Forged Arbitration Agreement Dispute: Supreme Court on When Courts Must Refuse Reference to Arbitration

Case Summary

• Case name: Rajia Begum v. Barnali Mukherjee (Civil Appeal Nos. @ SLP (C) No.6013 & @ SLP (C) No.20262 of 2021)

• Date of judgment: 2 February 2026

• Bench: Honourable Justice Pamidighantam Sri Narasimha; Honourable Justice Alok Aradhe

• Advocates: Not specified in the provided summary

• Acts and sections: Arbitration and Conciliation Act, 1996 — Sections 8, 9 and 11; Article 227 of the Constitution of India (High Court supervisory jurisdiction)

• Key cited authorities: A. Ayyasamy v. A. Paramasivam & Others; Rashid Raza v. Sadaf Akhtar; Vidya Drolia & Ors. v. Durga Trading Corporation; N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd.; Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd.; Sushma Shivkumar Daga v. Madhurkumar Bajaj; K. Mangayarkarasi v. N.J. Sundaresan; ITI Ltd. v. Siemens; Nirma Ltd. v. Lurgi Lentjes; Deep Industries Ltd. v. ONGC; Bhaven Construction v. Executive Engineer; Managing Director Bihar State Food and Civil Supply Corporation Ltd. v. Sanjay Kumar

Introduction

This two-judge Bench decision deals with an increasingly recurrent problem in arbitration practice: whether disputes should be referred to arbitration where the very arbitration agreement is alleged to be forged. The dispute arises out of an alleged Admission Deed dated 17 April 2007, the execution of which is stoutly denied by the appellant as fabricated. While one High Court order directed reference to arbitration under Section 8, another proceeding involving identical facts had earlier declined interim protection under Section 9, holding that the existence of the Admission Deed was in serious doubt. The Supreme Court has, after analysing settled precedents, clarified the thresholds for relegating such disputes to arbitration and the limits of supervisory interference under Article 227.

Disputed Admission Deed and evidentiary red flags

At the core is a partnership with RDDHI Gold and an Admission Deed allegedly admitting respondent no.1 as a partner and embedding an arbitration clause. The appellant denies execution of the deed and contends it is a forged document. Relevant facts that troubled the Court included: the absence of any contemporaneous documentary trail referring to the Admission Deed for nearly nine years; admissions by respondent no.1 that her husband continued to act as partner until 2010 (contradicting the recitals of the Admission Deed); and a multiplicity of contemporaneous banker and business documents that continued to treat respondent nos.2 and 3 as partners. These circumstances produced a prima facie finding in earlier Section 9 proceedings that the Admission Deed was doubtful and (following dismissal of a Special Leave Petition) that finding attained finality between the parties.

Doctrinal framework on fraud and arbitrability

Legal principles restated

The Bench reaffirms the well-settled principle that mere allegation of fraud does not per se render an arbitration agreement non-arbitrable. However, where allegations are of such gravity as to impugn the very existence of the arbitration agreement — i.e. when the plea of fraud permeates the contract to its roots — the dispute becomes one of non-arbitrability at least at the interlocutory stage. The Court recalled the two tests distilled in prior authorities: (1) whether the plea of fraud goes to the very existence of the arbitration clause or agreement, and (2) whether the allegations touch matters of public law or state action such that they fall outside the private contractual domain. If the first test is met — that the other party cannot be shown, even prima facie, to have entered into the arbitration agreement — courts will not ordinarily refer the dispute to arbitration.

Practical consequences for Sections 8, 9 and 11

Impact on Sections 8, 9 and 11 practice

Practitioners should take away the following practical points:

• Strength of prima facie material matters. Section 9 proceedings that culminate in a reasoned order doubting the instrument on which arbitration is founded will be a material consideration in later applications under Sections 8 or 11. An interlocutory finding that attains finality cannot be lightly ignored in subsequent proceedings founded on the same issue.

• Documentary proof is critical. The failure to produce an original or certified copy of a vital instrument (as required by Section 8(2)) is perilous where forgery is alleged. Courts accorded weight to the absence of contemporaneous documentation and to the presence of documents that are inconsistent with the purported deed.

• Timing and propriety of Section 11 applications. Where the existence of an arbitration agreement itself is in serious dispute and requires adjudication, appointment of an arbitrator under Section 11 is premature and legally impermissible. Section 11 is not a tool to bypass foundational jurisdictional questions.

• Limits of Article 227. High Courts should not exercise supervisory jurisdiction under Article 227 as an appellate revisiting of evidence. The decision emphasises that Article 227 is not an alternative appellate route to reappreciate factual findings and that dislodging concurrent findings without grave cause is impermissible.

Core judicial observations

Highlighted quotes

• “Arbitration, it bears reiteration, is founded upon consent.”

• “Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes cease to be merely contractual and strike at the very root of arbitral jurisdiction.”

• “The supervisory jurisdiction of the High Court under Article 227 of the Constitution is not an appellate jurisdiction in disguise, and it does not permit reappreciation of evidence.”

Strategic considerations for arbitration counsel

Strategic advice for counsel

For claimants seeking arbitration based on a disputed instrument: gather contemporaneous documentary evidence, produce originals or certified copies, and be prepared to meet a high threshold where forgery is alleged. For respondents who allege forgery: resist Section 8 referrals by stressing the absence of an original/documentary trail and seek final adjudication in court when the fraud allegation is serious. Consider parallel remedies (criminal complaint, forensic examination) to shore up the factual matrix before applying for relief under Section 9 or resisting Section 8/11 referrals. Maintain careful pleading to ensure the issue is framed as a jurisdictional challenge to the very existence of the arbitration agreement.

Precedential synthesis and doctrinal balance

Observations on precedent and doctrinal clarity

This judgment is significant in reaffirming the jurisprudential balance between the pro-arbitration policy of the Act and the need to protect parties from being compelled to arbitrate based on bogus instruments. It navigates authorities such as A. Ayyasamy and Avitel to provide clear guidance on when a court may “sidestep” arbitration. Importantly, the Court emphasises the finality of previous Section 9 findings and their evidentiary weight in later proceedings — a point of consequence for appellate strategy.

Court’s articulation on fraud and non-arbitrability

“The legal position about the impact of fraud on the arbitrability of a dispute under the Act is well delineated by decisions of this Court. A two-Judge Bench of this Court held that mere allegation of fraud simpliciter may not be a ground to nullify the arbitration agreement between the parties, but where the court finds that there are serious allegations of fraud which make a case of criminal offence or where the allegations of fraud are so complicated, which need to be decided based on voluminous evidence, the court can sidetrack the arbitration agreement and proceed with the suit. It has further been held that the court can proceed with the suit in cases where the fraud is alleged against the arbitration provision itself or is of a such a nature which permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself which contains an arbitration clause or the validity of the arbitration clause itself.

The aforesaid principle was referred to with approval, and two working tests were laid down for determining serious allegations of fraud, which would render the subject matter of an agreement non-arbitrable namely, (1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud, touch upon the internal affairs of the parties, inter se not imply the public domain. It was further held that the first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. Thus, in a case where a plea is taken with regard to the non-existence of an arbitration clause or agreement, the same would amount to a serious allegation of fraud and would render the subject matter of an agreement non-arbitrable.

In the backdrop of the aforesaid well-settled legal position, we may advert to the facts of the case in hand. At the heart of the controversy lies the Admission Deed, which is relied upon by respondent no.1 as the source of her induction into the firm and as the foundation of the arbitration agreement. On a prima facie consideration of the material placed on record, we find that there exists substantial and cogent material which casts serious doubt on the genuineness of the Admission Deed. The following circumstances are of particular relevance: ...”

Concluding perspective on arbitral consent and court oversight

The decision is a useful reaffirmation of the doctrine that not all allegations of fraud displace arbitration, but that serious, document-rooted allegations impugning the very existence of an arbitration agreement must be resolved by a court. For practitioners, the judgment underscores meticulous document production, early forensic steps where forgery is suspected, and careful sequencing of applications under Sections 9, 8 and 11. It also warns High Courts against using Article 227 to reappreciate concurrent material without a legitimate basis. The ruling thus advances both doctrinal clarity and practical guidance on the frontier between court jurisdiction and arbitral autonomy.