Reference by the Civil Court to Arbitration – Allegations of fraud & false documents

The suit for rendition of accounts and determination of the share of late Narayan Tiwari was filed by the plaintiffs who are legal heirs of deceased partner.  The Partnership Deed contains a clear and explicit arbitration agreement.

Defendant No.2 filed an application under Section 8 of the Arbitration Act to refer the parties to arbitration.

The Civil Court rejected the said application on the grounds that the Arbitrator would not be able to decide the issues in respect of allegations of fraud and preparation of false documents raised by the plaintiffs.

Section 37 appeal was rejected by the District Judge on different ground that Defendant No.2 was not admitting the existence or enforcement of the partnership deed containing an arbitration clause.

HELD that in view of section 40, the decision of the Arbitrator would bind not only the partners but also their legal heirs.  The civil aspect of fraud may be a subject matter of arbitration but criminal aspect can only be adjudicated by a court of law.   The allegations are in relation to the Reconstitution Deed of the Firm and not the Partnership Deed containing arbitration clause.

 Judgment dated 17.4.2025 of the High Court of Bombay in Writ Petition No.17174 of 2024 (AS) of Bhoalshankar Ramsuresh Dubey   Vs.   Dinesh Narayan Tiwari and others