Calcutta High Court (Appellete Side)
Rajia Begum vs Barnali Mukherjee And Others on 24 September, 2021
In the High Court at Calcutta
Civil Revisional Jurisdiction
Appellate Side
The Hon'ble Justice Sabyasachi Bhattacharyya
CO No.128 of 2021
IA No: CAN 1 of 2021
Rajia Begum
Vs.
Barnali Mukherjee and others
For the petitioner : Mr. Mainak Bose,
Mr. Soumitra Ganguly,
Mr. Subhojit Seal,
Mr. Samit Bhanja
For the opposite party no.1 : Mr. Ratnanko Banerjee,
Mr. Reetobroto Mitra,
Mr. Chandra Sekhar Jha,
Mr. Aditya Kumar
Hearing concluded on : 13.08.2021
Judgment on : 24.09.2021
Sabyasachi Bhattacharyya, J:-
1. The present challenge under Article 227 of the Constitution of India
has been preferred against an order passed under Section 37 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the
1996 Act"), by the Appellate Court, affirming an order passed by the
Trial Court rejecting the application of the defendant no.1/petitioner
under Section 8 of, read with Section 5, of the 1996 Act.
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2. Both the courts below proceeded on the premise that a serious
allegation of fraud was involved in the adjudication of the suit, which
required detailed evidence and ought to be heard by the Civil Court
itself, not by an arbitrator.
3. The Trial Court also held that it can be prima facie said that the
impugned deed dated April 17, 2007 may not have been acted upon or
have not come into existence at all. Since the existence of the deed
was found to be questionable, the Trial Court held that further
adjudication of the matter, taking into consideration cogent evidence,
was required, which was to be done by the Civil Court.
4. Learned counsel appearing for the petitioner contends that both the
courts below acted without jurisdiction in refusing to refer the matter
to arbitration within the purview of Section 8 of the 1996 Act. It is
submitted that the petitioner had previously filed an application under
Section 11 of the 1996 Act for appointment of arbitrator, before this
court, which was dismissed by an order dated March 11, 2021 upon
recording that the issue of existence of arbitration agreement was
pending before this court in a revisional application, giving liberty to
the petitioner to file afresh subject to the revisional court returning
any finding on the existence of the arbitration agreement. The said
order was passed during pendency of the instant revisional
application.
5. Learned counsel for the petitioner contends that both the courts below
misinterpreted the principles laid down by the Supreme Court in A.
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Ayyasamy Vs. A. Paramasivam and others, reported at (2016) 10 SCC
386, without examining the allegations of fraud as pleaded in
paragraph no. 25 of the plaint. There was no consideration of the
seriousness of the allegations of fraud and the courts below, it is
argued, proceeded on extraneous facts irrelevant for the consideration
of the issue of arbitrability qua fraud.
6. Learned counsel relies on Rashid Raza Vs. Sadaf Akhtar, reported at
(2019) 8 SCC 710 which, referring to A. Ayyasamy (supra), reiterated
that there is a distinction between serious allegation of
forgery/fabrication and a simple allegation of fraud. In particular,
paragraph 25 of A. Ayyasamy (supra) is relied on by the petitioner.
7. Next citing Booz Allen and Hamilton Inc. Vs. SBI Home Finance Limited
and others, reported at (2011) 5 SCC 532, learned counsel submits
that paragraph 36 of the said report cites instances of non-arbitrable
disputes which are to be expressly reserved for adjudication by public
fora. The same principle was reiterated by the Supreme Court, it is
contended, in the three-judge Bench decision of the Supreme Court
in Vidya Drolia and others Vs. Durga Trading Corporation, reported at
(2021) 2 SCC 1.
8. In Vidya Drolia (supra), the Supreme Court laid down and crystallised
the legal principles for determining non-arbitrability. It was clarified
that the Arbitration Act does not make any specific provision for
excluding any category of dispute, terming them as non-arbitrable,
but there are pronouncements which hold that fraud is one of such
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category where the disputes would be considered non-arbitrable. It
was, however, reiterated that mere allegation of fraud is not sufficient
but should be of such a nature that makes it a virtual case of criminal
offence. In the concurring judgment of Justice Chandrachud, it was
specifically held that the allegation of fraud can be made the subject
of arbitration and the fact that the allegation of criminal wrongdoing
or a statutory violation would not detract from the jurisdiction of the
arbitral tribunal to resolve the dispute arising out of a contractual
relationship.
9. It is further argued by the petitioner that Sections 26 and 27 of the
1996 Act sufficiently authorise an arbitral tribunal to appoint experts
and, if required, to apply to court for assistance in taking evidence.
10. Hence, it is contended that both the courts below acted without
jurisdiction in refusing to refer the matter to arbitration.
11. Learned counsel appearing for the plaintiff/contesting opposite party
no. 1 supports the orders impugned in the revisional application. It is
argued that a civil suit is maintainable under Section 9 of the Code of
Civil Procedure to determine and try all suits of a civil nature, unless
the authority and jurisdiction of the Civil Court is ousted. Since the
purported partnership deed dated April 17, 2007 was alleged to be ex
facie barred, being forged and manufactured, a civil suit to challenge
such a deed, even if it contains an arbitration agreement, is
maintainable, learned counsel for the opposite party No. 1 argues.
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12. In support of such proposition, learned counsel places reliance on
Jamuna Transport Corporation Ltd. & Ors. Vs. Ghanashyamdas Baheti
& Ors., reported at (2010) 4 CHC 488 (Cal) and Ghanshyamdas Baheti
Vs. Jamuna Transport Corporation Ltd., reported at AIR 2011 Cal 91.
By specifically relying on the language of Section 8 of the 1996 Act, it
is argued by the opposite party no.1 that an enquiry into the existence
or non-existence of the arbitration agreement at a prima facie level is
well within the scope of Section 8 of the 1996 Act.
13. By placing reliance on A. Ayyasamy (supra) and Vidya Drolia (supra),
learned counsel for the opposite party no. 1 argues that the court will
refuse to refer to arbitration and proceed with a suit on merits when
there are serious allegations of fraud that make a virtual case of
criminal offence or where there are serious allegations of forgery and
fabrication of documents or where fraud permeates the entire contract
so as to question the validity of the contract itself.
14. Learned counsel argues that, in the suit from which the present
revision arises, the plaint case of fraud and forgery is ex facie evident
with regard to execution of the partnership deed of April 17, 2017 on
several grounds.
15. Since the whole partnership deed is under challenge in the suit and
there is prima facie evidence of fraud, forgery and fabrication of the
partnership deed, which necessarily implies that no valid arbitration
agreement exists, since the arbitration clause itself perishes with the
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partnership deed, the performance of justice would not be served by a
reference to arbitration.
16. Hence, it is contended that the courts below rightly refused the
petitioner's prayer for reference to arbitration.
17. It is further contended on behalf of the plaintiff/opposite party no.1
that the suit has already been set down for ex parte hearing by an
order dated November 20, 2018, as no written statement has been
filed by the defendant no. 1/ petitioner.
18. It is submitted that the present challenge has been preferred to avoid
the consequences of ex parte hearing and to confer upon the
defendant no. 1/ petitioner the right to file a written statement in the
teeth of the order dated November 20, 2018 fixing the suit on the ex
parte board.
19. It is well-settled that, in order to adjudicate an application under
Section 8 of the 1996 Act, the court has to ascertain whether, prima
facie, no valid arbitration agreement exists, before deciding the issue
of reference of the parties to arbitration.
20. Section 8 (1) of the 1996 Act, as amended in 2016 with retrospective
effect from October 23, 2015, reads as follows:
"8. Power to refer parties to arbitration where there is an
arbitration agreement.--(1) A judicial authority, before which
an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party to the arbitration
agreement or any person claiming through or under him, so
applies not later than the date of submitting his first statement
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on the substance of the dispute, then, notwithstanding any
judgment, decree or order of the Supreme Court or any Court,
refer the parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
........."
21. The allegations made in the plaint and the stand taken by the
petitioner in her application under Section 8 of the 1996 Act reveal the
basic features of the factual premise of the suit.
22. As per both the parties, a partnership deed was entered into between
the opposite party nos. 1 to 3 was entered into on December 1, 2005.
23. The plaintiff pleads that, on October 7, 2010, a reconstituted deed was
executed whereby one Satyajit, the husband of the opposite party
no.1, Barnali Mukherjee, was inducted in the partnership, while
opposite party no.2 (the husband of the petitioner, Rajia) and opposite
party no.3, one Raihan Ikbal, retired from the partnership.
Consequently, the opposite party no.1 and her husband Satyajit
became the only partners in the firm.
24. On August 3, 2010, a company called Riddhi Gold Private Limited was
formed by the opposite party no.1 and her husband, Satyajit, on
March, 2011. Allegedly, the said company took over the business of
the partnership in respect of SENCO Gold Jewellery.
25. However, according to the defendant no.1/petitioner, prior to the
execution of the reconstituted deed dated October 7, 2010, a previous
reconstituted deed had been entered into by the partners of the firm
on April 17, 2007, whereby the defendant no.1/petitioner and one
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Bela Rani (the mother-in-law of the plaintiff/opposite party no.1,
Barnali) were inducted as partners in the firm. Consequently, it is
contended by the petitioner, on and after April 17, 2007, the opposite
party nos. 1 to 3 as well as the petitioner and the said Bela Rani
became partners of the firm. Further, the petitioner and Bela Rani,
the newly inducted partners by dint of the reconstitution deed dated
April 17, 2007, were not parties to the purported reconstitution deed
dated October 7, 2010, although the petitioner's husband, opposite
party no.2, had apparently signed therein.
26. Hence, in the absence of the petitioner and Bela Rani, the other
partners, the purported reconstitution deed dated October 7, 2010,
entered into between the original partners, that is, the opposite party
nos. 1 to 3, was vitiated and bad in law.
27. In view of such rival contentions, the courts below proceeded on the
premise that the matter should be heard by the civil court and not
referred to arbitration, since serious allegations of fraud were involved
for adjudication.
28. A perusal of the entire plaint shows that the ingredients of allegations
of fraud/forgery have been pleaded, particularly, in certain
paragraphs thereof, which are set out below:
"18) The defendant no. 1 claims rights as a partner of the partnership
firm allegedly brought into existence by an alleged Deed of April 17,
2007, which is a manufactured document, brought into existence to
extract unjust enrichments at the expense of the plaintiff.
......
20) The said document being a forged document, the alleged arbitration
agreement contained thereunder is naturally also forged and does not
blind the plaintiff.
21) The manifold interpolations and manipulations made in the forged
document of April 17, 2007 clearly indicates that such document has
been prepared in haste and with the aid of persons accustomed to
prepare such document.
.....
23) The plaintiff states that it is crystal clear from the documents
annexed hereinabove that the alleged deed dated April 17, 2007 is a
forged, fabricated and manufactured and it should be declared to be
null and void and be set aside and not given any effect too.
.....
25) The plaintiff submits that the alleged deed dated April 17, 2007
was never executed nor accepted and from mere perusal of the said
alleged deed, numerous instances of forgery can be clearly seen prima-
facie. The alleged deed dated April 17, 2007 is a forged, fabricated and
manufactured document and has been used to usurp the hard earned
money of the plaintiff and to defraud her. The numerous instances of
fraud and forgery committed by the defendant are mentioned herein
below:
a) The Notarial Certificate attached to the said alleged deed
contains only 3 names instead of 5 names and there is no deed
number mentioned therein;
b) "Signature of the continuing....." on top of the first page of the
alleged deed near the forged signatures appears to have been
inserted at a later date and time;
c) Bela Rani Mukherjee (since deceased) was completely bed
ridden due to serious ailments and was not in a position to sign
any such alleged document, which fact as transpires was not
known to the defendants;
d) Age of the plaintiff on the first page of the alleged deed has
been struck off and wrong age was written thereon, which is
unreservedly impossible as the age of the plaintiff can only
increase and cannot be get reduced which is evident from the
deed dated 01.12.2005;
e) The fonts appearing on the second page of the alleged deed
contains two different type fonts and there is no gap between
the two paragraphs which again goes on to show that the
alleged deed of April 17, 2007 is a forged, fabricated and a
manufactured document;
f) On the third page of the alleged deed, the paragraph numbers
are strangely struck off and nothing can be clearly made out as
to why such a thing was done;
g) There is a mention of a deed dated 01.04.2005 on the fourth
page of the alleged deed, but no deed with such date either was
ever executed or existed, neither any partnership was ever
established with the plaintiff, Bela Rani Mukherjee (since
deceased) and the defendant no.3 at it mention in the 1st line;
h) Again, in the 5th and 14th line on fourth page of the alleged
deed, it states that Bela Rani Mukherjee (since deceased) and
the defendant no. 1 expressed their desire to retire from the
partnership business and relinquish their rights in the said firm,
which is utterly contrary to the stand of the defendant no.1 in
her application under Section 9;
i) Paragraph no.5 appearing on the fifth page of the alleged deed
is struck off as it is verbatim of that of the deed of 01.12.2005,
which was the actual admitted partnership deed;
j) In paragraph no.7 on the sixth page of the alleged deed,
"16.04.2007" is struck off and "17.04.2007" is inserted in place
thereof without any justification thereto;
k) The Advocate who has identified the alleged deed, has put
his signature at the bottom of the eighth page and wrote
"16.04.2007" below his enrolment number which has been
mischievously suppressed by the defendant no.1 in the Section
9 proceedings.
Aforesaid are the various instances of forgeries, fabrication and
manipulations amongst others made by the defendants in the
alleged deed dated April 17, 2007.
.......
27) The legality and validity of the agreement is under serious doubts
as no such agreement had ever been executed by the Plaintiff and the
question of the agreement continuing to have a valid subsistence will
be conflicting with justice."
29. The relief pertaining to such allegation is contained in prayer (a) of the
plaint, which seeks a decree declaring the alleged deed of retirement-
cum-admission dated April 17, 2007 to be null and void and for a
direction for the said deed to be delivered up and cancelled. The other
prayers of prohibitive injunction and mandatory injunction and
ancillary reliefs are all consequential to relief (a).
30. A mere glance at the pleadings regarding to the alleged fraud shows
that it is well within the jurisdiction of an Arbitral Tribunal to
adjudicate the same, since no serious question of fraud, requiring
evidence at length to be adduced, has been raised. The premise of the
allegations were based on the ingredients stated in paragraph no.25,
all of which can be resolved on the examination of the impugned deed
itself, in conjunction with other corroborative evidence, if led by the
parties. There is no such issue involved in the suit which cannot be
decided by an Arbitral Tribunal but has to be decided solely by a civil
court, which could have prompted the courts below to refuse reference
of the matter to arbitration.
31. In Vidya Drolia (supra), the latest legal position on the ambit of the
civil court's jurisdiction at the reference stage was laid down.
32. In particular, reference may made in this context to N.N. Global
Mercantile Private Limited vs. Indo Unique Flame Limited and others,
reported at (2021) 4 SCC 379, a three-Judge Bench decision of the
Supreme Court relied on by the petitioner, where it was specifically
laid down that the ground, that allegations of fraud are not arbitrable,
is a wholly archaic view, which has become obsolete and deserves to
be discarded. However, it was held that the criminal aspect of fraud,
forgery or fabrication, which would be visited with penal consequence
and criminal sanction, can be adjudicated only by a court of law,
since it may result in a conviction, which is in the realm of public law.
The Supreme Court further held that all civil or commercial disputes,
either contractual or non-contractual, which can be adjudicated upon
by a civil court, in principle, can be adjudicated and resolved through
arbitration, unless it is excluded, either expressly by statute or by
necessary implication. The civil aspect of fraud, it was held, is to be
arbitrable in contemporary arbitration jurisprudence, with the only
exception being where the allegation is that the arbitration agreement
itself is vitiated by fraud or fraudulent inducement, or the fraud
pertains to the validity of the underlying contract and impeaches the
arbitration clause itself.
33. The definition of "fraud", as given in Section 17 of the Contract Act,
1872 was referred to in such regard.
34. The judgments of this Court cited by the plaintiff were primarily on
the scope of jurisdiction of a civil court. Such judgments have to be
read in the context of N.N. Global (supra), which crystallized the latest
law holding the field of arbitration.
35. In the context of the present case, a plain and meaningful reading of
the entire plaint, in particular, the paragraphs of the plaint referred to
in paragraph no. 28 above, which contain allegations in respect of
forgery/fraud, do not give rise to questions of such serious nature,
which involve a criminal element and consequences thereof.
36. The grounds of fraud and forgery, as alleged in paragraph 25 of the
plaint and its sub-clauses, do not make out any such case which
would prevent the matter from being decided by Arbitral Tribunal.
Mere examination of the documents-in-question, coupled with other
circumstantial evidence, would be sufficient to decide the question,
can very well be done by the Arbitral Tribunal.
37. In fact, the Arbitral Tribunal has ample powers under Sections 26 and
27 of the 1996 Act, respectively to appoint experts and to take the
assistance of court in taking evidence, if necessary. In view of such
wide scope of adjudication and the powers available to an Arbitral
Tribunal, the questions raised in the present suit do not create any
hindrance at all in referring the matter to an Arbitrator.
38. It is well-settled that Section 16 of the 1996 Act, pertaining to the
competence of an Arbitral Tribunal to rule on its own jurisdiction,
sufficiently empowers the Tribunal to rule on any objection even with
regard to the existence or validity of the arbitration agreement. In
view of the blanket powers conferred on the Arbitral Tribunal under
Section 16 of the 1996 Act itself, there arises no question of any
incompetence on the part of the Arbitral Tribunal to decide on the
disputes which have fallen for consideration in the present lis.
39. Moreover, the Trial Court, in the present case, took into consideration
extraneous factors and virtually adjudicated prematurely on whether
the impugned reconstitution deed was acted upon and/or executed at
all, by taking into consideration surrounding circumstances, which
can only be decided at the final trial of the proceeding and not at the
stage of deciding an application under Section 8 of the 1996 Act. The
Trial Court found, prima facie, that the deed dated April 17, 2007,
"may not have been acted upon" or "have not come into existence".
The Court further finds that the existence of the deed is questionable,
on consideration on the insufficient materials placed before the Court,
without indicating any particular portion of the pleadings which
contend such allegations which denuded the Arbitral Tribunal of the
power to decide the dispute, in view of the existence of a specific
arbitration clause in the impugned deed dated April 17, 2007. The
plea of fraud is not a magic wand which can compel a court to reject
an application for reference to arbitration, particularly in the context
of the ratio as laid down in N.N. Global (supra), which also considers
the previous relevant judgments in the field. None of the judgments
cited by the plaintiff/opposite party no.1 militate against the above
view, as finally crystallized in N.N. Global (supra).
40. In such view of the matter, both the courts below acted without
jurisdiction in refusing to refer the matter to arbitration under Section
8 of the 1996 Act. As such, the revisional application succeeds.
41. Accordingly, C.O. No. 128 of 2021 is allowed, thereby setting aside the
judgment and order dated September 25, 2020 passed by the
Additional District Judge, First Court at Suri, District-Birbhum in
Miscellaneous Case No.21 of 2018, affirming Order No.7 dated
September 6, 2018 passed by the Civil Judge (Junior Division), Sadar
Court, Suri in Title Suit No.71 of 2018. Title Suit No. 71 of 218 and
the disputes involved therein are hereby referred to arbitration. The
parties shall be at liberty to approach the Arbitral Tribunal, as and
when appointed, with appropriate pleadings and documents, for the
Arbitral Tribunal to adjudicate the matter on merits, independently
and in accordance with law, without being prejudiced in any manner
by any of the observations made herein.
42. CAN 1 of 2021 is disposed of accordingly.
43. There will be no order as to costs.
44. Urgent certified copies of this order shall be supplied to the parties
applying for the same, upon due compliance of all requisite
formalities.
( Sabyasachi Bhattacharyya, J. )
