Delhi High Court Navigates Arbitration in the Face of Fraud Allegations
Case Title: M/S. JRA INFRATECH v. ENGINEERING PROJECTS(INDIA) LIMITED
Date of Decision: September 11, 2023
Case Number: ARB.P. 800/2022
Coram: Hon’ble Ms. Justice Rekha Palli
Factual Background
The petitioner, M/S. JRA INFRATECH, filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to adjudicate disputes arising from an Agreement dated December 14, 2021, between the parties. The petitioner referred to Clause 76 of the General Conditions of Contract (GCC), as modified by Clause 19 of the Additional Contract dated December 14, 2021, which required the disputes to be referred to a sole arbitrator mutually appointed by the parties. However, the respondent, ENGINEERING PROJECTS(INDIA) LIMITED, unilaterally appointed an arbitrator, leading the petitioner to approach the court.
The respondent alleged that the Agreement was based on a forged experience certificate provided by the petitioner. It filed a criminal complaint against the petitioner, contending that this forgery rendered the Agreement void.
Issue
The petitioner seeks the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, to resolve disputes arising from an Agreement dated 14.12.2021.
Contentions
- Petitioner: Asserted that the disputes should be referred to arbitration as per the Agreement’s arbitration clause. It was argued that the criminal complaint by the respondent was an afterthought, and that the respondent’s appointment of an arbitrator validated the arbitration process. It also cited the decision in Amrish Gupta v. Gurchait Singh Chima, 2022 SCC OnLine Del 1116, which emphasized that disputes of a purely private nature should not be considered non-arbitrable.
- Respondent: Claimed that the Agreement was vitiated by fraud due to the petitioner’s submission of a fake experience certificate. Argued that the disputes were non-arbitrable due to the criminal complaint.
Observation and Analysis
The court examined the arbitration clause in the Agreement, which mandated arbitration for disputes. It noted that the respondent had appointed an arbitrator earlier, and the appointment letter acknowledged that the disputes arose from the Agreement.
The court found that the respondent’s argument that the Agreement was void due to fraud was insufficient to deny arbitration. The court cited court decisions in Rashid Raza v. Sadaf Akhtar (2019) 8 SCC 710 and Avantha Holding Ltd. v. CG Power and Industrial Solutions Ltd, 2021 SCC OnLine Del 5202 to support the view that allegations of fraud should not prevent arbitration unless the court determines the arbitration agreement to be void. It relied on the Supreme Court’s decision in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379 : (2021) 2 SCC (Civ) 555. and held that unless the court definitively finds the arbitration agreement void, disputes should be referred to arbitration.
Decision and Conclusion
The court allowed the petition, appointing Justice M. M. Kumar as the arbitrator. It ruled that the disputes should be arbitrated, leaving the determination of arbitrability to the arbitrator. The court clarified that it had not decided the merits of the claims and counterclaims, allowing the parties to present them before the arbitrator.
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Written by – Ananya Chaudhary
