Arbitration Survives FIR & Criminal Complaint – Bombay HC Reinforces Limited Judicial Interference.
Mere allegations of fraud or criminality do not automatically render a dispute non-arbitrable.
Dispute arising out of the mortgage deed dated 28.12.2020 for appointment of arbitrator.
Respondent – borrower had secured loan of Rs.3 crores under the mortgage deed dated 28.12.2020 from the applicant – NBFC. Clause 21 provided for the arbitration clause. Another loan of Rs.44,62,570/- was sanctioned vide letter dated 16.2.2022. Another mortgage deed was executed on 16.2.202 for the top up loan.
By section 21 notice dated 7.1.2023, the applicant invoked the arbitration. This was opposed on the ground that the said deed was fraudulent and FIR was also filed. Moreover, there are proceedings under SARFAESI Act are pending before the DRT. Therefore, the disputes are not arbitrable.
HELD that the SARFAESI proceedings are in the nature of enforcement proceedings, whereas, an arbitration is in the context of adjudicatory proceedings. The proceedings of SARFAESI and arbitral can go hand in hand.
The issues of criminality and fraud in the context of challenge to the arbitration agreement was considered and held that “There is an arbitration agreement. The matter must end there”.
Judgment dated 1.10.2025 of the High Court of Bombay in Arbitration Application (L) No.29984 of 2023 of Mangal Credit and FinCorp Limited Vs. Ulka Chandrashekhar Nair
