When Arbitration Agreement Is Alleged To Be Forged, Dispute Is Not Arbitrable : Supreme Court

The Supreme Court on Monday (February 2) observed that the parties cannot be compelled to arbitrate when the very existence of the contract containing the arbitration clause was alleged to be fake. “…in a case where plea is taken with regard to non-existence 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.”, observed a bench of Justices PS Narasimha and Alok Aradhe, pointing that the allegations of fraud going to the very existence of the contract containing the arbitration clause must be first decided by the civil court. “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 non-arbitrability and the court will examine it, as a jurisdictional issue only to enquire whether the dispute has become non-arbitrable due to one or the other reason.”, the court said. The dispute arose from a family-run jewellery firm, M/s RDDHI Gold, originally having three partners. The appellant claimed that a 2007 Deed of Admission and Retirement inducted her as a partner, retired the others, and contained an arbitration clause. The respondent denied the existence of the deed, alleging it was forged. The business was acquired by a private company in 2011, and the dispute arose in 2016 when the appellant first relied on the deed. The batch of appeals arose from the conflicting decisions of the High Court, where in one proceeding it had referred the dispute to an arbitration under Section 8 of the Arbitration Act, however in another proceeding the High Court declined to refer by refusing to appoint the arbitrator under Section 11(6) of the Act. The core issue was whether arbitration could be forced when the document containing the arbitration clause was itself disputed. Answering in negative, the judgment authored by Justice Aradhe observed: “Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes ceases to be merely contractual and strikes at the very root of arbitral jurisdiction. A controversy of this nature falls squarely within the category of disputes that are generally recognized as non-arbitrable.” Since, the Appellant failed to produce the original Admission Deed or a certified copy of deed, the Court said that the very existence of the deed was disputed, rendering the arbitration clause to be illusory and meaningless. “…that the allegations of fraud in the present case were serious and that the respondent no.1 had failed to produce the original Admission Deed or a certified copy thereof, as required under Section 8(2) of the Act. The aforesaid findings were not perfunctory, but were grounded in the material on record and in the statutory requirements.”, the court added. In support, the Court relied on settled precedents, including A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386 and Avitel Post Studioz Ltd. v. HSBC PI Holdings (2021) 4 SCC 713, and its recent restatement of law in Managing Director Bihar State Food and Civil Supply Corporation Limited and Another v. Sanjay Kumar (2025) to underscore that “serious allegations of fraud” assume a different dimension where the arbitration agreement itself is questioned. In such cases, the dispute enters the realm of non-arbitrability, as arbitral jurisdiction is founded on consent.“…mere allegation of fraud simpliciter may not be a ground to nullify the arbitration agreement between the parties, but where the court finds that there are serious allegations of fraud which make a case of criminal offence or where the allegations of fraud are so complicated, which need to be decided on the basis of voluminous evidence, the court can sidetrack the arbitration agreement and proceed with the suit.”, the court said referencing A. Ayyasamy. Resultantly, the Court quashed the High Court's order referring the civil suit to arbitration under Section 8. At the same time, it dismissed a connected appeal challenging the refusal to appoint an arbitrator under Section 11. Cause Title: RAJIA BEGUM VERSUS BARNALI MUKHERJEE (with connected appeal)Citation : 2026 LiveLaw (SC) 101Click here to download judgmentAppearance: For Petitioner(s) Mr. Siddhartha Dave, Sr. Adv. Mr. Shailesh Madiyal, Sr. Adv. Mr. Aakash Sirohi, AOR Mr. Indra Lal, Adv. Mr. Subhojit Seal, Adv. Mr. Sunando Raha, Adv. Mr. Sk Sayan Uddin, Adv. Ms. Manishitha Bhattacharjee, Adv. Mr. Aviral Saxena, AOR For Respondent(s) Mr. Subhojit Seal, Adv. Mr. Sunando Raha, Adv. Mr. Aviral Saxena, AOR Mr. Siddhartha Dave, Sr. Adv. Mr. Shailesh Madiyal, Sr. Adv. Mr. Aakash Sirohi, AOR Mr. Indra Lal, Adv.

When Arbitration Agreement Is Alleged To Be Forged, Dispute Is Not Arbitrable : Supreme Court

Yash Mittal

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