The seriousness of allegations of fraud or fabrication can influence the Court's decision on whether to consider the existing arbitration clause.

S. RAVINDRA BHAT, J.

CM No.13397/2017 in FAO(OS) 104/2017

CM Nos.13400/2017 in FAO(OS) 105/2017

CM Nos.13414/2017 in FAO(OS) 106/2017

Exemption is allowed subject to just exceptions.

FAO(OS) 104/2017 & CM Nos.13396/2017, 13398/2017

FAO(OS) 105/2017 & CM Nos.13399/2017, 13401/2017

FAO(OS) 106/2017 & CM Nos.13413/2017, 13415/2017

1. The appellant is aggrieved by the judgment of learned Single Judge who declined to grant relief under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘Act’). On 16.01.2017 a common order was made rejecting the application under Section 9 of Act and the appellant’s request for an order under Section 11 of Act.

2. The court had taken note of its previous directions of 23.4.2015 as well as subsequent orders, especially of the order dated 11.08.2016. The Court had required the appellant to furnish several details such as the payment of tax, whether the sale consideration allegedly paid by the petitioner was in cash, whether such financial transactions were disclosed, statements etc. After noticing the response as well as the contentions urged on behalf of the respondent as to the authenticity or genuineness of the documents, the Court proceeded to examine the affidavit in response to its order dated 23.04.2015. The learned Single Judge observed as follows :

“12. Interestingly, the Petitioner does not mention when each of the persons gave the said sum. The Petitioner does not mention whether he issued them any receipt for such payment. The Court is prima facie not satisfied with the reply given by the Petitioner as regards the source of his income. Although he has enclosed with the affidavit his bank account statements and claims that he has been filing income tax returns on regular basis, the Court is of the view that a fresh detailed investigation is required in this regard.

13. The question that arises is whether the Court should appoint an Arbitrator and refer all the questions to the Arbitrator as prayed for by the Petitioner or should the Court decline it given the nature of dispute that has arisen and as mentioned in its order dated 23rd April, 2015. IN the latter order the Court has already extracted the passage from the decision of the Supreme Court in Bharat Rasiklal Ashra Vs. Gautam Rasiklal Ashra (2012) 2 SCC 144 where it was stated that the mere fact that the allegations of fraud, forgery, fabrication are likely to involve recording of evidence or involve some delay in disposal, “are not grounds for refusing to consider the existence of a valid arbitration agreement.”

14. However, there are limits to the extent to which a Court can undertake such exercise in a petition under Section 11 of the Act. Given that arbitration itself is supposed to be an efficacious remedy, if even at the stage of appointment of arbitrator, the Court is going to have to take evidence and satisfy itself that the agreements in question are not forged or fabricated as alleged by the Respondent, the exercise would be complicated and time consuming thus defeating the very object of the Act.

15. In the present case, the arbitration petition was first filed by the Petitioner in 2012. Even by the end of 2016 there is no clarity on whether the agreements and receipts in question were forged and fabricated. The disputes between the parties also include two criminal cases where the investigation is still going on. The Court of the MM is far better equipped to deal with the issues arising out of the FSL report and to examine in great detail the evidence that emerges. Likewise, in a civil Court, there would be scope for examination of exhibits and prepare the scientific forensic report to provide an opportunity to the Respondent to cross-examine such witnesses.

16. No doubt, in terms of the Act as amended with effect from 23rd October 2015 the Court is expected to proceed to appoint an Arbitrator if there is in fact valid arbitration agreement. On the other hand, there might be miscarriage of justic