There are delay masters who invent excuses to delay or avoid the arbitration. For them "Allegation Fraud" is one of such excuse. Arbitration proceedings in India are plagued with delays, interventionist courts, and parties attempting to scuttle the proceedings. Several instances are there where arbitration proceeding were stalled on the ground that the criminality underlying the fraud will render the dispute non-arbitrable. However recent developments in Indian Arbitration have changed this situation. Now arbitral disputes having 'fraud' as an key issue also can be arbitrable.
'Fraud' is the word used and misused frequently in litigation. In many case the allegations of fraud itself is a fraudulent operative. When commercial relations go sour leading to disputes, parties routinely make allegations of fraud. Many counsels are playing with the 'fraud' to divert, dilute, delay and done away the arbitration process. Earlier Supreme Court’s decision in N. Radha krishnan v. Maestro Engineering, was become handy to avoid arbitration stating that disputes involving allegations of fraud are incapable of being adjudicated by an arbitral tribunal.
However, Swiss Timing v. Organising Committe, changed the pattern. Allegation fraud has not been considered as an obstruction for arbitration. These contradictory decisions left the issue open and continued the uncertainty around the viability of domestic arbitrations as an effective dispute resolution mechanism.
Off late the Supreme Court has cleared the air in the A. Ayyasami v. A. Paramasivam case. It is held that a mere allegation of fraud will not render disputes non-arbitrable.
Ayyasami Story:
The Respondents had entered into a partnership deed with the Appellant for running the hotel and filed for an injunction before a civil court for preventing the Appellant from managing the affairs of the hotel. A dispute arose on account of allegations of fraud and embezzlement of monies against the Appellant in managing a hotel. The Appellant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the dispute to arbitration given the arbitration agreement between the parties.
The Respondents raised fraud as a ground to argue that the civil court was an appropriate forum to adjudicate this matter. The lower court followed Radhakrishnan judgment and dismissed the plea for referral of the dispute to an arbitral tribunal. This was upheld by the Madras High Court. In appeal, the Supreme Court considered the issue whether mere allegations of fraud render disputes non-arbitrable.
The Supreme Court acknowledged that the previous decisions had identified fraud as one of the categories for considering disputes non-arbitrable. The apex court has distinguished between mere allegations of fraud and serious cases of fraud. It is held that disputes involving mere allegations of fraud are arbitrable, except when such allegations are of a serious, complex nature, which would warrant examination of extensive and voluminous evidence. The court has put aside those people who are taking fraud as a convenient mod to avoid arbitration.
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Supreme court has given more importance to the commercial interests and party autonomy in choosing arbitration as the preferred mode of dispute resolution. It is in the usual direction of the apex court that arbitration shall be strengthened. instead of avoiding the arbitration, it is encouraging the parties to commit for arbitration.
Ayyasamy has also aligned the law relating to the issue of mere allegations of fraud in domestic arbitrations and off-shore arbitrations. The Supreme Court has ruled that outside arbitrations cannot be refused on the ground that issues of fraud are involved. Hereinafter mere allegations of fraud will not be a ground to get out of arbitration proceedings, either in domestic or international arbitrations.
though the present regime is arbitration friendly, India ranks 178 out of 189 economies on the ease of enforcing contracts. Recently the Government of India in its efforts to promote arbitration constituted a High Level Committee (HLC) chaired by Mr. Justice B. N. Srikrishna, Retired Judge, Supreme Court. This HLC has been constituted to examine specific issues and the roadmap required to make India a robust centre for international and domestic arbitration.
There are many issues still need to be set right with respect to implementation of Arbitration. Many government agencies are still avoiding arbitration. Lack of experts in conducting arbitration is also a daunting task.
'Fraud' is the word used and misused frequently in litigation. In many case the allegations of fraud itself is a fraudulent operative. When commercial relations go sour leading to disputes, parties routinely make allegations of fraud. Many counsels are playing with the 'fraud' to divert, dilute, delay and done away the arbitration process. Earlier Supreme Court’s decision in N. Radha krishnan v. Maestro Engineering, was become handy to avoid arbitration stating that disputes involving allegations of fraud are incapable of being adjudicated by an arbitral tribunal.
However, Swiss Timing v. Organising Committe, changed the pattern. Allegation fraud has not been considered as an obstruction for arbitration. These contradictory decisions left the issue open and continued the uncertainty around the viability of domestic arbitrations as an effective dispute resolution mechanism.
Off late the Supreme Court has cleared the air in the A. Ayyasami v. A. Paramasivam case. It is held that a mere allegation of fraud will not render disputes non-arbitrable.
Ayyasami Story:
The Respondents had entered into a partnership deed with the Appellant for running the hotel and filed for an injunction before a civil court for preventing the Appellant from managing the affairs of the hotel. A dispute arose on account of allegations of fraud and embezzlement of monies against the Appellant in managing a hotel. The Appellant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the dispute to arbitration given the arbitration agreement between the parties.
The Respondents raised fraud as a ground to argue that the civil court was an appropriate forum to adjudicate this matter. The lower court followed Radhakrishnan judgment and dismissed the plea for referral of the dispute to an arbitral tribunal. This was upheld by the Madras High Court. In appeal, the Supreme Court considered the issue whether mere allegations of fraud render disputes non-arbitrable.
The Supreme Court acknowledged that the previous decisions had identified fraud as one of the categories for considering disputes non-arbitrable. The apex court has distinguished between mere allegations of fraud and serious cases of fraud. It is held that disputes involving mere allegations of fraud are arbitrable, except when such allegations are of a serious, complex nature, which would warrant examination of extensive and voluminous evidence. The court has put aside those people who are taking fraud as a convenient mod to avoid arbitration.
.
Supreme court has given more importance to the commercial interests and party autonomy in choosing arbitration as the preferred mode of dispute resolution. It is in the usual direction of the apex court that arbitration shall be strengthened. instead of avoiding the arbitration, it is encouraging the parties to commit for arbitration.
Ayyasamy has also aligned the law relating to the issue of mere allegations of fraud in domestic arbitrations and off-shore arbitrations. The Supreme Court has ruled that outside arbitrations cannot be refused on the ground that issues of fraud are involved. Hereinafter mere allegations of fraud will not be a ground to get out of arbitration proceedings, either in domestic or international arbitrations.
though the present regime is arbitration friendly, India ranks 178 out of 189 economies on the ease of enforcing contracts. Recently the Government of India in its efforts to promote arbitration constituted a High Level Committee (HLC) chaired by Mr. Justice B. N. Srikrishna, Retired Judge, Supreme Court. This HLC has been constituted to examine specific issues and the roadmap required to make India a robust centre for international and domestic arbitration.
There are many issues still need to be set right with respect to implementation of Arbitration. Many government agencies are still avoiding arbitration. Lack of experts in conducting arbitration is also a daunting task.