The Court Shall Refer The Parties To Arbitration When There Is A Duality Of Expert Opinion As To The Genuineness Of The Agreement: Bombay High Court

The Bombay High Court has held that when an allegation as to the fraud and forgery committed in the execution of the agreement is made and there is a duality of expert opinion on the genuineness of the agreement, the court shall refer the matter to the arbitrator. The Single Bench of Justice N.J. Jamadar has held that when the underlying document in which the arbitration agreement is contained is alleged to be affected by fraud and forgery and there is uncertainty as to the veracity of the signatures on the agreement, the Court shall appoint the arbitrator to decide on the dispute. The Court also reiterated that insufficiency of the stamp duty is not a ground on which the appointment of the arbitrator can be refused. Facts The parties entered into a joint venture agreement wherein the applicant agreed to pay off the debt of the respondents and in return, the respondents granted the applicant development rights in the property owned by the respondents and also agreed to share the net profit out of the said development project. The agreement had a dispute resolution clause that provided for arbitration as a method of dispute resolution. A dispute arose between the parties consequently, the applicant filed an application for interim reliefs, the respondents submitted that they would not dispose of the said property without giving two-weeks' time to the applicant, the court accepted the submission of the respondents, however, it did not pass any injunctive relief as prayed for by the applicant. Subsequently, the applicant moved the application for the appointment of the arbitrator. The respondent resisted the application on the ground that the joint venture agreement is a false, forged and fabricated document and the applicant has not paid sufficient stamp duty on the said agreement. The Court ordered a pre-arbitration trial to determine the authenticity of the agreement. The pre-arbitration trial continued for several years. With the coming of the 2015 Amendment Act, the applicant filed an appeal in the Supreme Court against the order of the High Court on the ground that a mini-trial is not permissible given the change in the position of law after the amendment which only allows the Court to satisfy itself as to the existence of the arbitration agreement noting more. The Supreme Court did not explicitly set aside the order of the High Court; however, it directed the High Court to expeditiously decide the application taking into consideration the prevalent legal position. Accordingly, the applicant filed an affidavit for the appointment of the arbitrator. The Contention Of The Parties The applicant sought the appointment on the following grounds: The pre-arbitration trial is pending for more than 7 years and has not reached any conclusion, the same defeats the purpose of the A&C Act as it provides for expeditious resolution of disputes. The issue of insufficiency of stamp duty is not a ground to refuse the appointment of the arbitrator and the same is outside the limited scope of enquiry under Section 11 of the A&C Act. The allegations of fraud or forgery shall not be decided by the Court while appointing an arbitrator who shall decide on the legality and validity of the agreement. Moreover, the material on record is not sufficient for the Court to draw a conclusion regarding the agreement being forged. The respondent has not denied the averment of the applicant that it has paid off the debts of the respondents. The respondent resisted the application on the following grounds: The pre-arbitration trial is pending adjudication; therefore, it is not apposite to appoint the arbitrator without determining the validity of the agreement.The Supreme Court has not set aside the order of the High Court directing pre arbitration trial and it still holds the field, therefore, the same cannot be ground for the appointment of the arbitrator. The 2015 Amendment would have no application as the agreement was prior in time.The allegation is of egregious fraud going to the very existence of the agreement. The allegation of fraud and forgery is backed by unimpeachable experts' evidence. The expert reports are categorical to the extent that the fingerprints of the parties on the agreement are not similar to the specimen provided.The rubber stamp and the embossed stamps on the agreement are not identical to the respondents' stamps. In view of the overwhelming expert evidence in support of respondent's allegations, there is no ground to interdict the earlier order directing the pre-arbitration trial to determine the validity of the agreement. Analysis By The Court The Court rejected the argument of the respondent that the Supreme Court has not set aside the order of the Court, therefore, the pre-arbitration trial must continue on the ground that the Supreme Court has ...

The Court Shall Refer The Parties To Arbitration When There Is A Duality Of Expert Opinion As To The Genuineness Of The Agreement: Bombay High Court

ausaf ayyub

Tags