The court affirmed that allegations of fraud do not negate an arbitration agreement unless they are serious and complex, allowing the tribunal to rule on its own jurisdiction.

JUDGMENT :

BIREN VAISHNAV, J.

1. Airport Authority of India has filed this petition under Article 227 of the Constitution of India, challenging the order dated 06.02.2023 passed below Exh.20 by the Commercial Court, Ahmedabad, in Commercial Civil Suit No.1464 of 2021 (Old Suit No.109 of 2019). The petitioner was the plaintiff before the Commercial Court. The respondent was the defendant. A suit for recovery of Rs.2,28,75,348.12 was filed by the petitioner against the defendant, wherein, on an application filed by the respondent at Exh.20 under Section 8 of the Arbitration and Conciliation Act, 1996, (hereinafter to be referred to as ‘the Arbitration Act’ for short), the Commercial Court by the impugned order allowed the application directing that the disputing context of the suit be referred to arbitration.

2. FACTS IN BRIEF:

2.1 The respondent is a proprietary concern. A tender was floated by the petitioner authority for vehicle parking rights at Sardar Vallabhbhai Patel International Airport, Ahmedabad. The bid of the respondent came to be accepted and accordingly license for the vehicles parking rights at the airport came to be issued in favour of the respondent. A license agreement was executed on 23.06.2017. Clause 6 of the license agreement required the respondent to provide a security deposit in the form of a bank guarantee. The license agreement inter-alia stated that the respondent licensee had deposited a sum of Rs.8,39,15,802/- equal to six month license fee in the form of a bank guarantee from Bank of India, Mira Road Branch, Mumbai. This was a bank guarantee presented by the respondent bank dated 22.05.2017 prior to that of entering into the contract i.e. the license agreement.

2.2 It appears that though the genuineness and validity of the bank guarantee was confirmed by the Chief Manager of the Bank of India, it was subsequently found that the bank officials by communication dated 09.08.2018 informed the petitioner that the bank guarantee was never issued by the Bank of India, Mira Road Branch, Mumbai. A criminal complaint was filed against the respondent under Sections 406, 409, 420 etc. under the Indian Penal Code on the ground that the respondent had committed fraud and forgery by creating a forged and bogus bank guarantee. By a communication dated 24.08.2018 as per Clause 22 of the agreement the license agreement was terminated. On a challenge to this termination by the respondent by filing SCA No.13146 of 2018, the petition came to be dismissed on 18.09.2018.

2.3 The petitioner finding that there was no fall back to recover a sum of Rs.2,28,75,348.12 since the bank guarantee was forged. A commercial suit being Commercial Suit No.1464 of 2021 was filed by the petitioner in the Commercial Court at Ahmedabad. The respondent in such suit being the defendant, filed an application under Section 8 of the Arbitration Act contending that in light of para 19 of the agreement, which contained an arbitration clause, the dispute ought to be referred to the arbitrator and the Court will have no jurisdiction to proceed with the suit. Since that application was granted, the present petition by the plaintiff petitioner.

3.Mr.Bhadrish Raju learned counsel for the petitioner would make the following submissions:

3.1 Mr.Raju would submit that unlike tenders where, pursuant to a tender agreement already executed pursuant to a contract, a bank guarantee is given, here was a case where already a security deposit was given in form of a bank guarantee before the tender contract was entered into. He would submit that a bank guarantee was given on 22.05.2017, whereas, the tender was actually entered into on 23.06.2017. This was therefore not a tender where pursuant to a contract a bank guarantee was given but a guarantee given prior to the contract.

3.2 Mr.Raju would therefore submit that once upon verification the bank guarantee was found to be fraudulent, it permeated to the root of the contract which was vitiated by fraud. The contract bein