Back
2022 Supreme(Online)(KER) 53284
HIGH COURT OF KERALA
Sathish Ninan, J
SVS MARKETING SANITARY PVT. LTD – Appellant
Versus
BATHTOUCH METALS PVT. LTD., – Respondent
AR/46/2021
K.SHAJ, RENJIT GEORGE, C.IJLAL, ARUN CHAND, VINAYAK G MENON, BHARAT VIJAY, P.MAJID MUHAMMED, K.JITHU S. NAIR, B.BINDU, RAYMOND GEORGE DIAS, HARSHIT S TOLIA, ANKIT K. MEHTA
The court upheld that disputes involving allegations of fraud may be arbitrable, emphasizing a prima facie review at the referral stage unless outright fraud invalidates the arbitration agreement.
Headnote:
Arbitration - Dispute Resolution - Arbitration and Conciliation Act, 1996 - Sections 11(5), 16(1) - The court examined the arbitrability of the dispute, finding that a prima facie review principles apply, and directed referral to arbitration for a preliminary issue on the existence of the arbitration agreement.
Fact of the Case:
The applicant sought the appointment of an arbitrator under the Arbitration and Conciliation Act, 1996, claiming disputes over defective goods supplied by the respondent based on an agreement allegedly signed by both parties. The respondent disputed the agreement's validity, alleging forgery of their signature.
Issues: Whether allegations of fraud render a dispute non-arbitrable and which forum is competent to adjudicate such issues.
Ratio Decidendi: Disputes regarding fraud may be arbitrable unless they wholly undermine the existence of the arbitration agreement; hence, the Arbitral Tribunal is the preferred forum for initial adjudication of such matters.
Final Decision: The request for arbitration was granted, directing preliminary examination by the appointed arbitrator.
O R D E R
The applicant has approached this Court seeking the appointment of an Arbitrator in terms of Section 11 (5) of the Arbitration and Conciliation Act, 1996 (herein after referred to as “the Act”) for resolution of the disputes that have arisen between the applicant and the respondent, out of a business transaction.
2. The applicant is a Private Limited Company engaged in manufacturing, distribution and sale of sanitary wares. The respondent is also a Private Limited Company engaged in the business of manufacturing sanitary wares.
3. According to the applicant, Annexure-A4 agreement dated 17.10.2018 was entered into between the parties with regard to the manufacture and supply of sanitary wares for the applicant company. The applicant alleges that the goods supplied were defective or of inferior quality. There has arisen disputes between the parties. Though the applicant, as per Annexure-A10 notice, required the respondent to co-operate for appointment of an Arbitrator for resolution of the disputes, the respondent has not acted in pursuance thereof. The applicant claims to have been thus constrained to approach this Court by way of this Arbitration Request.
4. The respondent, through its Managing Director, filed a counter affidavit opposing the prayer. The respondent denied Annexure-A4 agreement. It is contended that the respondent has not signed Annexure-A4 agreement. The alleged signature of the Managing Director of the respondent, as seen in Annexure-A4 agreement, is claimed to be forged one. In the counter affidavit, there is an outright denial of all the averments in the Arbitration Request, paragraph-wise.
5. Heard Sri.K.Shaj, learned counsel for the applicant and Sri.Harshit S. Tolia, the learned counsel for the respondent.
6. The counter affidavit by the respondent does not admit that there were any business transactions between the parties. However, the argument of the learned counsel for the respondent and from Annexure-R2 document produced therewith makes it evident that, the respondent admits that there were business transactions between the parties but, it was without entering into any formal agreement. There being no agreement between the parties and there being no agreement for arbitration, the present Arbitration Request is liable to be dismissed, is the substance of the contention.
7. That Annexure-A4 agreement stipulates for resolution of disputes between the parties through arbitration, is not in dispute. However, the genuineness of the very document is under challenge. The respondent denies the purported signature of its Managing Director as is seen therein. The contention is that, it is forged. To substantiate the contention that the signature seen in Annexure-A4 is not that of the Managing Director of the respondent Company, the respondent has produced Annexure-R1, the opinion of a handwriting expert. In Annexure-R1 report, the expert has opined that the signature seen in Anneuxure-A4 agreement is not that of the Managing Director of the respondent Company. In Annexure-A4, just below the signature of the respondent is affixed a round seal of the Company. The respondent alleges that the said stamp is also a fabricated one. Alleging fabrication and forgery the respondent has filed a complaint before the police. A true copy of the complaint dated 29.08.2021 is produced along with the counter affidavit as Annexure- R2. An agreement created by forgery, fabrication and fraud cannot be the basis for initiation of an arbitration proceeding, is the contention. The plea of fraud cannot be made the subject matter of an arbitration proceeding, it is urged. The learned counsel for the respondent would rely on the decisions of the Apex Court inBooz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others (2011) 5 SCC 532 , A.Ayyasamy v. Paramasivam (2016) 10 SCC 386, and Rashid Raza v. Sadaf Akhtar (2019) 8 SCC 710 to canvass the said contention.
8. The learned counsel for the applicant would on the other han
