LexA. AYYASAMY versus A. PARAMASIVAM & ORS.
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(2016] 11 S.C.R. 521 A. AYYASAMY v. A. PARAMASIVAM & ORS. (Civil Appeal Nos. 8245-8246 of 2016) OCTOBER 04, 2016 (A.K. SIKRI AND DR. D.Y. CHANDRACHUD, JJ.] Arbitration and Conciliation Act, 1996: s. 8 - Application under - Qziestioning the maintainability of the suit on the ground that the parties had agreed to settle the dispute through arbitration - Application dismissed holding that suit was maintainable as the case involved serious allegations as to fraud and malpractices - The order affirmed by High Court - On appeal, held: The cases where there are serious allegations of fraud that in normal course constitute criminal offence, and are complex in nature demanding extensive evidence, are to be treated as non-arbitrable and civil court should decide the matter - However, mere allegation of fraud simplicitor may not nullify the effect of arbitration agreement - Jn the present case, the allegations of fraud were not so serious which could not be decided by the arbitrator - Application u/s. 8 was wrongly rejected. Words and Phrases: "Fraud" - Meaning of Allowing the appeals, the Court HELD: Per A.K. Sikri, J. 1. The Arbitration and Conciliation Act, 1996 does not make any provision excluding any category of disputes treating them as non-arbitrable. Notwithstanding the above, the Courts have held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. The Courts have held that certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, cannot be referred to arbitration. 521 A B c D E F G H 522 SUPREME COURT REPORTS [2016111 S.C.R. A Patent, trademarks and copyright; anti-trust/competition laws; insolvency/winding up; bribery/corruption; fraud; criminal matters are the categories of disputes which are generally treated as non-arbitrable. Thus, fraud is one such category spelled out by the decisions of this Court where disputes would be considered B c D E F G H as non-arbitrable. [Para 9) (535-B-E) 2. 'Fraud' is a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment. Fraud can be of different forms and hues. Its ingredients are an intention to deceive, use of unfair means, deliberate concealment of material facts, or abuse of position of confidence. [Para 10) [535-F] The _Black's Law Dictionary - referred to. 3. However, mere allegation of fraud in the pleadings by one party against the other, cannot be a ground to hold that the matter is incapable of settlement by arbitration and should be decided by the civil court. The allegations of fraud should be such that not only these allegations are serious that in normal course these may even constitute criminal offence, they are also complex in nature and the decision on these issues demand extensive evidence for which civil court should appear to be more appropriate forum than the Arbitral Tribunal. Otherwise, it may become a convenient mode of avoiding the process of arbitration by simply using the devi':!e of making allegations of fraud and pleading that issue of fraud needs to be decided by the civil court. The Law Commission has recognized that in cases of serious fraud, courts have entertained civil suits. It has tried to make a distinction in cases where there are allegations of serious fraud and fraud simplicitor. [Paras 13 and 18) [536-F-G; 537-A; 541-A] Boaz Allen & Hamilton Inc. v. SB! Home Finance Limited and others 2011 (7) SCR 310 : (2011) 5 SCC 532; State of West Bengal & Ors. v. Associated Contractors 2014 (10) SCR 426 : (2015) 1 SCC 32 - relied on. N. Radhakrishnan v. Maestro Engineers and Others 2009 (15) SCR 371 : (2010) 1 SCC 72; Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak AIR 1962 SC 406 : 1962 Suppl. SCR 702 - distinguished. A. AYYASAMY v. A. PARAMASIVAM & ORS. Ramesh Kumar & Am: v. Furu Ram & Anr. (2011) 8 SCC 613 : 2011 (10) SCR 453; P. Anand Gajapathi Raju v. P. V.G Raju 2000 (2) SCR 684 : (2000) 4 SCC 539; Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums (2003) 6 SCC 503 - referred to. Russell v. Russell (1880) 14 Ch D 471 - referred to. 4. Thus, mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Sect
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