Alleged Forged Arbitration Agreement Renders Dispute Non-Arbitrable; Supreme Court
Kiran Raj
The Supreme Court Division Bench of Justice P.S. Narasimha and Justice Alok Aradhe on Monday (February 2) said parties cannot be pushed into arbitration when the very contract said to contain the arbitration clause is alleged to be forged. The dispute arose from a partnership-business arrangement in which one side claimed entry and a majority stake on the strength of an “admission and retirement” deed, while the other side denied ever executing it and alleged fabrication. The Court held that when a plea of non-existence of the arbitration agreement is raised, it amounts to a serious fraud allegation that makes the matter non-arbitrable at that stage and requires determination by a civil court. It set aside the order referring the suit to arbitration and upheld the refusal to appoint an arbitrator.
The dispute arose from a partnership business formed under a 2005 deed. A third party later claimed that two partners had executed a 2007 power of attorney authorising her to manage the firm and, acting on that authority, she executed an “admission and retirement” deed by which those two partners purportedly retired and she acquired a majority interest.
It was contended from the opposing side that the firm’s business was later taken over by a company under an absorption deed in 2011, and that the claim surfaced only after a 2016 notice asserting a 50.33% stake. The opposing side denied any execution of the 2007 deed or the claimed induction, alleging it was forged and fabricated.
An application under Section 9 of the Arbitration and Conciliation Act, 1996 was filed seeking interim protection. The record referred to contemporaneous documents, including banking correspondence and loan-related papers from 2009–2010, showing the claimant’s role as guarantor and depicting the two partners as continuing partners; it also noted the claimant’s admission that her spouse continued as a partner until 2010 despite recitals of retirement in 2007. Proceedings also involved applications under Sections 8 and 11 of the 1996 Act, and supervisory proceedings under Article 227 of the Constitution.
The Court recorded: “The present appeals arise from a partnership dispute in which appellant claims entry into the firm by virtue of a document whose execution is stoutly denied and is alleged to be forged.” It also stated that “a common issue namely, whether the disputes can be referred to arbitration or an arbitrator can be appointed when the very existence of arbitration agreement itself is seriously disputed on the allegations of forgery and fabrication, arises for consideration in these appeals.”
On the governing approach, the Court stated: “Thus, in a case where plea is taken with regard to non-existence of an arbitration clause or agreement, the same would amount to serious allegation of fraud and would render the subject matter of an agreement non-arbitrable.” It recorded: “Thus, it is evident that when an allegation of fraud is made with regard to arbitration agreement itself, such a dispute is generally recognised as a dispute, which is in the realm of non-arbitrability and the court will examine it, as a jurisdictional issue only to enquire whether the dispute has become non-arbitrable due to one or the other reason.”
Referring to precedent, the Court noted the principle from A. Ayyasamy v. A. Paramasivam (2016) “…mere allegation of fraud simpliciter may not be a ground to nullify the arbitration agreement between the parties, but where the court finds that there are serious allegations of fraud which make a case of criminal offence or where the allegations of fraud are so complicated, which need to be decided on the basis of voluminous evidence, the court can sidetrack the arbitration agreement and proceed with the suit.” It also referred to Avitel Post Studioz Ltd. and its later restatement in Managing Director, Bihar State Food and Civil Supply Corporation Ltd. v. Sanjay Kumar (2025).
Applying those principles, the Court stated: “Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes ceases to be merely contractual and strikes at the very root of arbitral jurisdiction. A controversy of this nature falls squarely within the category of disputes that are generally recognized as non-arbitrable.”
On the material before the courts below, it recorded: “Both the Trial Court and the First Appellate Court had concurrently held that the allegations of fraud in the present case were serious and that the respondent no.1 had failed to produce the original Admission Deed or a certified copy thereof, as required under Section 8(2) of the Act. The aforesaid findings were not perfunctory, but were grounded in the material on record and in the statutory requirements.”
The Supreme Court held that “the dispute relating to the Admission Deed dated 17.04.2007 involves serious allegations going to the root of the arbitration agreement itself and is not amenable to arbitration at this stage. The order dated 24.09.2021 passed by the High Court allowing the respondent no.1’s application under Section 8 of the Act is unsustainable and is hereby quashed and set aside. The order dated 11.03.2021 passed by the High Court rejecting the respondent no.1’s application under Section 11 of the Act warrants no interference and is accordingly affirmed. The appeal @ SLP (C) No. 6013 of 2021 is dismissed whereas the appeal @ SLP (C) No. 20262 of 2021 is allowed.”
Advocates Representing the Parties
For the Petitioners: Mr. Siddhartha Dave, Sr. Adv. Mr. Shailesh Madiyal, Sr. Adv. Mr. Aakash Sirohi, AOR Mr. Indra Lal, Adv. Mr. Subhojit Seal, Adv. Mr. Sunando Raha, Adv. Mr. Sk Sayan Uddin, Adv. Ms. Manishitha Bhattacharjee, Adv. Mr. Aviral Saxena, AOR
For the Respondents: Mr. Subhojit Seal, Adv. Mr. Sunando Raha, Adv. Mr. Aviral Saxena, AOR Mr. Siddhartha Dave, Sr. Adv. Mr. Shailesh Madiyal, Sr. Adv. Mr. Aakash Sirohi, AOR Mr. Indra Lal, Adv.
Case Title: Rajia Begum v. Barnali Mukherjee & Ors.
Neutral Citation: 2026 INSC 106
Case Numbers: Civil Appeal arising out of SLP (C) Nos. 6013 of 2021 and 20262 of 2021
Bench: Justice P.S. Narasimha, Justice Alok Aradhe
