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Whether mere allegation of fraud will nullify arbitration ag

Whether Mere allegation of fraud will nullify arbitration agreement?

When the case involves serious allegations of fraud, the dicta
contained in the aforesaid judgments would be understandable.
However, at the same time, mere allegation of fraud in the
pleadings by one party against the other cannot be a ground to
hold that the matter is incapable of settlement by arbitration and
should be decided by the civil court. The allegations of fraud
should be such that not only these allegations are serious that in
normal course these may even constitute criminal offence, they
are also complex in nature and the decision on these issues
demand extensive evidence for which civil court should appear to
be more appropriate forum than the Arbitral Tribunal. Otherwise,
it may become a convenient mode of avoiding the process of
arbitration by simply using the device of making allegations of
fraud and pleading that issue of fraud needs to be decided by the
civil court. The judgment in N. Radhakrishnan does not touch
upon this aspect and said decision is rendered after finding that
allegations of fraud were of serious nature.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 8245-8246 OF 2016
A. AYYASAMY
VERSUS
A. PARAMASIVAM & ORS.
Dated:October 04, 2016
Citation: 2016 SCCONLINE 1110

https://www.lawweb.in/2016/10/whether-mere-allegation-of-fraud-will.html

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Ms.Usha Kapoor (CEO) 18 October 2016

In Ayya samy v PRAMA SHIVAM AND oTHERS THE SUPREM COUR RTjUDGMENT IS LAUDABLE AS REGARDS MERE ALLEGATIONS OF FRAUD SHOULDS NOT BE A GROUND FO RREFUSAL OF ARBITRATION AGREEMENT OR REFUSAL TO REFER THE MATTER TO ARBITRATOR.PM

Posted about 12 hours ago

Whether Mere allegation of fraud will nullify arbitration agreement?

Comment

With regard to international arbitrations linked to India, recent decisions appear to have steered the legal position towards international practice. In line with the doctrine of separability, a party alleging fraud to resist arbitration must now establish that the fraud actually vitiates the arbitration agreement itself, not just the parent contract. Even at the stage of enforcement, the party resisting the award will have to show substantial flaws in the award in order to succeed.

In contrast, insofar as domestic arbitrations in India are concerned, allegations of fraud remain a minefield that may threaten the entire arbitral process, from the referral to arbitration until enforcement of the award. Due to the judicially developed principles prohibiting referral of such disputes to arbitration, parties must be extremely careful to avoid casual allegations of fraud – not only in their pleadings, but also in any correspondence and conduct before the arbitration. It is hoped that with further judicial consideration, the present state of the law – in which a stray allegation of fraud has the potential to scupper an entire arbitration – may be reviewed.iF YOU APPRECIATE THIS ANSWER PLEASE CLICK THE THANK YOU BUTON ON THIS FORUM.