Arbitrability – Contract procured by fabricated documents
Tender contract procured by forged and fabricated documents – Termination – Arbitrability – Sections 37(2)(a) of the Arbitration Act.
On 30.6.2017, the Respondents issued Letter of Intent to the Appellant for supply of 4000 passengers baggage trolleys and placed purchase order dated 13.7.2017. The said order contained an arbitration clause.
On 31.10.2017, a complaint was received from one M/s. GILCO Exports India Ltd that the appellant had procured tender by producing forged and fabricated documents.
On 20.2.2018, the blacklisting order was passed, and the contract was terminated.
The appellant invoked arbitration. The allegations of fraud were pointed out before the Arbitrator appointed by the Delhi International Arbitration Centre. However, by the Award dated 13.3.2019, the Arbitrator set-aside the termination order.
The respondents filed section 34 petition. In the meanwhile, criminal complaint dated 26.10.2021 was filed with the police.
Section 34 Court had set-aside the Award on the ground that the fraud ought to have been adjudicated by the Arbitrator. This was confirmed upto the Supreme Court.
In the fresh proceedings started on 28.3.2023, one of the issues framed was whether the disputes are non-arbitrable.
Two other issues were – the plea of non-arbitrability of disputes cannot be decided without recording evidence and whether the res judicata applies in view of the earlier orders of the High Court and the Supreme Court.
The Arbitrator held that the dispute of fraud is not arbitrable and therefore falls within the realm of section 16 of the Arbitration Act, 1996.
HELD that the cases where serious fraud is involved, they are to be treated as non-arbitrable and it is only the Civil Court which has to decide such matters. The conclusion of the Arbitrator that a Court is better equipped to adjudicate these issues does not call for any interference. The issues that arise are complicated and complex in nature involving production of witnesses outside the country and also documents from outside the country, particularly when Heathrow Airport UK and Noi-Bai International Airport, Vietnam have stated that the SJM did not participate in any supply of trolleys. Therefore, the finding of the Arbitrator that the issue is not an internal matter of the Appellant and the Respondents is, therefore, correct.
The present case is not ground of fraud simpliciter. The facts of the case are extremely serious and they do make out a case for criminal offence. The plea of fraud is of such a nature that it goes to the validity of the entire contract including the arbitration clause.
Judgment dated 11.3.2025 of the High Court of Delhi in ARB.A. (COMM) No.55/2023 of Bentwood Seating System (P) Ltd Vs. Airport Authority of India and another
