Supreme Court Resolves Arbitration Jurisdiction Conflict in Partnership Dispute -- High Court Contradictory Orders on Arbitration Agreement Validity Set Aside -- Civil Suit Directed to Proceed for Determination of Admission Deed Validity

Nature of Litigation: Partnership dispute involving allegations of forged Admission Deed with arbitration clause

Remedy Sought

Appellants seek determination of Admission Deed validity before arbitration -- Respondent seeks arbitration based on Admission Deed

Filing Reason

Conflicting High Court orders on arbitration jurisdiction when existence of arbitration agreement is disputed

Previous Decisions

High Court rejected Section 9 application (04.05.2018) -- Supreme Court dismissed appeal against Section 9 order -- Trial Court and Appellate Court rejected Section 8 application -- High Court allowed Article 227 revision referring suit to arbitration (24.09.2021) -- High Court dismissed Section 11 application (11.03.2021)

Issues

Whether disputes can be referred to arbitration when existence of arbitration agreement is seriously disputed on allegations of forgery Whether arbitrator can be appointed when validity of arbitration agreement is challenged as fabricated

Submissions/Arguments

Respondent counsel argued observations in Section 9 appeal are tentative and should not prejudice other proceedings -- Prima facie observations in Section 9 appeal cannot affect Section 11 jurisdiction -- Disputes involving fraud allegations challenging arbitration agreement are arbitrable -- High Court rightly exercised supervisory powers under Article 227

Ratio Decidendi

When the very existence of an arbitration agreement is seriously disputed with allegations of forgery and fabrication, the court must first determine the validity of the agreement before referring disputes to arbitration -- The arbitral tribunal cannot decide its own jurisdiction when the foundational agreement existence is challenged as forged

Judgment Excerpts

The High Court on the same factual foundation involving the same alleged arbitration agreement, has in one proceeding directed the parties to resolve their disputes through arbitration and whereas in another proceeding, declined to appoint an arbitrator on the ground, that the existence of an arbitration agreement is itself in serious doubt The appellant took a stand that the Admission Deed is a forged and fabricated document, concocted by the respondent no.1 The High Court dismissed the petition filed by the respondent No.1, under Section 11 of the Act, by order dated 11.03.2021, inter alia holding that it would not be expedient to appoint an arbitrator till such time that the issue regarding the existence of an arbitration agreement between the parties has been answered finally

Procedural History

2005-12-01: Partnership firm established -- 2007-04-17: Alleged Admission Deed executed -- 2016-10-02: Respondent issued notice claiming partnership interest -- 2016-11-21: Appellant denied Admission Deed execution -- 2018-05-04: High Court rejected Section 9 application -- 2018-05-16: Appellant filed civil suit -- 2018-09-06: Trial Court rejected Section 8 application -- 2020-09-25: Appellate Court dismissed appeal -- 2021-03-11: High Court dismissed Section 11 application -- 2021-09-24: High Court allowed Article 227 revision referring suit to arbitration -- 2026: Supreme Court appeals filed