"Arbitrability Of A Dispute Vis-a-Vis Allegations Of Forgery Over The Arbitration Agreement: Through The Lens Of Section 8 And Section 11 Of The Arbitration And Conciliation Act, 1996"

INTRODUCTION-

Arbitration, as a way of dispute resolution, pivots on the existence of indisputable consent given by the parties that opt for the same. This consent to refer a dispute to Arbitration needs to be inarguably free, clear and in compliance with Section 7 of the Arbitration and Conciliation Act, 1996, (“the Act”) which necessitates consensus ad idem, i.e., “meeting of minds” for agreement about the same thing. However, when the very existence of the document that contains the said consent is staunchly disproved, a closer scrutiny must be deployed in order to understand the implications of referring a dispute to Arbitration in the face of probable fraud or forgery.

Through a significant pronouncement handed out by the Hon’ble Supreme Court on 2^nd February, 2026, the importance of party autonomy in Arbitration and simultaneously, the need for judicial determination of fraud was thoroughly scrutinized. A division bench comprising of Justice Pamidhighantam Sri Narasimha and Justice Alok Aradhe, in Rajia Begum v. Barnali Mukherjee¹, shed light on the indispensable prerequisites for referring any dispute to Arbitration and the impact of incredulity assigned to the consent given by the parties to the dispute.

Background of the Dispute-

The present case arose from a partnership dispute involving a firm which was originally constituted in 2005, named M/s RDDHI Gold.  Rajia Begum, the Appellant, claimed her position in the firm through an Admission and Retirement Deed dated 17.04.2007, presumably executed by two partners, including her husband. She asserted that the Admission deed solidified a 50.33% stake for her in the firm. On the other hand, Barnali Mukherjee, the Respondent, resolutely contested the very existence of the deed and submitted that it was devoid of clear consent, thereby suggesting forgery or fraud. The dispute escalated when Rajia Begum sought to enforce rights under this deed, including invoking the arbitration clause contained within it.

PROCEDURAL HISTORY-

Application under Section 9 of the Arbitration and Conciliation Act, 1996

Rajia Begum first approached the Trial Court under Section 9 of the Act, seeking interim protection in the form of preservation of the subject matter of the dispute and appointment of a receiver for the company ‘RDDHI Gold Pvt. Ltd.’, which had purportedly absorbed the partnership business in 2011. The Trial Court initially allowed this application. However, on appeal, the High Court reversed this order by its judgment dated 04.05.2018. The High Court took note of the fact that despite the Admission Deed allegedly being executed in April 2007, Rajia Begum had not been allowed any access to the partnership business, its books of accounts, or any share of profits for over ten years thereafter. The High Court recorded a prima facie finding that the existence and due execution of the Admission Deed was in serious doubt, holding that in view of cogent material indicating its non-existence, it would not be prudent to accord interim protection to a party who had failed to demonstrate the existence of a valid arbitration agreement even on a prima facie basis. Aggrieved, Rajia Begum preferred a Special Leave Petition before the Supreme Court, which was dismissed, thereby lending finality to the High Court’s prima facie assessment between the parties.

Application under Section 8 of the Arbitration and Conciliation Act, 1996

Barnali Mukherjee instituted a civil suit on 16.05.2018 before the competent civil court, seeking a declaration that the Admission Deed was a forged document. In response, Rajia Begum filed an application before the Trial Court under Section 8 of the Act, seeking a reference of the suit to arbitration on the ground that the parties were bound by an arbitration agreement contained in the Admission Deed. The Trial Court dismissed this application vide order dated 06.09.2018, holding that the allegations of fraud in relation to the Admission Deed were of a complicated nature and that Rajia Begum had failed to produce either the original Admission Deed or a certified copy thereof, as mandated under Section 8(2) of the Act. An appeal before the Additional District Judge also met the same fate and was dismissed on 25.09.2020. Thereafter, Rajia Begum preferred a revision petition under Article 227 of the Constitution. By its order dated 24.09.2021, the High Court allowed the revision, set aside the concurrent findings of the Trial Court and the First Appellate Court, and directed that the dispute be referred to arbitration.

Application under Section 11 of the Arbitration and Conciliation Act, 1996

Simultaneously and running parallel to the Section 8 proceedings, Rajia Begum had also filed a separate petition under Section 11 of the Act directly before the High Court, praying for the appointment of an arbitrator to adjudicate the disputes between the parties arising out of the alleged arbitration clause in the Admission Deed. By order dated 11.03.2021, the High Court dismissed this petition as well, holding that it would not be expedient or appropriate to appoint an arbitrator unless and until the question of whether a valid arbitration agreement existed between the parties was conclusively answered.

Issue For Determination Before The Supreme Court-

The peculiarity of the situation before the Supreme Court lay in the contradiction resulting from proceedings under Section 11 of the Act and Article 227 of the Consititution. On one hand, in the Section 11 proceedings, the High Court had declined to appoint an arbitrator taking the view that the existence of the Arbitration Agreement was itself in serious doubt. On the other hand, in the Article 227 revision arising from the Section 8 proceedings, the same High Court had directed referral of the suit to arbitration, thereby treating the Arbitration Agreement as valid enough to operate. These two positions, resting on the identical factual substratum and the same alleged Arbitration Agreement, were irreconcilable with each other. The Supreme Court was therefore called upon to determine, in both appeals together.

Submissions Advanced By The Parties-

Rajia Begum’s counsel argued that the High Court’s observations in the Section 9 (of “the Act”) proceedings were tentative and could not fetter jurisdiction under Sections 8 and 11. It was further contended that allegations of fraud touching an arbitration agreement remain arbitrable, and the High Court’s intervention under Article 227 was justified. On the other hand, Barnali Mukherjee’s counsel submitted that the Admission Deed was a forged document, that no privity of contract ever existed, that the finalised Section 9 findings could not be disregarded, and that the High Court had impermissibly re-appreciated evidence while exercising supervisory jurisdiction.

Court’s Analysis-

Hon’ble Supreme Court, in adjudicating over the present dispute, reaffirmed that Arbitration is founded on consent, and where the document containing the arbitration clause is itself seriously alleged to be forged, the dispute falls in the realm of non-arbitrability. The Bench, therefore, held that the dispute “involves serious allegations going to the root of the Arbitration Agreement itself and is not amenable to arbitration at this stage”

Drawing on Ayyasamy v. A Paramasivam & Others², which had distinguished “simple” from “serious fraud” and opined that when fraud permeats the arbitration agreement itself, it ousts arbitral jurisdiction; Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd.³, which crystallised the test as asking whether the party against whom breach is alleged can be held to have entered into the arbitration agreement at all; and Managing Director Bihar State Food and Civil Supply Corporation Limited and Another v. Sanjay Kumar⁴, which reaffirmed these principles and held that fraud directed at the arbitration agreement is a “distinct category of non-arbitrability” – the Court held that the Admission Deed, having remained missing from all records for nine years, and being contradicted by Rajia Begum’s own admissions and by contemporaneous banking documents, placed the arbitration clause under such grave doubt as to require a complete judicial inquiry. The High Court’s interference vide Article 227 with the concurrent findings of two courts was held impermissible in the absence of any jurisdictional error.

Conclusion-

The Supreme Court allowed Barnali Mukherjee’s appeal and dismissed Rajia Begum’s. The High Court’s order dated 24.09.2021 referring the dispute to arbitration under Section 8 was quashed, and its order dated 11.03.2021 refusing to appoint an arbitrator under Section 11 was affirmed. Regarding the Section 9 proceedings, the Hon’ble Supreme Court conclusively noted that-

“While findings in Section 9 proceedings are undoubtedly prima facie in nature, such findings, when they attain finality, cannot be ignored in subsequent proceedings founded on the very same issue. The prima facie satisfaction recorded by the High Court regarding the doubtful existence of the arbitration agreement was, therefore, a relevant consideration while examining applications under Sections 8 and 11 of the Act.”

The prima facie satisfaction recorded by the High Court regarding the doubtful existence of the arbitration agreement was, therefore, a relevant consideration while examining applications under Sections 8 and 11 of the Act. The judgment is a firm reminder that where the agreement to arbitrate is itself tainted by serious allegations of forgery, courts are not only entitled but obliged to step in, ensuring that arbitration is not deployed as an instrument to defeat a party’s right to civil adjudication.

Therefore, the findings in Rajia Begum V. Barnali Mukherjee provide a cardinal reminder to the parties involved in a dispute that in the face of serious allegations of fraud or forgery over the mere existence of the document containing Arbitration agreement, Arbitration as a way of dispute resolution is inconceivable. Conclusively, if the consent to arbitrate is under a “grave cloud of doubt”, no dispute can be referred to Arbitration.

Footnotes

1. Rajia Begum v. Barnali Mukherjee, 2026 INSC 106.

2. Ayyasamy v. A Paramasivam & Others, (2016) 10 SCC 386

3. Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd., (2021) 4 SCC 713

4. Managing Director Bihar State Food and Civil Supply Corporation Limited and Another v. Sanjay Kumar, (2025) SCC OnLine SC 1604

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