Mere Registration Of Criminal Case In Relation To An Agreement Would Not Make The Disputes Arising Out Of It Non-Arbitrable: Delhi High Court

The Court reiterated that pendency of criminal case is not an absolute bar to the maintainability of an arbitration petition. It held that to shut out the arbitration at the initial stage itself would destroy the very purpose for which the parties had entered into arbitration and that there is no inherent risk of prejudice in permitting the criminal proceedings to simultaneously proceed with the arbitration.

Facts

The parties entered into an agreement dated 08.02.2007, whereby Mr. S.K Zaman, husband of respondent No.1 and father of respondent no.2, borrowed money from the petitioner.

The borrowed amount, totalling approximately 1.11 crores, was intended for investing in real estate properties, including the subject property. Thereafter, an was executed on 16.07.2012 between Mr. S.K. Zaman and the petitioner, agreeing to a lump-sum payment settlement, which Mr. S.K. Zaman failed to pay by 2015.

However, upon the failure to repay the amount, Mr. Zaman handed over possession of the flat and original title deeds to the petitioner. A dispute arose between the petitioner and the legal heirs of Mr. Zaman (Respondents) regarding the possession of the subject property leading to the filing of the petition.

Submissions by the Parties

The respondent made the following objections to the reference of the dispute to arbitration:

• The MOU is forged and fabricated. The Court in another matter between the same parties had directed investigation by the police, pursuant thereto, the Police has registered a case of forgery/fabrication.

Analysis by the Court

The Court examined the conflicting reports regarding the authenticity of the signatures on the MOU. It observed that there are conflicting reports by both the parties with regards to the authenticity of the MoU. The Court noted that the issue of forgery requires a thorough examination of the evidence, which is more suited for arbitration.

The Court referred to Section 16 of the Arbitration and Conciliation Act, 1996, which provides that the arbitral tribunal has the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

The Court held that merely because a criminal case of forgery/fabrication has been registered in relation to an agreement, any civil/commercial dispute arising out of such agreement would not become non-arbitrable.

The Court reiterated that pendency of criminal case is not an absolute bar to the maintainability of an arbitration petition. It held that to shut out the arbitration at the initial stage itself would destroy the very purpose for which the parties had entered into arbitration and that there is no inherent risk of prejudice in permitting the criminal proceedings to simultaneously proceed with the arbitration.

Accordingly, the Court allowed the petition and appointed a sole arbitrator.

Case Title: Mr. Dushyant Chikara v. Fauzia Sultana

Citation: 2024 LiveLaw (Del) 396

Date: 12.02.2024

Counsel for the Petitioner: Mr Saurav Agrawal, Mr. Akhil Sachar, Mr. Shhivam Chaudahry and Mr. Rajat Chhabra, Advs

Counsel for the Respondent: Mr. Mukul Gupta Sr. Adv,(VC) with Mr. Tushar Gupta, Mr. Sumit Kr. Mishra & Mr. Parinay Gupta

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