LI Network
Published on: December 17, 2023 at 11:14 IST
The Supreme Court recently reiterated that a plea of fraud must be substantial in nature to undermine the jurisdiction of an arbitrator.
This ruling came in response to an appeal seeking the declaration of nullity for a Conveyance Deed and the valid termination of registered Development Agreements.
The two-judge bench, consisting of Justice Aniruddha Bose and Justice Sudhanshu Dhulia, emphasized that the appellants failed to substantiate their plea of fraud, relying solely on bald allegations.
The court consistently maintained that a serious nature of fraud is required to oust the jurisdiction of an arbitrator.
The court also clarified that the Arbitral Tribunal possesses the authority to delve into jurisdictional issues, including the existence and validity of an arbitration clause, demonstrating its competence to decide on its own jurisdiction.
In this case, the appellants, plaintiffs in a civil suit, challenged the referral of the matter to arbitration under Section 8 of the Arbitration & Conciliation Act, 1996.
The respondents, defendants, invoked the arbitral clause in agreements forming the basis of the Conveyance Deed and Development Agreements. The Trial Court and the Bombay High Court allowed the arbitration application, prompting the appeal to the Supreme Court.
The Supreme Court, citing precedent and the purpose of minimizing judicial interference in arbitration matters, emphasized the independence of the arbitration clause within a contract.
It referred to Rashid Raza v. Sadaf Akhtar, establishing two conditions for the court to refuse arbitration referral: if the plea permeates the entire contract, including the arbitration agreement, or if the fraud allegation affects the internal affairs of the parties with no implication in the public domain.
The court concluded that the appellants failed to demonstrate a serious nature of fraud, and the Arbitral Tribunal had the authority to address jurisdictional issues. Consequently, the Supreme Court dismissed the appeal, upholding the referral of the matter to arbitration.
Case Details: Sushma Shivkumar Daga & Anr. v. Madhurkumar Ramkrishnaji Bajaj & Ors.