The main legal point established in the judgment is that serious allegations of fraud must be proven and should go to the validity of the arbitration agreement itself to render the disputes non-arbitrable.

ORDER :

The present Arbitration Application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) for appointment of a sole Arbitrator to resolve the disputes between the parties.

2. Heard Ms. Zainab Khan, learned counsel, representing Mr. S. Nagesh Reddy, learned counsel for the Applicant and Mr. N. Rishi Kumar learned counsel appearing for the Respondents.

3. Contentions of the Applicant :

i. The Applicant and Respondent No. 1 entered into an agreement of sale dated 07.02.2020 for a sale consideration of Rs. 3,00,00,000/-

ii. The said agreement of sale relates to the property owned by Respondent No. 1, bearing Municipal No. 1-15/A consisting of stilt + 2 upper floors, having a plinth area of 3750 Sq. Ft. with RCC roof, together with land admeasuring 223 Sq. Yds. forming part of Sy. No. 159, situated at Khajaguda village, Serlingampally Mandal, R.R. District (hereinafter ‘subject property’).

iii. In the said transaction, the son-in-law of Respondent No. 1 acted as a mediator.

iv. As per the terms of the Agreement and its recitals, the Applicant issued a cheque of Rs. 10,00,000/- as advance payment and also paid an amount of Rs. 55,00,000/- The said cheque of Rs. 10,00,000/- was presented by Respondent No. 1 and was duly honored on 06.03.2020.

v. On various dates, the Applicant paid cash to Respondent No. 1 through her son-in-law, the payments made to her son-in-law were duly acknowledged by her by issuing receipts.

vi. As on 13.06.2020, Respondent No. 1 was in receipt of Rs. 1,70,00,000/- and her son-in-law assured that the registration of property would be affected the next day. However, the registration did not take place as the son-in-law of Respondent No. 1 demanded an extra amount of Rs. 50,00,000/-

vii. While things stood thus, a suit bearing OS No. 319 of 2020 was filed by Respondent No. 2 (daughter of Respondent No. 1) seeking perpetual injunction against the Applicant and her family members. It was during this time that the Applicant came to know that the subject property is already transferred to Respondent No. 2 by Respondent No. 1 by executing a gift deed.

viii. Aggrieved by the action of Respondent Nos. 1 and 2, the Applicant filed an application under Section 9 of the Act, 1996 vide A.O.P. No. 5 of 2020 on the file of XV Additional District Judge, Ranga Reddy at Kukatpally. The said application was allowed vide order dated 24.07.2020 and an interim injunction was granted restraining the Respondents herein from alienating the property.

ix. The Applicant invoked Clause 11 of the agreement dated 07.02.2020 and issued an arbitration notice to the Respondents on 02.11.2020. The said notice remained unserved on the Respondents. Therefore, the present application is flied seeking appointment of an Arbitrator.

4. Contentions of the Respondents :

i. The Respondents denied all the allegations made by the Applicant. The execution of agreement of sale deed dated 07.02.2020 was denied stating that the same was forged by the Applicant. The receipts showing acknowledgment of payments of various amounts were also denied stating that the same were fabricated.

ii. Since, the agreement of sale deed dated 07.02.2020 itself is forged, no arbitration agreement exists. Further, where serious allegations of fraud and forgery exists, the disputes are not arbitrable.

Findings of the Court:

5. As stated above, the Respondents contend that the agreement of sale dated 07.02.2020 was never executed. They contend that serious allegations of fraud and forgery exist against the Applicant and the existence of the arbitration agreement itself is in challenge and therefore, the dispute is non-arbitrable.

6. Therefore, now the question that arise before this Court is whether serious allegations of fraud exist in the present case, so as to make the entire dispute non-arbitrable.

7. It is relevant to note that the question of arbitrability of fraud was considered by the Supreme Court in A. Ayyasamy v. A. Paramasivam, (201