the High Court in its order dated 04.05.2018
has categorically recorded a finding that the Admission Deed is
not a genuine document. It is submitted that the material on
record does not indicate that the respondent no.1 has acted as a
partner since 2007 till date. It is contended that the Admission
Deed is a manufactured and a forged document. It is argued that
the High Court erred in interfering with the orders passed by the
Trial Court and the Appellate Court in exercise of powers under
Article 227 of the Constitution of India. In support of the
aforesaid submissions, reliance has been placed on the decisions
2
of this Court .
1
A. Ayyasamy v. A Paramasivam & Others, (2016) 10 SCC 386; Rashid Raza v. Sadaf Akhtar, (2019) 8
SCC 710; Vidya Drolia & Ors. v. Durga Trading Corporation, (2021) 2 SCC 1; N.N. Global Mercantile
Pvt. Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379; Avitel Post Studioz Ltd. & Ors. v. HSBC PI
Holdings (Mauritius) Ltd., (2021) 4 SCC 713; Sushma Shivkumar Daga & Anr. v. Madhurkumar
Ramkrishnaji Bajaj & Ors., (2024) 12 SCC 253; K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr.,
(2025) 8 SCC 299; ITI Ltd. v. Siemens Public Communications Network Ltd., (2002) 5 SCC 510; Nirma
Ltd. v. Lurgi Lentjes Energietechnik GMBH, (2002) 5 SCC 520; Deep Industries Ltd. v. Oil and Natural
Gas Corporation Ltd. & Anr., (2020) 15 SCC 706 and Bhaven Construction v. Executive Engineer,
Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75.
2
A. Ayyasamy (supra); Vidya Drolia & Ors. (supra); SBP & Co. v. Patel Engineering Ltd. and Anr. (2005)
8 SCC 618 and Deep Industries Ltd. (supra).
8
(vi) ISSUE
11. We have bestowed our consideration upon rival submissions
and have carefully traversed the record placed before us. The
central question which emerges for our determination is whether
in the factual matrix of the case, the disputes between the
parties could have been referred to the arbitration under Section
8 of the Act and correspondingly whether the High Court was
justified in declining the appointment of an arbitrator under
Section 11 of the Act.
(vii) IMPACT OF FRAUD ON ARBITRABILITY
12.
The legal position with regard to the impact of fraud on
arbitrability of a dispute under the Act is well delineated by
3
decisions of this Court. A two-Judge Bench of this Court held
that 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. It has further been held
3
A. AYYASAMY v. A. PARAMASIVAM AND OTHERS, (supra)
9
that the 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.
13. The aforesaid principle was referred to with approval, by another
4
two-Judge Bench of this Court and two working tests were laid
down for determining serious allegations of fraud, which would
render the subject matter of an agreement non-arbitrable
namely, (1) does this plea permeate the entire contract and
above all, the agreement of arbitration, rendering it void, or (2)
whether the allegations of fraud, touch upon the internal affairs
of the parties, having no implication in the public
inter se
domain. It was further held that the first test is satisfied only
when it can be said that the arbitration clause or agreement
itself cannot be said to exist in a clear case in which the court
finds that the party against whom breach is alleged cannot be
said to have entered into the agreement relating to arbitration at
4
AVITEL POST STUDIOZ LIMITED AND OTHERS v. HSBC PI HOLDINGS (MAURITIUS) LTD. (supra)
10
all. Thus, in a case where plea is taken with regard to non-
existence of an arbitration clause or agreement, the same would
amount to serious allegation of fraud and would render the
subject matter of an agreement non-arbitrable.
14. Recently, a two-Judge Bench of this Court in Managing
Director Bihar State Food and Civil Supply Corporation
5
Limited (to which one of us P.S. Narasimha, J. was a party)
6
took note of the previous decisions of this Court and restated
the principles governing arbitrability in cases involving
allegations of serious fraud. The relevant extract of para 21
of the decision in Managing Director (supra) is extracted
below:-
“ 21. In view of our decision, it is unnecessary to
delve deep on this issue, but sufficient to restate
the law on the subject. The position of law as it
applies to initiation of arbitral proceedings in the
teeth of allegations of criminality involved in the
dispute, where criminal proceedings are either
pending or to be initiated is considered in several
decisions of this Court. In A. Ayyasamy v. A.
Paramasivam , this Court has considered the
matter in detail and laid down certain principles.
As the relevant portions of the decision
in Ayyasamy (supra) have been extracted in the
5
Managing Director Bihar State Food and Civil Supply Corporation Limited and Another v. Sanjay
Kumar, (2025) SCC OnLine SC 1604
6
A. Ayyasamy (supra), Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678, Rashid Raza v.
Sadaf Akhtar, (2019) 8 SCC 710 and Avitel Post Studioz Limited And Others (supra)
11
subsequent decisions of this Court in Ameet
Lalchand Shah v. Rishabh Enterprises , Rashid
Raza v. Sadaf Akhtar , and Avitel Post Studioz
Limited v. HSBC PI Holdings (Mauritius) Limited , we
are of the opinion that our judgment need not be
burdened by extracting excerpts from the judgment
all over again. Instead, we seek to restate the
principles as follows:—
XXX XXX XXX
VI. “Serious allegations of fraud” is to be
understood in the context of facts. In Rashid
Raza (supra) this Court laid down two tests. The
first test is satisfied only when it can be said that
the arbitration clause or agreement itself cannot be
said to exist in a clear case in which the court finds
that the party against whom breach is alleged
cannot be said to have entered into the agreement
relating to arbitration at all. The second test can be
said to have been met in cases in which allegations
are made against the State or its instrumentalities
of arbitrary, fraudulent, or mala fide conduct, thus
necessitating the hearing of the case by a writ
court in which questions are raised which are not
predominantly questions arising from the contract
itself or breach thereof, but questions arising in the
public law domain.
XXX XXX XXX
IX. However, the allegations of fraud with respect to
the arbitration agreement itself stand on a different
footing. This position is generally recognized as a
dispute which is in the realm of non-arbitrability.
In such cases, the arbitral tribunal will not
examine the allegation of fraud but will consider
the submission only for the purpose of examining
exclusion of jurisdiction. This principle, in its
application, can be seen in the judgment of this
Court in Avitel.”
15. Thus, it is evident that when an allegation of fraud is made with
regard to arbitration agreement itself, such a dispute is
12
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.
(viii) ANALYSIS
16. In the backdrop of the aforesaid well settled legal position, we
may advert to the facts of the case in hand. At the heart of the
controversy lies the Admission Deed which is relied upon by
respondent no.1 as the source of her induction into the firm and
as foundation of arbitration agreement. On a prime facie
consideration of the material placed on record, we find that
there exists substantial and cogent material which casts serious
doubt on the genuineness of the Admission Deed. The following
circumstances are of particular relevance: -
“(i) Respondent No.2, Aftabuddin, is the
husband of the respondent no. 1. While the
Admission Deed records that Respondent
Nos.2 and 3 retired from the partnership on
17.04.2007, the respondent No.1 herself
admits that her husband continued to function
as a partner of the firm from 2005 till 2010.
This admission is wholly inconsistent with the
recitals of the document relied upon by the
respondent No.1.
(ii) The Admission Deed does not find mention
in any contemporaneous documentary record
for nearly nine years and surfaced for the first
time only on 02.10.2016, when the respondent
13
No.1 issued a legal notice asserting a 50.33%
stake in the firm. The complete absence of the
document from the documentary trail prior
thereto is a circumstance that cannot be lightly
brushed aside.
(iii) The record further discloses that even
after 17.04.2007, the respondent no.1 role in
relation to the firm was not that of a partner
but was confined to that of a guarantor for
financial facilities availed by the firm. This is
evident from several contemporaneous
documents, including banking correspondent,
promissory notes, hypothecation agreements,
and letters addressed to Allahabad Bank
between 2009 and 2010, all of which
consistently portray Respondent Nos.2 and 3
as continuing partners of firm.”
17. It is also of significance that, in proceedings under Section 9 of
the Act, the High Court, by order dated 04.05.2018, had
recorded a prima facie finding that the existence of the
Admission Deed was doubtful and declined to grant interim
protection. The relevant extract of the order reads as under: -
“Even without considering such aspect of the
matter, the order impugned cannot be
sustained on the simple ground that it was the
admitted case of the respondent herein that for
a period of more than ten years after the
purported execution of the document of April
17, 2007 she had not been allowed any access
to the partnership business or its books of
accounts or given a share of its profits. If a
party had not been diligent enough to protect
her interest for a period of ten years, the party
could not have come to court and expected any
positive order by way of interim measure.
14
Since it is evident that the court of the
first instance in the present case failed to take
relevant considerations into account while
coming to an unreasoned tentative finding
that the purported deed of April 17, 2007 had
been executed by the parties, such order
cannot be sustained.”
18. The Special Leave Petition filed against the said order was
dismissed by this Court, thereby lending finality to the said
prima facie assessment between the parties, in the absence of
any subsequent change in circumstances.
19. While findings in Section 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 under Sections 8 and 11 of the Act.
20. The cumulative effect of the aforesaid circumstances lends
considerable credence to contention of the appellant that the
Admission Deed is not genuine. At the very least, the Admission
Deed is under grave cloud of doubt, requiring a detailed and
full-fledged inquiry. In the present case, arbitration clause does
not exist independently but is embedded in the document whose
15
existence is seriously disputed. Arbitration, it bears reiteration,
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 ceases 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.
21. 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 under Section 8(2) of the Act. The aforesaid findings
were not perfunctory, but were grounded in the material on
record and in the statutory requirements.
22. The 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. The High
Court, while exercising jurisdiction under Article 227 of the
Constitution, was not justified in dislodging the concurrent
16
findings and directing reference of the dispute to arbitration,
particularly when the very existence of the arbitration agreement
was under serious doubt.
23. Conversely, the High Court was correct in dismissing the
respondent no.1’s application under Section 11 of the 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.
(ix) CONCLUSION
24. For the reasons aforesaid, we hold as follows:
(i) The dispute relating to the Admission Deed dated
17.04.2007 involves serious allegations going to the
root of the arbitration agreement itself and is not
amenable to arbitration at this stage.
(ii) The order dated 24.09.2021 passed by the High Court
allowing the respondent no.1’s application under
Section 8 of the Act is unsustainable and is hereby
quashed and set aside.
(iii) The order dated 11.03.2021 passed by the High Court
rejecting the respondent no.1’s application under
17
Section 11 of the Act warrants no interference and is
accordingly affirmed.
25. In the result, the appeal @ SLP (C) No. 6013 of 2021 is
dismissed whereas the appeal @ SLP (C) No. 20262 of 2021 is
allowed. There shall be no order as to costs.
…..…….……………….………….……….J.
[PAMIDIGHANTAM SRI NARASIMHA]
.……………………………….….……..….J.
[ALOK ARADHE]
NEW DELHI;
FEBRUARY 2, 2026.
18