Fraud allegations and cancellation suits do not by themselves bar arbitration where a valid agreement exists.

After the 2015 amendment, section 8 of the Arbitration and Conciliation Act requires referral to arbitration where a prima facie valid arbitration agreement exists, and allegations of fraud do not by themselves defeat arbitrability unless the arbitration agreement itself is questioned or the dispute raises recognised public-law concerns. The SC also held that a suit for cancellation of instruments under section 31 of the Specific Relief Act is an in personam remedy operating inter partes, not a proceeding in rem, and registration of the instrument does not alter that character. On that basis, the dispute remained referable to arbitration.

---

---

Issues: (i) Whether allegations of fraud in the suit rendered the dispute non-arbitrable so as to defeat an under section 8 of the Arbitration and Conciliation Act, 1996. (ii) Whether a suit for cancellation of written instruments under section 31 of the Specific Relief Act, 1963 is a proceeding in rem and therefore outside arbitration.

Issue (i): Whether allegations of fraud in the suit rendered the dispute non-arbitrable so as to defeat an application under section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The post-amendment scheme of section 8 requires referral to arbitration where a valid arbitration agreement exists, unless the court finds prima facie that no such agreement exists. Allegations of fraud do not by themselves oust arbitral jurisdiction when the dispute concerns civil wrongs between the parties and the agreement itself is not alleged never to have been entered into. The fraud exception applies only in limited situations, such as where the arbitration agreement itself is said to be nonexistent or where the dispute has public ramifications of the kind recognised in the governing law.

Conclusion: The fraud plea did not make the dispute non-arbitrable, and referral to arbitration was justified.

Issue (ii): Whether a suit for cancellation of written instruments under section 31 of the Specific Relief Act, 1963 is a proceeding in rem and therefore outside arbitration.

Analysis: The scheme of the Specific Relief Act shows that rectification, rescission, cancellation, declaration, and related reliefs under the Act operate inter partes and protect individual civil rights. Section 31 concerns cancellation of instruments that are void or voidable against the plaintiff and the relief is directed against specific persons, with delivery up and cancellation being consequential. Registration of an instrument does not change its character into a public or in rem adjudication. The contrary view that cancellation under section 31 is necessarily in rem was found inconsistent with the structure of the Act and with the law that arbitrators may decide justiciable civil disputes including specific performance and allied reliefs.

Conclusion: A suit under section 31 is not a proceeding in rem, and the relief sought did not bar arbitration.

Final Conclusion: The interference with the orders below was unwarranted, and the dispute remained referable to arbitration.

Ratio Decidendi: After the 2015 amendment, section 8 mandates referral to arbitration where a prima facie valid arbitration agreement exists, and a suit for cancellation of an instrument under section 31 of the Specific Relief Act, 1963 is an in personam remedy, not a proceeding in rem.

---