TaxTMI 
TaxTMI 
2026 (2) TMI 174
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....s alleged to be forged. 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. 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 (Admissio....
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....t 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 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 b....
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....t under Article 227 be maintained. In support of the aforesaid submissions, reliance has been placed on the decisions of this Court [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.]. 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 ....
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....ith approval, by another two-Judge Bench of this Court [AVITEL POST STUDIOZ LIMITED AND OTHERS v. HSBC PI HOLDINGS (MAURITIUS) LTD. (supra)] 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, inter se having no implication in the public 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 all. Thus, in a case where plea is taken with regard to nonexistence 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 Suppl....
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....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 generally recognised as a dispute, which is in the realm of nonarbitrability and the court will examine it, as a jurisdictional issue only to enquire whether the dispute has become nonarbitrable 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 ....
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....period of ten years, the party could not have come to court and expected any positive order by way of interim measure. 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....