Capalpha Trade Private Limited vs Dentsu Communications India Pvt. Ltd.

901-CARBP-183-2025.docx
Varsha
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO. 183 OF 2025
Capalpha Trade Private Limited
A private limited company incorporated
under the provisions of the Companies
Act, 2013 and having its registered office
th
at 501, 5 Floor, Stanford Plaza, Opposite
Richa Building, Off New Link Road, Andheri
West Mumbai 400 053. ...Petitioner
(Org. Claimant)
VERSUS
Dentsu Communications India Pvt. Ltd.
A private limited company incorporated
under the provisions of the Companies
Act, 1956 and having its registered office
nd
at Devchand House, C Block, 2 Floor,
Shivsagar Estate, Dr. Annie Besant Road,
Worli, Mumbai 400 018. ...Respondent
(Org. Respondent)
Mr. Nirav Shah a/w. Ms. Aarti R., Mr. Amit Shroff, Mr. Vijay
Mulchandani i/b. M/s. Harish Shroff & Co for the petitioner.
Mr. Sharan Jagtiani, Senior Advocate a/w. Ms. Anindita R.
Digitally
signed by
VARSHA
VIJAY
RAJGURU
Date:
2026.06.30
19:09:25
+0530
Chowdhary, Mr. Sushrut Garg, Ms. Shraddha Achliya for the
VARSHA
VIJAY
RAJGURU
respondent.
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CORAM : GAURI GODSE, J.
th
RESERVED ON: 27 MARCH 2026
th
PRONOUNCED ON: 30 JUNE 2026
JUDGMENT:
1. This petition is a statutory appeal under Section 37 of
the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) to
challenge the order passed by the learned sole arbitrator
allowing the respondent’s application under Section 16 of the
Arbitration Act. By the impugned order, the learned arbitrator
held that the disputes under reference are not arbitrable and
that it would be convenient if they were tried by the civil
court.
2. The dispute between the parties arises from the terms
and conditions set out in the purchase order. Since there was
a dispute over payment of the amounts claimed under the
purchase orders, the petitioner invoked the arbitration clause
and filed an application under Section 9 of the Arbitration Act
in this court. During the course of hearing of the application
under Section 9 of the Arbitration Act, the parties agreed to
make a reference to initiate the arbitration proceedings, and
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the application under Section 9 of the Arbitration Act filed
before this court was agreed to be treated as an application
under Section 17 of the Arbitration Act to be decided by the
learned arbitrator.
3. Accordingly, the statement of claim was filed by the
th
petitioner on 20 July 2022. The statement of defence was
nd
filed on 2 November 2022. The petitioner’s arguments on
the application at Exhibit ‘17’ were concluded, and the
respondent’s arguments were partially heard. In the
meantime, the respondent filed an application under Section
16 of the Arbitration Act, raising an objection to the arbitral
tribunal's jurisdiction on the ground that the allegations of
fraud, collusion, and forgery involved third parties.
SUBMISSIONS ON BEHALF OF THE PETITIONER:
4. The respondent had secured various orders from state
governments to supply food grains for mid-day meals in
schools. To conduct such programs, there was an existing
arrangement under which the respondent regularly sourced
food grains from Suumaya Agro, which is part of the
Suumaya group. The respondent approached the claimant
for short-term financing of the supply of these food grains by
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Suumaya Agro to the respondent. Accordingly, the
th
respondent’s CSR division issued a letter of intent on 5
March 2021 to the claimant for the purchase of the food
grains for an amount of Rs. 600 crores over a period of 20
months.
5. For short-term financing, the respondent would place
its purchase order by email with the claimant, and the
claimant would then place a purchase order for the identical
description with Suumaya Agro at a lower price, for which
Suumaya Agro would raise the invoice with the claimant.
Suumaya Agro was to either supply the goods directly under
the invoice to the respondent or, as per the respondent’s
instructions, in a bill-to-ship arrangement. The claimant
would release funds to Suumaya Agro only after receiving
specific written confirmation from the respondent certifying
that the goods were delivered to and received by the
respondent, as per the respondent's order to the claimant.
6. The respondent would pay the claimant the invoice
amounts raised by the claimant within the prescribed period
st
of thirty days, extendable to fifteen days. Between 21
February and 15 September 2021, the respondent paid
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approximately Rs. 175 Crores to the claimant under the
agreed mechanism; however, there were persistent defaults
thereafter. The claimant had received emails from the
respondent stating that the respondent’s employees handling
its CSR division had suddenly resigned and that the need to
process transactions was under review. Thereafter, the
respondent claimed they had discovered internal fraud
committed by their former employees.
7. At the hearing of the Section 16 application, the
claimant's counsel submitted that for the purpose of the
arbitration, the claimant would not dispute the respondent's
case as to fraud/collusion between the respondent's former
employees, and third parties and the claimant will not dispute
that there was no delivery of goods by Suumaya Agro, and
that the lorry receipts and invoices raised by Suumaya Agro
were bogus. It was submitted that the claimant would contest
only the respondent's allegations that the claimant was a
party to the fraud/collusion, and would contend that the
respondent is vicariously liable for the fraud/collusion
committed by its former employees.
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8. Learned counsel for the petitioner submitted that the
findings in the impugned order are contradictory and
untenable as the learned Arbitrator proceeded on the basis
that the petitioner had made allegations of fraud and various
other offences in the reference, which is factually incorrect.
The petitioner's claim is based solely on the purchase orders
and seeks recovery of money. The only reference to "fraud"
in the statement of claim is in response to the allegations
made by the respondent. In light of the claimant's
statements, the award would not have an erga omnes effect
or affect the rights and liabilities of third parties.
9. Learned counsel for the petitioner submitted that it is
settled law that where the party resisting the arbitral
reference is the one alleging fraud, jurisdiction will not
necessarily be declined. The findings that proceeding with
the arbitral reference would be "unfair to the respondent", as
it would be constrained to summon third parties as its
witnesses in order to establish its case on fraud, is alien to
the law. Learned counsel for the petitioner submitted that, as
a dominus litis , the petitioner is entitled to pursue any and all
remedies available to it in law, and the reasoning in the
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impugned order that the claimant may, in defending itself
against the respondent's allegations of fraud, be compelled
to adduce evidence of fraud against the respondent and may
also result in injustice/prejudice to the claimant itself, is
incomprehensible and alien to the law.
10. Learned counsel for the petitioner submitted that
without recording a positive finding that it lacks jurisdiction,
the learned Arbitrator has refrained from exercising
jurisdiction and held that it is not merely on account of the
allegations of fraud by a party, but because of a combination
of all the factors that the respondent's application succeeds.
Such reasoning is not sustainable in law. The impugned
order holds that the arbitration agreement is valid. Neither
party is contesting the role of third parties in the fraud, nor
making any claims against such third parties. However, the
impugned order holds that the tribunal lacks jurisdiction
because determining this reference would require impleading
third parties. The reliance upon the judgment of the Delhi
1
High Court in Simran Sodhi v Sandeep Singh is erroneous
and misconceived. This was a case in which jurisdiction was
declined because certain reliefs sought would affect the
1 2022 SCC OnLine Del 3688
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rights of third parties. In the present case, the learned
Arbitrator has observed that the rights of third parties would
not be affected by an award passed in this arbitration.
11. The impugned order acknowledges that jurisdiction
cannot be declined on the basis that several third-party
witnesses are to be summoned. Learned counsel for the
petitioner relies upon the decision of the Apex Court in Abdul
2
Kadir Shamsuddin Bubere v Madhav Prabhakar Oak .
Similar disputes where there are massive allegations of
fraud, the registration of hundreds of FIRs, and with
implications on even public corporations, the disputes have
been referred to arbitration by courts to specifically examine
whether the extent of the fraud will impact the arbitrability of
the issue which is before the tribunal in arbitration; and that
this must be done in accordance with the several tests laid
down by the Apex Court in MD Bihar State Food and Civil
3
Supply Corporation Ltd & Anr. Vs. Sanjay Kumar . Therefore,
the arbitral tribunal's finding that the third parties' rights may
be affected, despite its specific finding that its award will not
have an erga omnes effect, is incoherent and ought to be set
aside.
2 (1962) 3 SCR 702
3 2025 SCC 2C 1604
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12. The tribunal has failed to appreciate and correctly apply
the law as laid down in A. Ayyasamy Vs. A Paramasivam &
4
Ors. , holding that the limited circumstances where fraud is
not arbitrable are where the fraud permeates the entire
contract, rendering the arbitration agreement void and where
the allegations of fraud have implications on the public
domain, and 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.
Learned counsel for the petitioner also relied upon the
decisions of the Apex Court in Rashid Raza Vs. Sadaf
5
Akhtar and Avitel Post Studioz Ltd. & Ors. Vs. HSBC PI
6
Holdings (Mauritius) Ltd . The respondent's allegation of
fraud does not meet the test laid down by the Apex Court. It
is not the respondent's pleaded case that the arbitration
agreement itself is vitiated by fraud, and the impugned order
confirms its validity.
13. It is a well-settled legal principle that only the criminal
aspect of fraud or forgery, with penal consequences, is not
arbitrable, as it is in the realm of public law. The civil claims
4 (2016) 10 SCC 386
5 (2019) 8 SCC 710
6 (2021) 4 SCC 713
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arising from these actions are therefore clearly amenable to
arbitral reference, as held by the Apex Court in N.N. Global
7
Mercantile Pvt. Ltd. Vs. Indo Unique Flame Ltd. & Ors , The
tribunal, whilst accepting that the dispute does not attract any
of the four tests laid down by the Apex Court in Vidya Drolia
8
Vs. Durga Trading Corporation has concluded that the
arbitral reference would be "inexpedient", as it would be
desirable for a collective resolution of the disputes by
including the third parties. Such a conclusion is arbitrary,
impermissible in law and flies in the face of settled law in
Vidya Drolia , and Nilesh Shejwal Vs. Agrowon Agrotech
9
Industries Pvt. Ltd. .
14. The impugned order has erred in rejecting the
claimant's preliminary point as to the maintainability of the
Section 16 application, given that it was filed belatedly after
the filing of the statement of defence, and after the
conclusion of the hearing of the petitioner's Section 17
application, contrary to Section 16(2) of the Arbitration Act.
The impugned order erroneously concludes that the
jurisdictional objection had in fact been raised in the
7 (2021) 4 SCC 379
8 (2021) 2 SCC 1
9 2024 SCC OnLine Bom. 3953
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statement of defence. The impugned order is contrary to the
settled law, which precludes a party from pursuing an
objection to jurisdiction belatedly. Learned counsel for the
petitioner relied upon the Apex Court’s decision in MSP
Infrastructure Ltd. v Madhya Pradesh Road Development
10
Corporation Ltd .
15. According to the learned counsel for the petitioner, the
petitioner’s claim is not based on the allegations of fraud and
more particularly against the third parties. The petitioner’s
claim is purely based on the contractual terms and conditions
as recorded in the purchase orders and the invoices raised
by the petitioner. Hence, once the agreement between the
parties is held to be legal, valid, and subsisting, the dispute
has to be decided by the arbitral tribunal by framing issues
on the parties' rival pleadings. If the arbitral tribunal holds
that the agreement between the parties is valid and
subsisting, the parties cannot be relegated to the Public Fora
on the ground that the allegations of fraud would involve third
parties.
16. Once the agreement is valid and subsisting, the issues
involved in deciding the petitioner’s claim can be examined
10 (2015) 13 SCC 713
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by the learned arbitrator by framing proper issues and
permitting the parties to lead evidence. The impugned order
is therefore liable to be set aside, and the arbitral reference is
required to be restored.
SUBMISSIONS ON BEHALF OF RESPONDENT:
17. The learned senior counsel for the respondent
th
submitted that the demand notice dated 19 October 2021,
issued by the petitioner, alleged that the transactions were
fraudulent and that collusion occurred among the
respondent's former employees. The application under
Section 9 of the Arbitration Act, filed in this court, referred to
the complaints filed by the petitioner before the Economic
Offence Wing. While deciding the application under Section 9
th
of the Arbitration Act, this court passed an order on 4 April
2022 referring the disputes and differences that arose
between the parties under the four purchase orders placed
by the respondent and the invoices raised by the petitioner to
arbitration. While referring the parties to arbitration, the
issues regarding the arbitrability were kept open.
18. After the arbitral tribunal was constituted, the
respondent filed a reply to the application under Section 17
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of the Arbitration Act. The respondent clearly stated that the
transaction relied upon by the petitioner was sham, bogus
and fraudulent, as it pertained to the conduct of Suumaya
Enterprises appointed by the petitioner. In the petitioner's
rejoinder, it was claimed that the transactions were
legitimate. In view of the disclosures made before the
Economic Offence Wing regarding the undertakings
furnished by Suumaya and its directors, the respondent filed
an application before the learned arbitrator, stating that the
allegations would involve third parties as serious allegations
of fraud were made. Considering the documents produced
before the learned arbitrator, which involved allegations of
fraud against third parties and the respondent's ex-
employees, the arbitral claim could not have been decided
without examining the allegations of fraud, forgery, and
fabrication of the documents. Hence, the learned arbitrator
rightly considered the implications of fraud as alleged by the
petitioner.
19. The categories of non-arbitrable disputes are carved
out by the Apex Court based on common law, and include
disputes of a public nature that are not capable of
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adjudication or settlement by arbitration. The arbitrability
based on public policy cannot be decided in a private
arbitration. The courts have, therefore, time and again held in
various decisions that disputes involving allegations of public
fraud would be more conveniently decided by a civil court.
Learned senior counsel for the respondent relied upon the
decision in Booz Allen and Hamilton Inc. Vs SBI Home
11
Finance Ltd. & Ors and the decision in Vidya Drolia to
support his submissions that the four tests for deciding
whether the dispute would be arbitrable are satisfied in the
facts of the present case.
20. Learned senior counsel for the respondent submitted
that the test for considering whether the dispute is arbitrable
is with reference to the cause of action and the subject
matter that relates to the action in rem, which do not pertain
to the subordinate rights in personam when the cause of
action and the subject matter affect the third parties, which
has an erga omnes effect. According to the Learned senior
counsel for the respondent, the allegations of fraud involving
third parties are serious and complex in nature. The learned
senior counsel for the respondent relied upon the decision in
11 (2011) 5 SCC 532
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A. Ayyasamy to support his submissions that the difference
between the simple allegation of fraud and the complex and
egregious nature of fraud is to be considered while
examining whether the dispute would be arbitrable or
whether it would be appropriate to refer the parties to Public
Fora. In the present case, the allegations of fraud are
serious, involving the fabrication of documents involving third
parties. Hence, the petitioner’s claim cannot be said to be
restricted only to the terms and conditions of the contract.
Learned senior counsel for the respondent also relied upon
the decision of the Apex Court in Rashid Raza Vs. Sadaf
12
Akhtar .
21. Learned senior counsel for the respondent relied upon
the decision of the Delhi High Court in Bentwood Seating
13
Systems (P) Ltd. Vs. Airport Authority of India and Anr , and
the decision of this court in Baban Piraji Ghadge Vs. Amit
14
Sheth and Anr . He submits that it is a well-settled legal
principle that when allegations of fraud, forgery, and
fabrication are serious in nature, they are better decided by
12 (2019) 8 SCC 710
13 2025 SCC OnLine Del 1558
14 Arbitration Petition No. 61 of 2016
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the civil court, as the witnesses can be cross-examined in
open court rather than in a private forum of arbitration.
22. The learned senior counsel for the respondent also
relied upon the decision in the case of Managing Director,
Bihar State Food and Civil Supply Corporation Limited, vs.

Sanjay Kumar and submitted that the Apex Court reaffirmed
the principles governing arbitrability in cases involving
allegations of serious fraud. It is held by the Apex Court that
where the dispute involves fraud with criminal implications,
the dispute should not be decided by the arbitral tribunal, as
it would have public implications and ramifications that would
directly or indirectly affect the non-parties to the arbitration.
Learned senior counsel for the respondent, therefore,
submitted that the legal principles decided by the Apex Court
in the A. Ayyasamy and Vidya Drolia squarely apply to the
present case. Hence, the learned arbitrator had rightly held
that the determination of the petitioner’s claim cannot be
decided in an arbitration and has to be decided in a Public
Fora.
23. Learned senior counsel for the respondent submitted
that, in view of the third party’s involvement in the serious
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allegation of fraud, which is already investigated by the
Economic Offence Wing and the State agencies, the dispute
and the petitioner’s claim cannot be decided in an arbitration
proceeding. The claimant has not abandoned its right to file
the civil suit against the third parties. Hence, the dispute
cannot be decided in different proceedings in a private
arbitration and also in a Public Fora for the same reliefs or
the reliefs pertaining to the same transactions. Hence, the
learned arbitrator has rightly held that the dispute would not
be arbitrable.
24. With regard to the concessional statements made on
behalf of the petitioner, the learned arbitrator has rightly held
that the concession would not come to the aid of the claimant
to hold that the allegations of fraud can be segregated to
decide the petitioner’s claim. Since the claimant had not
abandoned its right to file civil proceedings against the third
parties based on the same allegations on collusion and
conspiracy, the learned arbitrator rightly held that the
different proceedings before the private arbitration or the
Public Fora for the same relief is not favourable and
therefore, it would be suitable and convenient and
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appropriate that the dispute is examined in a civil court where
even the third parties involvement is not restricted.
Considering the allegations involved in the criminal
proceedings which also form the basis of the arbitral claim,
the learned arbitrator, by referring to the criminal proceedings
and the petitioner’s special leave petition filed before the
Apex Court involving the same transactions and the
allegation of commission of heinous crimes, found it fit that
the dispute would not be arbitrable and it should be
conveniently decided in a civil court.
25. To support the submissions that the party is not
required to file an application under Section 16(2) of the
Arbitration Act separately and that an arbitrator is bound to
decide the issue of jurisdiction if the objection of arbitrability
is clear and consistent with the provisions of sub-section (2)
of Section 16 of the Arbitration Act, the learned senior
counsel for the respondent relied upon the decision of this
15
court in ICICI Bank Ltd. Vs. Welways Engineers (India) . He
also relied upon the decision of the Apex Court in Rashtriya
16
Ispat Nigam Ltd. Vs. Verma Transport Co. to support his
submissions that though the respondent had participated in
15 2016 SCC OnLine Bom 2644
16 (2006) 7 SCC 275
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the hearing of the application under Section 17 of the
Arbitration Act, it would not amount to any waiver of the
respondent in raising the jurisdiction objection in view of the
supplemental and incidental proceedings produced before
the arbitral tribunal.
26. Learned senior counsel for the respondent relied upon
the decision of the Apex Court in ONGC Vs. Discovery
17
Enterprises Pvt. Ltd. and Anr to support his submissions
that the scope of review under Section 37 of the Arbitration
Act for examining the order passed under Section 16 of the
Arbitration Act is limited to the extent of exercising the
appellate power by being mindful of the fact that the statute
has entrusted the arbitral tribunal with the power to rule of its
own jurisdiction with the purpose of facilitating the efficacy of
arbitration as an institutional mechanism for resolution of the
dispute.
27. Hence, according to the learned senior counsel for the
respondent, no interference in the impugned order is called
for.
17 (2022) 8 SCC 42
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CONSIDERATION OF SUBMISSIONS:
28. To consider the submissions made on behalf of both
parties, it is necessary to correctly understand the petitioner’s
claim. The petitioner’s claim is to recover the amount under
the contract with the respondent for the trade financing
arrangement for the products purchased by the respondent
from Suumaya Agro, which is not a party to the arbitral
reference. According to the claimant, they released funds to
Suumaya, and the respondent was bound and liable to pay
the claimant the amounts corresponding to the invoices
raised by the claimant on the respondent. The claimant has
relied upon purchase orders, sub-purchase orders, delivery
confirmation, lorry receipts, and invoices along with other
documents and emails, in support of the claim to recover the
amounts.
29. The learned arbitrator has discussed in detail the
particulars of the LOI acted upon by the parties and the
reference, which involves 14 identical purchase orders and
the various emails exchanged between the parties. The
particulars of the agreement between the respondent and
Suumaya are also discussed in detail in the impugned order.
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The learned arbitrator has noted the arguments on behalf of
the claimant by relying upon the claimant’s notice under
Section 8 of the Insolvency and Bankruptcy Code 2016 (IBC)
and the complaint to the Economic Offence Wing against the
respondent and Suumaya.
30. The respondent has alleged fraud, collusion, and
conspiracy against the claimant, Suumaya, and the
respondent's ex-employees. The respondent denies that
there was an agreement between them and Suumaya. It is
alleged that the claimant had an arrangement with Suumaya.
The respondent alleged that the transactions relied upon by
the claimant were sham, bogus and a result of collusion
between Suumaya group, the claimant and the former
employees of the respondent. It is contended by the
respondent that after the hearing on the application under
Section 17 commenced, they discovered further documents
which showed the allegations of fraud made by the claimant.
However, the claimant made concessional statements before
the learned arbitrator that they would not be making any such
allegations of fraud in the arbitral claim. The respondent
contended that despite such concessions, the reference
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would not be arbitrable, as the serious allegations of fraud,
collusion, and conspiracy were made by the claimant, as
evidenced by the documents produced along with the
application under Section 16.
31. The learned arbitrator has referred to the allegations in
the criminal complaint registered against the respondent as
accused and its employees as co-accused. In the criminal
complaint filed by the claimant, it is alleged that an amount of
₹150 crores due and payable to the claimant was
misappropriated by the accused persons and they had
conspired and connived to commit various offences against
the claimant, including the offences punishable under
Sections 406, 420, read with 120B and 34 of the Indian
Penal Code.
32. The learned arbitrator has further discussed the
particulars of the chargesheet and the investigations carried
out, including the seizure of hard disks, bogus lorry receipts,
invoices, documents, correspondence, ledger accounts, and
bank accounts, as well as a list of about 40 witnesses and
statements recorded during the criminal investigation. The
impugned order further records the particulars of the orders
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passed by the learned magistrate and a copy of a special
leave petition filed by the claimant against the order passed
by this court granting bail to Ishita Gupta of Suumaya group.
The contents of the special leave petition filed before the
Apex Court are reproduced in the impugned order.
33. The learned arbitrator held that the claimant has made
serious allegations of misrepresentation, misappropriation of
funds, forgery, inducement, fabrication, deceit, and criminal
breach of trust against the respondent, its officers, and the
entities of the Suumaya group in the criminal complaint. It is
observed that the transactions are not only between the
claimant and the respondent, but also between the
respondent and Suumaya and the respondent and third
parties. It is noted by the learned Arbitrator that the nature of
the alleged offences is heinous and invites prison sentences
of various durations, including life imprisonment, and the
cognisance of the offences has been taken by the economic
offence wing, and a charge sheet has been filed.
34. The claimant’s statements are recorded in the
impugned order, which states that they would contest only
the respondent’s contention that the claimant is party to the
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alleged fraud and collusion and would not base its cause of
action against the respondent on fraud or collusion for the
purpose of the arbitral reference. It is further stated by the
claimant that if the respondent claims that its officers have
committed a fraud in collusion or otherwise, the claimant will
contend that the respondent would nevertheless be liable to
the claimant on the ground of vicarious liability. Thus, the
claimant would proceed on the basis that the respondent’s
employees have acted fraudulently in collusion with others,
not including the claimant, and would not invite the Arbitral
Tribunal to decide the issue whether the respondent’s
officers acted fraudulently in collusion with others, not
including the claimant or otherwise. The claimant also stated
that they would proceed on the basis that there was no
delivery of the goods and that the lorry receipts and invoices
raised by Suumaya were bogus, as alleged by the
respondent, without the claimant's involvement.
35. The reference is held to be non-arbitrable mainly on the
ground that the allegations of fraud, collusion and conspiracy
made by the respondent in arbitration proceedings and by
the claimant in the criminal proceedings involve third parties
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and therefore it would be appropriate that the disputes are
adjudicated in a civil court. The arbitration agreement is held
to be valid. To determine the correctness of the reasons
recorded in the impugned order, it is necessary to refer to the
well-established legal principles.
LEGAL PRINCIPLES:
36. In Ayyasamy, it is held that disputes involving serious
fraud may not be submitted to arbitration when very serious
allegations of fraud make a virtual case of criminal offence or
where allegations of fraud are so complicated that it
becomes absolutely essential that such complex issues can
be decided only by the civil court on the appreciation of the
voluminous evidence that needs to be produced. However,
the guiding principles for judicial decision-making are laid
down in paragraphs 48 and 53 as under:
“ 48. The basic principle which must guide judicial decision-
making is that arbitration is essentially a voluntary
assumption of an obligation by contracting parties to resolve
their disputes through a private tribunal. The intent of the
parties is expressed in the terms of their agreement. Where
commercial entities and persons of business enter into such
dealings, they do so with a knowledge of the efficacy of the
arbitral process. The commercial understanding is reflected
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in the terms of the agreement between the parties. The duty
of the court is to impart to that commercial understanding a
sense of business efficacy.
………………………………………………………………………
53. The Arbitration and Conciliation Act, 1996, should in
my view be interpreted so as to bring in line the principles
underlying its interpretation in a manner that is consistent
with prevailing approaches in the common law world.
Jurisprudence in India must evolve towards strengthening
the institutional efficacy of arbitration. Deference to a forum
chosen by parties as a complete remedy for resolving all
their claims is but part of that evolution. Minimising the
intervention of courts is again a recognition of the same
principle.”
emphasis applied by me
37. In Rashid Raza , the Apex Court held that the principles
of law laid down in Ayyasamy make a distinction between
serious allegations of forgery/fabrication in support of the
plea of fraud as opposed to “simple allegations”. Two
working tests laid down in para 25 are: (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 inter se,
having no implication in the public domain.
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38. In Avitel Post Studioz Ltd. , the Apex Court, with
approval, quoted the legal principles settled in Rashid Raza
and held that serious allegations of fraud arise only if either
of the two tests laid down is satisfied, and not otherwise. It is
held that the first test is satisfied only when 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 and 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,
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.
39. In Avitel Post Studioz, the Apex Court discussed
various decisions, including Booz Allen , regarding cases
involving serious and specific allegations of fraud, document
fabrication, forgery, coercion, etc., as well as cases involving
prosecutions for criminal offences. It is held that when same
set of facts may lead to civil and criminal proceedings and if it
is clear that a civil dispute involves questions of fraud,
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misrepresentation, etc. which can be the subject-matter of
such proceeding under Section 17 of the Contract Act, and/or
the tort of deceit, the mere fact that criminal proceedings can
or have been instituted in respect of the same subject matter
would not lead to the conclusion that a dispute which is
otherwise arbitrable, ceases to be so.
40. In Vidya Drolia , the Apex Court referred with approval
the legal principles settled in Avitel Post Studioz and Rashid
Raza . It is held that the Arbitral Tribunals, not being courts of
law or established under the auspices of the State, cannot
act judicially so as to affect those who are not bound by the
arbitration clause. It is thus held that Arbitration is unsuitable
when it has erga omnes effect, that is, it affects the rights
and liabilities of persons who are not bound by the arbitration
agreement. It is held that Arbitrators, like the courts, are
equally bound to resolve and decide disputes in accordance
with the public policy of the law and that complexity is not
sufficient to ward off arbitration. It is held by the Apex Court
that the Arbitration Act has been enacted to promote
arbitration as a transparent, fair, and just alternative to court
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adjudication. The tests for determining non-arbitrability and
non-arbitrable criminal cases are laid down as under:
“76. In view of the above discussion, we would like to
propound a fourfold test for determining when the subject-
matter of a dispute in an arbitration agreement is not
arbitrable:
76.1. ( 1 ) When cause of action and subject-matter of the
dispute relates to actions in rem, that do not pertain to
subordinate rights in personam that arise from rights in rem.
76.2. ( 2 ) When cause of action and subject-matter of the
dispute affects third-party rights; have erga omnes effect;
require centralised adjudication, and mutual adjudication
would not be appropriate and enforceable.
76.3. ( 3 ) When cause of action and subject-matter of the
dispute relates to inalienable sovereign and public interest
functions of the State and hence mutual adjudication would
be unenforceable.
76.4. ( 4 ) When the subject-matter of the dispute is expressly
or by necessary implication non-arbitrable as per mandatory
statute(s).
76.5. These tests are not watertight compartments; they
dovetail and overlap, albeit when applied holistically and
pragmatically will help and assist in determining and
ascertaining with great degree of certainty when as per law in
India, a dispute or subject-matter is non-arbitrable. Only
when the answer is affirmative that the subject-matter of the
dispute would be non-arbitrable.
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76.6. However, the aforesaid principles have to be applied
with care and caution as observed in Olympus
Superstructures (P) Ltd. [ Olympus Superstructures (P) Ltd. v.
Meena Vijay Khetan , (1999) 5 SCC 651] : (SCC p. 669, para
35)
“ 35 . … Reference is made there to certain disputes like
criminal offences of a public nature, disputes arising out of
illegal agreements and disputes relating to status, such as
divorce, which cannot be referred to arbitration. It has,
however, been held that if in respect of facts relating to a
criminal matter, say, physical injury, if there is a right to
damages for personal injury, then such a dispute can be
referred to arbitration ( Keir v. Leeman [ Keir v. Leeman ,
(1846) 9 QB 371 : 115 ER 1315] ). Similarly, it has been
held that a husband and a wife may refer to arbitration the
terms on which they shall separate, because they can
make a valid agreement between themselves on that
matter ( Soilleux v. Herbst [ Soilleux v. Herbst , (1801) 2 Bos
& P 444 : 126 ER 1376], Wilson v. Wilson [ Wilson v. Wilson ,
(1848) 1 HL Cas 538] and Cahill v. Cahill [ Cahill v. Cahill ,
(1883) LR 8 AC 420 (HL)] ).
77. Applying the above principles to determine non-
arbitrability, it is apparent that insolvency or intracompany
disputes have to be addressed by a centralised forum, be the
court or a special forum, which would be more efficient and
has complete jurisdiction to efficaciously and fully dispose of
the entire matter. They are also actions in rem. Similarly,
grant and issue of patents and registration of trade marks are
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exclusive matters falling within the sovereign or government
functions and have erga omnes effect. Such grants confer
monopoly rights. They are non-arbitrable. Criminal cases
again are not arbitrable as they relate to sovereign functions
of the State. Further, violations of criminal law are offences
against the State and not just against the victim. Matrimonial
disputes relating to the dissolution of marriage, restitution of
conjugal rights, etc. are not arbitrable as they fall within the
ambit of sovereign functions and do not have any
commercial and economic value. The decisions have erga
omnes effect. Matters relating to probate, testamentary
matter, etc. are actions in rem and are a declaration to the
world at large and hence are non-arbitrable.
78. In view of the aforesaid discussions, we overrule the
ratio in N. Radhakrishnan [ N. Radhakrishnan v. Maestro
Engineers , (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12] inter
alia observing that allegations of fraud can ( sic cannot) be
made a subject-matter of arbitration when they relate to a
civil dispute. This is subject to the caveat that fraud, which
would vitiate and invalidate the arbitration clause, is an
aspect relating to non-arbitrability. We have also set aside
the Full Bench decision of the Delhi High Court in HDFC
Bank Ltd. [ HDFC Bank Ltd. v. Satpal Singh Bakshi , 2012
SCC OnLine Del 4815 : (2013) 134 DRJ 566] which holds
that the disputes which are to be adjudicated by the DRT
under the DRT Act are arbitrable. They are non-arbitrable.”
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41. In Bihar State Food & Civil Supply Corpn. Ltd. , the
Apex Court reiterated the principles governing arbitrability in
cases involving allegations of serious fraud, as considered in
decisions of the Apex Court in Abdul Kadir Shamsuddin
Bubere, A. Ayyasamy , Rashid Raza, and Avitel Post Studioz .
It is held that the law is settled on a distinction between
“serious fraud” and “fraud simpliciter” to segregate and
exclude disputes involving serious fraud from arbitrability,
and that serious allegations of fraud must be understood in
the context of facts and the two tests to be applied in view of
the well-settled legal principles. It is 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 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 that are not predominantly questions arising from the
contract itself or breach thereof, but questions arising in the
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public law domain. It is held that disputes involving
allegations of serious fraud require greater clarity to ensure
certainty about the availability of the remedy. At least one
instance of serious fraud will be where disputes involving
allegations having criminal law implications transcend inter
se disputes between the contracting parties and attain public
implications, where the ramifications could directly or
indirectly affect non-parties and impact integrity in
governance, accountability in public service, distribution of
essential commodities, safety and security of the nation.
42. In Bihar State Food & Civil Supply Corpn. Ltd. , the
Apex Court has explained that the conduct of arbitration is
governed by the Arbitration Act, and that the limits of dispute
resolution through arbitration are statutorily incorporated in
the Arbitration Act itself in Section 2(3); however, categories
of cases that are not arbitrable are not enumerated in
Section 2(3) of the Act. The Apex Court discussed the
principles settled in Ayyasamy for the categories of non-
arbitrable subjects carved out by the courts, keeping in mind
the principle of common law that certain disputes which are
of a public nature, etc., are not capable of adjudication and
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settlement by arbitration and for the resolution of such
disputes, courts, i.e. public fora, are better suited than a
private forum of arbitration. The Apex Court further discussed
that disputes that shall not be submitted to arbitration have
been recognised in a large number of decisions, including
Booz Allen, Vidya Drolia , and Avitel Post Studioz, for
disputes that shall not be submitted to arbitration due to the
application and operation of criminal laws to the dispute in
question. It is held that the mere fact that criminal
proceedings can or have been instituted in respect of the
same incident would not per se lead to the conclusion that
the dispute which is otherwise arbitrable ceases to be so. It is
thus held as under:
“22.4. The reason for permitting submission of such disputes
to arbitration is well explained in Swiss Timing [ Swiss Timing
Ltd. v. Commonwealth Games 2010 Organising Committee ,
(2014) 6 SCC 677 : (2014) 3 SCC (Civ) 642. Also see similar
reasoning by B.N. Srikrishna, J. in the context of Section 45
of the Arbitration Act in Shin-Etsu Chemical Co. Ltd. v. Aksh
Optifibre Ltd. , (2005) 7 SCC 234 at 267, para 74 : (2005) 127
Comp Cas 97.] as : (SCC p. 693, para 28)
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“ 28 . To shut out arbitration at the initial stage would
destroy the very purpose for which the parties had entered
into arbitration. Furthermore, there is no inherent risk of
prejudice to any of the parties in permitting arbitration to
proceed simultaneously to the criminal proceedings. In an
eventuality where ultimately an award is rendered by the
Arbitral Tribunal, and the criminal proceedings result in
conviction rendering the underlying contract void , the
necessary plea can be taken on the basis of the
conviction to resist the execution/enforcement of the
award. Conversely, if the matter is not referred to
arbitration and the criminal proceedings result in an
acquittal and thus leaving little or no ground for claiming
that the underlying contract is void or voidable , it would
have the wholly undesirable result of delaying the
arbitration.”
43. In N.N. Global Mercantile , the Apex Court was dealing
with the issues regarding the application of the doctrine of
separability of an arbitration agreement from the underlying
substantive contract and its unenforceability if the underlying
contract was not stamped and, whether allegations of
fraudulent invocation of the bank guarantee furnished under
the substantive contract, would be an arbitrable dispute. The
Apex Court held that a conjoint reading of Sections 5 and 16
would indicate that all civil commercial matters, including the
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issue as to whether the substantive contract was voidable,
can be resolved through arbitration.
44. In Nilesh Shejwal , this Court referred the parties to
arbitration, rejecting the respondent’s objection to arbitrability
in light of the allegations of forgery and document fabrication.
This Court relied upon the legal principles settled in
Ayyasamy and Vidya Drolia and held that the petitioner may
face the charge in the criminal prosecution, and it may also
have a repercussion in determining whether the termination
was justified or not but filing of criminal proceedings by itself
will not make the dispute that has arisen between the parties,
which is set out in the notice invoking arbitration, to be a non-
arbitrable.
45. In ICICI Bank Ltd , relied upon by the respondent, this
Court held that when objection of jurisdiction is on record
before the learned arbitrator in detail and the contents of
such objection are in conformity with the provisions of
Section 16(2) of the Arbitration Act, the learned arbitrator
was bound to consider such objection. In Rashtriya Ispat
Nigam Ltd. , the Apex Court held that a defendant's waiver of
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a right in the lis must be gathered from the facts of each
case.
46. In MSP Infrastructure Ltd. , the Apex Court held that
Section 16(2) disables a party from petitioning a tribunal to
challenge its jurisdiction belatedly, having submitted to the
jurisdiction of the tribunal, filed the statement of defence, led
evidence, made arguments and ultimately challenged the
award under Section 34 of the Arbitration Act, 1996. It is held
that a party must raise any objection to the jurisdiction of the
tribunal before or at the time of submission of its statement of
defence. In Vidya Drolia , it is held that a party opposing
arbitration, as per sub-section (2), should raise the objection
to the jurisdiction of the tribunal before the Arbitral Tribunal,
not later than the submission of the statement of defence.
However, the Arbitral Tribunal, as per sub-section (4), is
empowered to admit a plea regarding lack of jurisdiction
beyond the periods specified in sub-sections (2) and (3) if it
considers that the delay is justified.
47. In ONGC Ltd. , the Apex Court held that if the Arbitral
Tribunal accepts a plea that it lacks jurisdiction, the Court in
the exercise of the appellate jurisdiction, under Section 37(2)
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( a ) must have due deference to the grounds which have
weighed with the Tribunal in holding that it lacks jurisdiction
having regard to the object and spirit underlying the statute
which entrusts the Arbitral Tribunal with the power to rule on
its own jurisdiction. It is held that the decision of the Tribunal
that it lacks jurisdiction is not conclusive; however, in the
exercise of this appellate power, the court must be mindful of
the fact that the statute has entrusted the Arbitral Tribunal
with the power to rule on its own jurisdiction with the purpose
of facilitating the efficacy of arbitration as an institutional
mechanism for the resolution of disputes.
ANALYSIS:
48. The learned Arbitrator was of the opinion that the
statements made on behalf of the claimant would not change
the claimant’s case that there is a fraud and other serious
offences and that the same have been committed by the
respondent and others in collusion and conspiracy with each
other. It is held by the learned Arbitrator that, the respondent
has maintained its allegations against the claimant based on
which various conclusions and findings may be arrived at on
the point that the respondent or the claimant is guilty of the
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offence having acted in collusion or having conspired with
one or more of the third parties, or that the claimant and
respondent both are innocent and are victims of the offences.
It is held that even a prima facie conclusion cannot be
recorded as to whether the claimant or respondent has made
false allegations against the other or with a view to
jeopardising the reference. According to the learned
arbitrator, the reference would necessarily involve a
consideration of every allegation of fraud, collusion and
conspiracy involving third parties.
49. The learned Arbitrator has observed that the claimant
has not agreed to proceed on the basis that it is involved in
the commission of the offence and that the respondent is
entitled to establish its defence based on the alleged
offences involving the claimant without any procedural
hurdles. Hence, the learned arbitrator has recorded the
following reasons to hold that the reference is non-arbitrable:
(i) The cases involving collusion and conspiracy
invariably require the impleadment of the parties
alleged to be involved, and third parties cannot be
compelled to join the reference. The respondent
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would have to summon the third parties as its own
witnesses, which would be unfair to the respondent.
(ii) In civil proceedings, the respondent has various
options for filing a suit, including impleading all third
parties, and even in the claimant’s suit, the
respondent can seek the impleading of third parties.
The respondent can also file a counterclaim
impleading all the third parties.
(iii) Even if the claimant agreed to proceed on the basis
that the respondent’s employees have acted
fraudulently in collusion with others, but not
including the claimant, the respondent’s difficulties
would remain, as the respondent would still have to
establish the claimant’s involvement in the offences.
(iv) The claimant has not abandoned its right to file a
suit or other proceedings against the respondent
and the third parties based on the commission of the
alleged offences. In such an event, the same
evidence in all probability will be produced by the
respondent and the claimant. The claimant would
file separate proceedings before a private and a
public forum for the same relief regarding the same
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transactions, but on different causes of action. Thus,
when a case of fraud results in such consequences,
the dispute would be non-arbitrable. A consolidated
proceeding in a civil court would be appropriate.
(v) The order proceeds on the basis that reference
would be maintainable, irrespective of whatever
allegations of fraud and other serious offences are
made by the claimant or by the respondent. The
order is based on the combined effect of various
factors.
(vi) Dealing with the question of fraud would require a
trial and would pose no difficulty in the reference,
provided all the parties concerned are parties to the
reference, and the fact that the allegations would
require a consideration of voluminous documents
and several issues would make no difference.
(vii) There is a high degree of probability that in
defending itself against the respondent’s allegations,
the claimant may find it necessary to steer or even
veer in the direction of its allegations of the same
nature, but against the respondent, which may arise
in the midst of the trial. Hence, the claimant, while
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defending the allegations of fraud against it, may
understandably be compelled to adduce evidence
against the respondent. However, it is observed that
such a probability is not a basis for passing the
order, but may result in injustice to the claimant in
this reference.
50. Thus, the learned arbitrator has held that a reference
would be maintainable, irrespective of whether the
allegations of fraud and other serious offences are made by
the claimant or the respondent. However, according to the
learned Arbitrator, the order was based on the combined
effect of various factors. The learned arbitrator has
concluded that, although dealing with the question of fraud
would require a trial, it would pose no difficulty in the
reference, provided all the parties concerned or parties to the
reference are present. He has also concluded that an arbitral
tribunal can always deal with the most complex and
complicated issues, and for a variety of reasons, dealing with
such matters would pose less difficulties in an arbitration;
however, it was not possible in the present case for the other
reasons he recorded in the order.
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51. To summarise the reasons in the impugned order,
according to the learned Arbitrator, the claimant would file
separate proceedings before a private and a public forum for
the same relief regarding the same transactions, but on
different causes of action and that when a case of fraud
results in such consequences, the dispute would be non-
arbitrable. This reasoning would not stand the test laid down
by the Apex Court, inasmuch as the arbitral claim, based on
enforcement of the contract between the parties, is held to be
valid. The dispute between the parties to the arbitration, per
se, would not assume a public character, rendering it
incapable of adjudication and settlement by arbitration only
on the ground of the pendency of criminal proceedings. The
arbitration agreement can be nullified only if the reference
falls within the well-recognised categories of non-arbitrable
subjects. The circumstances surrounding the arbitral claim
can be addressed by summoning the third parties to record
evidence. The respondent has not denied the contract
between the parties but has disputed the nature of the
transaction pleaded by the claimant, which can be
adjudicated in arbitration based on the evidence to be led by
the parties.
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52. Thus, the findings recorded in the impugned order
show that the reference can be dealt with by recording
evidence, but only for a collective resolution of the disputes
by including third parties; the learned Arbitrator allowed the
application under Section 16. There is no clear finding
recorded that the arbitral tribunal would lack jurisdiction, in
view of the allegations of fraud, or as to why the allegations
are egregious enough to render the reference non-arbitrable.
It is only for convenience purposes that the resolution of the
dispute is held to be better suited in public fora. The learned
arbitrator, in so many words, held that the mere allegation of
fraud and other offences made against the respondent would
not necessarily lead to the application being allowed, as the
allegations against the claimant would not be sufficient to
refrain from entertaining the reference if all the parties
concerned were before the tribunal. However, no claim is
made against third parties. For the purpose of deciding the
claim based on the terms and conditions and scope of the
contract, the third parties can at any time be summoned for
recording evidence. Even the learned arbitrator has held that
third parties can be summoned to record evidence.
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53. The learned Arbitrator has relied upon paragraphs 23
and 25 of the Apex Court’s decision in A. Ayyasamy and held
that where there are serious allegations of fraud, they are to
be treated as non-arbitrable, and that only the civil court
should decide such matters. However, the learned arbitrator
further held that, in view of the concessional statements
made on behalf of the claimant, the award may not have
erga omnes effect, and the rights and liabilities of third
parties may not be affected, and it can even be assumed that
the subject matter or the dispute would not require a
collective adjudication. But it is further held that the
proceedings would be inexpedient, as it would be desirable
for a collective resolution of the disputes by including the
third parties.
54. The learned Arbitrator has also expressed an opinion
that the mere requirement of summoning several third parties
ought not to defeat a valid agreement. Thus, the learned
arbitrator concluded that although the arbitration agreement
is valid, it would be more convenient for the differences and
disputes to be tried by a civil court; therefore, it is necessary
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to nullify the effect of the arbitration agreement, which is
otherwise valid.
55. In light of the legal principles settled by the Apex Court,
as discussed in the above paragraphs, only for convenience
purposes, the effect of the arbitration agreement cannot be
nullified. The reasons recorded by the learned arbitrator, as
referred to in the above paragraphs, themselves are
sufficient to hold that the reference in the present case
cannot be considered as not arbitrable. Nothing is indicated
to show as to how the allegations with criminal law
implications, transcending inter se disputes between the
parties, would have ramifications that could directly or
indirectly affect non-parties and impact the integrity of
governance and accountability in public service, as well as
the safety and security of the nation. To fit within the
categories of non-arbitrable, as laid down by the Apex Court,
neither are there allegations 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, nor
do allegations of serious fraud show any clarity to ensure
certainty about the availability of the remedy. The ground of
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mere convenience before the civil court cannot be accepted
as valid to hold the reference non-arbitrable.
56. It is settled law that actions in rem are excluded from
arbitration, which binds only the parties to the arbitration
agreement. In the present case, nothing is indicated to show
that the dispute is of a public nature and incapable of
adjudication and settlement by arbitration. In the absence of
any finding as to why a public forum would be better suited
than a private forum of arbitration, the arbitration agreement
cannot be nullified. No reason is recorded in the impugned
order that the award would affect any third party and in what
manner. No reason is recorded as to why an effective and
enforceable award would not be possible.
57. It is a well-established legal principle, as discussed in
the above paragraphs, that the mere fact that criminal
proceedings have been instituted in respect of the same
incident would not per se lead to the conclusion that the
dispute which is otherwise arbitrable ceases to be so. No risk
or prejudice to any of the parties is seen in permitting
arbitration to proceed simultaneously with the criminal
proceedings. Even if the criminal proceedings result in
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conviction, nothing is shown as to how it would vitiate the
underlying contract or how, on the basis of the conviction, the
award would be unenforceable. Similarly, if the criminal
proceedings result in an acquittal, the underlying contract
would not be vitiated. Therefore, mere pendency of criminal
proceedings or the alleged offences punishable with severe
imprisonment, including life imprisonment, cannot itself be a
ground for allowing the application under Section 16. It is
necessary to record reasons as to how the allegations in the
criminal complaint would amount to an allegation of serious
fraud in the arbitral reference resulting in public implications.
58. Considering the pleadings of the parties and the
reasons recorded in the impugned order, in light of the well-
settled legal principles, I do not find any substance in the
objection raised on behalf of the petitioner that the
jurisdictional objection should not have been entertained
after the statement of defence was filed. However, a valid
reason sustainable in law must be recorded to hold that a
public forum is better suited. Mere convenience or
inconvenience of the parties is not recognised in law as a
valid reason to hold an arbitral tribunal to lack jurisdiction. In
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the present case, the parties to the reference have chosen to
resolve their dispute through arbitration before a private
tribunal, and the claim is only against the party to the
agreement for enforcement of a contract which is otherwise
held to be valid.
59. In Simran Sodhi , the Delhi High Court followed the
legal principles settled by the Apex Court in Ayyasamy and
Vidya Drolia , and, on the facts of that case, held that the
allegation raised by the petitioner against the respondent
was not that of fraud simplicitor. It was held that the
allegations of creating a false and fabricated agreement
constitute criminal offences, which, if proved, would be
visited upon with penal consequences and criminal
sanctions, and an investigation into the allegations would
therefore lie in the realm of public law affecting the rights of a
third party. Hence, it was held that the allegations of
fraud/forgery would not be lis in personam and cannot be
referred to arbitration.
60. In the decision of the Delhi High Court in Bentwood
Seating Systems relied upon by the learned counsel for the
respondent, the High Court in the facts of the case, held that
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the allegations of fraud were extremely serious and the plea
of fraud was of such a nature that it permeats the validity of
entire contract including the agreement to arbitrate; hence
upheld the order under Section 16 holding that the dispute
was non-arbitrable. Even in the decision of Baban Piraji
Ghadge of this court, the dispute was held to be non-
arbitrable as the allegations of forgery and fabrication of the
partnership deed constituted serious criminal offences and
affected the validity of the arbitration clause. Hence, these
decisions are of no assistance to the respondent in the facts
of the present case.
61. Therefore, for the reasons recorded above in the
exercise of appellate power under Section 37 of the
Arbitration Act, keeping in mind the purpose of facilitating the
efficacy of arbitration as an institutional mechanism agreed
by the parties for the resolution of their disputes, the
impugned order needs interference. Hence, the impugned
rd
order dated 3 August 2023 is set aside, and the application
under Section 16 of the Arbitration Act filed by the
respondent is dismissed. The arbitration proceedings are
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restored and shall continue from the stage at which the
respondent filed the application under Section 16.
[GAURI GODSE, J.]
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