The Supreme Court decided, referring to its earlier decision in patel Engineering, that, when ruling on an article 11 application, the Tribunal had the right to rule on issues relating to the existence of the arbitration agreement — particularly where issues of fraud or falsification had been raised — before it could refer the dispute to arbitration. In Bharat Rasiklal v. Gautam Rasiklal , the conflict within a partnership led a partner to attempt to initiate arbitration proceedings. The partner requested the appointment of an arbitrator to the Gujarat High Court, in accordance with section 11 of the Arbitration and Conciliation Act 1996. However, the competing partner disputed the existence and validity of the arbitration agreement and argued that the relevant documents had been falsified. As Lord Briggs noted with memorization at Takhar, the question of whether or not such applications succeed will depend on the “outcome of the naked struggle between two important and long-established principles. the principle of fraud and the principle of the end of the year”. The importance of these principles depends on the circumstances of each case. The result achieved at Sinocore (and the generally robust attitude of English courts to arbitration) could indicate that the pendulum will be more weighted according to finality in the event of a challenge to the enforcement of an arbitral award. However, the fact that the arbitral tribunal had already investigated the fraud and found it to be non-causal was essential to that finding. This judgment confirms the radical abandonment of the 1996 law aimed at enhancing the effectiveness of arbitration. It was decided that, as long as the arbitration agreement was established, mere accusations of fraud or the opening of criminal proceedings would not render disputes non-existent.
Only in the rare cases where the contract containing an arbitration clause is deemed non-existent would the arbitration clause no longer exist. The allegation of “fraud” by either party only renders the contract questionable in accordance with Article 17 of the Contracts Act and, by applying the principle of separating the arbitration/agreement clause from the underlying contract, the parties cannot be allowed to avoid arbitration proceedings solely on the basis of such allegations of fraud. However, where serious allegations of fraud have an impact on the public and the tribunal refrains from being subject to fair arbitration and in the interest of all parties, the court may refer the parties to a civil court and not to arbitration. However, such cases would be very rare, and in other cases, the courts would not allow any party to the arbitration to avoid arbitration by merely making a bogey of nullity of the underlying contract. Given the potential for using harassing fraud charges as a tactic to delay proceedings, the Supreme Court attempted to limit the effect of its oversight function to claims for which the agreement purporting to contain the arbitration agreement had not yet been implemented, so its existence was less patented. The Tribunal noted that arbitrators were better able to rule on the validity of the agreement in cases of termination, performance or frustration of a contract. In all cases, in the Tribunal`s view, questions relating to the scope of the arbitration clause and the merits of the remedy should be left to the arbitrators. The court also indicated that there would be serious cost implications for parties who made false allegations of fraud.
In many cases, although arbitration clauses are contained in the treaty, the parties raise issues such as fraud, counterfeiting, etc., and assert in court that the matter is not likely to be arbitrated, given that the contract is compromised or has become a criminal matter. This article examines India`s views on these issues. The Arbitration and Conciliation Act, 1996, the procedural law of India (The Act), contains no specific provisions excluding a category of disputes which they describe as inexeciable. . . .