IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION IN ITS COMMERCIAL DIVISION COMMERCIAL ARBITRATION APPLICATION NO. 119 OF 2024 Mangal Credit And Fincorp Limited Through Its …Applicant Authorised Representative Mr. Dhirav Kishor Veera Versus GBL Chemical Limited & Ors …Respondents Mr. Pankaj Jain a/w Pradeep Purohit i/b P. D. Jain & Co. Jain &

Co., for the Applicant.

Mr. Chirag Mody, a/w Yash Momaya, Parag Khandhar, Tapan Radkar, Anaheeta Verma i/b DSK Legal, for Respondent Nos.1 &

2.

CORAM : SOMASEKHAR SUNDARESAN, J.

DATE : JUNE 18, 2025 ORAL JUDGMENT :

1. This is an Application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) seeking reference of disputes and differences between the parties pursuant to which the four Respondents have been designated as borrowers in respect of a loan extended by the Applicant. The Loan Agreement is dated March 30, 2024. The arbitration clause is contained in Clause 8.2 (found at Page 46 of the Application). In the interest of brevity, the arbitration agreement is not Digitally signed by ASHWINI ASHWINI JANARDAN JANARDANVALLAKATI VALLAKATIDate:

2025.06.24 +0530 being extracted here. Suffice it to say, that this matter falls within the jurisdiction of this Court.

2. The primary objection from the Learned Counsel on behalf of Respondent Nos.1 and 2 is that the factual matrix underlying the loan agreement would demonstrate that the loan was a product of fraud. Learned Counsel on behalf of these Respondents would even suggest that the Applicant may be party to the fraud. Consequently, he would submit that since fraud vitiates all solemn acts and would lead to disputes not being arbitrable, this Application under Section 11 ought not to be entertained at all.

3. Learned Counsel on behalf of Respondent Nos.3 and 4 would submit that since they are behind bars, she is unable to take instructions to make submissions on their behalf.

4. Having examined the record, it is apparent that allegations of fraud are indeed found in the course of the conduct between the parties. While the loan agreement is dated March 30, 2024, the loan agreement was recalled within three days on the premise that the documentation submitted for the borrowing being approved contained discrepancy and inconsistency. However, Learned Counsel for the Applicant submits that as far as the Applicant is concerned, the loan was indeed disbursed, the document was executed by the then Chief Executive Officer and the whole time director, and the monies were indeed remitted into a bank account held by Respondent No.1 with a nationalized bank for the past one and half years.

5. Learned Counsel for Respondent Nos.1 and 2 submits that an entire device of fraud was unearthed upon investigations, and this discovery of such fraud is a matter of public record, since the fraud was also disclosed to the stock exchanges, Respondent No.2 being a listed company. He would also submit that there are judgments which would clearly indicate that serious allegations of fraud would not be arbitrable, particularly, the fraud goes to the very validity of the contract which contains the arbitration clause.

6. Toward this end, he would rely upon the judgments in the decisions in A. Ayyaswamy v. A. Paramasivam & Ors, (2016) 10 SCC 386;, Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710; and Avitel Post Studioz Limited & Ors v. HSBC Holdings

(Mauritious) Limited, (2021) 4 SCC 713 to contend that disputes involving serious allegations of fraud ought not to be arbitrable. The offshoot of this submission is that this Court sitting in the jurisdiction of Section 11 should take a note of a fact that there are serious allegations of fraud and forthwith dismiss the Application and not permit commencement of arbitration.

7. Having examined the record with the assistance of the Counsel and the march of the law in terms of the scope of the jurisdiction under Section 11 Court, I am unable to agree that, at the threshold, the Applicati