SUPREME COURT RECENTLY OVERRULED ITS JUDGMENT IN N RADHAKRISHNAN CASE BY HOLDING THAT ALLEGATIONS OF FRAUD ALSO COME UNDER AMBIT OF ARBITRATION AS LONG AS THEY RELATE TO CIVIL DISPUTE.
SUPREME COURT'S PRESENT JUDGMENT
• (VIDYA DROLIA V. DURGA TRADING CORPORATION)
• The three-judge's bench of Supreme Court overruled its judgment in the ‘N. Radhakrishnan' case by saying that such cases should not be brought out of the scope of arbitration
• It observed that arbitration is not a flawed process and that the arbitrators appointed are usually experts in their field
• It laid a fourfold test to determine if a case cannot be taken for arbitration -
• The subject matter of the case should not concern the society in general
• The case would affect an unrelated third party; and to prevent this, a central adjudication is required
• When the case relates to inalienable sovereign and public interest functions of State, &
• When the case is expressly non-arbitrable
• Applying the above formula, cases relating to Trademark, Criminal Cases, Matrimonial Disputes, Cases relating to probate testamentary matter, Disputes under DRT, etc. become non-arbitrable.
WHAT WAS THE OVERRULED 'N RADHAKRISHNAN' JUDGMENT?
• N. Radhakrishnan vs M/S. Mastero Engieers & Ors (2009)
• In this case, the Supreme Court had upheld an order rejecting an application under section 8 of the Arbitration Act
• The application was rejected on ground that it would be miscarriage of justice if cases related to alleagations of fraud or manipulation of finances are not tried in court of law
• It also held that Courts are far more competetent to decide such matters
• It thus brought such subjects outside the scope of Arbitration Act
• The case was presided over by a Division Bench.
LAW GOVERNING ARBITRATION IN INDIA
• Arbitration is an alternate dispute resolution (ADR) mechanism wherein disputes are adjudicated outside the courts by appointed arbitrators.
• It is codified by the Arbitration and Conciliation Act, 1996
• Section 8 of the Act provides that the court may refer the parties for arbitration, on an application moved by one of the parties to the dispute, if it is brought that the dispute is subject to a valid arbitration agreement.
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