Case Note & Summary
The Supreme Court resolved conflicting High Court orders regarding arbitration in a partnership dispute where the existence of the arbitration agreement was seriously disputed due to allegations of forgery -- The Court held that when the very existence of an arbitration agreement is challenged as forged, the court must first determine its validity before referring disputes to arbitration -- The Court set aside the High Court's order under Article 227 that referred the civil suit to arbitration and upheld the High Court's order under Section 11 declining arbitrator appointment -- The civil suit was directed to proceed for adjudication on the validity of the Admission Deed
Headnote
The Supreme Court addressed appeals arising from contradictory High Court orders in a partnership dispute -- The appellant challenged the Admission Deed as forged -- The respondent sought arbitration based on the Admission Deed -- The High Court in one proceeding directed arbitration under Article 227 while in another declined arbitrator appointment under Section 11 -- The Court held that when the existence of arbitration agreement is seriously disputed with allegations of forgery, the matter must be decided by the court before referral to arbitration -- The Court set aside the High Court's order referring the suit to arbitration and upheld the order declining arbitrator appointment -- The civil suit was directed to proceed for determination of the Admission Deed's validity
Issue of Consideration
Whether disputes can be referred to arbitration or an arbitrator can be appointed when the very existence of arbitration agreement itself is seriously disputed on allegations of forgery and fabrication
Final Decision
The Supreme Court set aside the High Court's order dated 24.09.2021 under Article 227 that referred the civil suit to arbitration -- The Court upheld the High Court's order dated 11.03.2021 dismissing the Section 11 application -- The civil suit was directed to proceed for determination of the Admission Deed's validity -- Both appeals were disposed of accordingly
Law Points
- Arbitration and Conciliation Act
- 1996 (Act) -- Section 8 -- Section 9 -- Section 11 -- Constitution of India -- Article 227 -- Prima Facie Existence of Arbitration Agreement -- Fraud Allegations on Arbitration Agreement -- Jurisdiction of Arbitral Tribunal -- Referral to Arbitration
Case Details
Civil Appeal No. of 2026 (@ SLP (C) No.6013 of 2021), Civil Appeal No. of 2026 (@ SLP (C) No.20262 of 2021)
PAMIDIGHANTAM SRI NARASIMHA J. , ALOK ARADHE J.
Not specified in provided text
Rajia Begum, Barnali Mukherjee
Barnali Mukherjee, Rajia Begum, Aftabuddin, Raihan Ikbal
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Nature of Litigation
Partnership dispute involving allegations of forged Admission Deed with arbitration clause
Remedy Sought
Appellants seek determination of Admission Deed validity before arbitration -- Respondent seeks arbitration based on Admission Deed
Filing Reason
Conflicting High Court orders on arbitration jurisdiction when existence of arbitration agreement is disputed
Previous Decisions
High Court rejected Section 9 application (04.05.2018) -- Supreme Court dismissed appeal against Section 9 order -- Trial Court and Appellate Court rejected Section 8 application -- High Court allowed Article 227 revision referring suit to arbitration (24.09.2021) -- High Court dismissed Section 11 application (11.03.2021)
Issues
Whether disputes can be referred to arbitration when existence of arbitration agreement is seriously disputed on allegations of forgery
Whether arbitrator can be appointed when validity of arbitration agreement is challenged as fabricated
Submissions/Arguments
Respondent counsel argued observations in Section 9 appeal are tentative and should not prejudice other proceedings -- Prima facie observations in Section 9 appeal cannot affect Section 11 jurisdiction -- Disputes involving fraud allegations challenging arbitration agreement are arbitrable -- High Court rightly exercised supervisory powers under Article 227
Ratio Decidendi
When the very existence of an arbitration agreement is seriously disputed with allegations of forgery and fabrication, the court must first determine the validity of the agreement before referring disputes to arbitration -- The arbitral tribunal cannot decide its own jurisdiction when the foundational agreement existence is challenged as forged
Judgment Excerpts
The High Court on the same factual foundation involving the same alleged arbitration agreement, has in one proceeding 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
The appellant took a stand that the Admission Deed is a forged and fabricated document, concocted by the respondent no.1
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
Procedural History
2005-12-01: Partnership firm established -- 2007-04-17: Alleged Admission Deed executed -- 2016-10-02: Respondent issued notice claiming partnership interest -- 2016-11-21: Appellant denied Admission Deed execution -- 2018-05-04: High Court rejected Section 9 application -- 2018-05-16: Appellant filed civil suit -- 2018-09-06: Trial Court rejected Section 8 application -- 2020-09-25: Appellate Court dismissed appeal -- 2021-03-11: High Court dismissed Section 11 application -- 2021-09-24: High Court allowed Article 227 revision referring suit to arbitration -- 2026: Supreme Court appeals filed
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 8, Section 9, Section 11
- Constitution of India: Article 227
