RASHID RAZA versus SADAF AKHTAR

Citation: [2019] 12 S.C.R. 460 · Decided: 04-09-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 12 S.C.R.
RASHID RAZA
v.
SADAF AKHTAR
(Civil Appeal No. 7005 of 2019)
SEPTEMBER 04, 2019
[R. F. NARIMAN, R.SUBHASH REDDY AND
SURYA KANT, JJ.]
Arbitration and Conciliation Act, 1996: s. 11 – Appointment
of arbitrator – Partnership deed between the parties – Partnership
dispute – FIR by one of the partners alleging siphoning of funds
and various business improprieties – Application u/s. 11 for
appointment of arbitrator under the arbitration clause – Dismissal
of the application – On appeal, held: There is distinction between
serious allegations of forgery/fabrication in support of the plea of
fraud as opposed to “simple allegations” – Two working tests are
whether the plea permeate the entire contract and above all, the
agreement of arbitration, rendering it void, or whether the
allegations of fraud touch upon the internal affairs of the parties
inter se having no implication in the public domain – In view thereof,
in the instant case there are simple allegations since there is no
allegation of fraud which would vitiate the partnership deed as a
whole or, in particular, the arbitration clause concerned in the said
deed – All the allegations pertain to the affairs of the partnership
and siphoning of funds therefrom and not to any matter in the public
domain – Thus, the disputes raised between the parties are arbitrable
and, hence, s. 11 application is maintainable.
A. Ayyasamy v. A. Paramasivam and Others (2016) 10
SCC 386 : [2016] 11 SCR 521 – relied on.
Case Law Reference
[2016] 11 SCR 521
relied on
Para 5, 6
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7005
of 2019.
From the Judgment and Order dated 06.12.2018 of the High Court
of Jharkhand at Ranchi in Arbitration Application No. 1 of 2018.
   [2019] 12 S.C.R. 460
460
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Shivam Singh, Animesh Kumar, Neeraj Shekhar, Shadab Eqbal,
Sumit Kumar, Ms. Ekta Bharati, Murari Kumar, Advs. for the Appellant.
Shree Prakash Sinha, Rishi Pallav, Rakesh Mishra, Ms. Marina
Wheeler, Ms. Mohua Sinha, Shekhar Kumar, Advs. for the Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. The present case arises out of a partnership dispute in which
an FIR dated 17.11.2017 was lodged by one of the partners alleging
siphoning of funds and various other business improprieties that were
committed.  The FIR is at present under investigation.
2. An Arbitration Petition dated 02.01.2018 was filed by the
appellant before the High Court under Section 11 of the Arbitration and
Conciliation Act, 1996, seeking appointment of an Arbitrator under the
Arbitration clause which is to be found in the partnership deed between
the parties which is dated 30.01.2015.  The High Court, by the impugned
order dated 06.12.2018, has cited our judgment in ‘A. Ayyasamy v. A.
Paramasivam and Others’ [(2016) 10 SCC 386] and after extracting
paragraph 26 from the said judgment has held:
“…….The allegation of fraud that was levelled against the
appellant was that he had signed and issued a cheque of
Rs.10,00,050 on 17th June, 2010 of Hotel Arunagiri in favour of
his son without the knowledge and consent of the other partners
i.e. respondents.  It was a mere matter of account which could be
looked into and found out even by the arbitrator.  The facts of the
instant case however are much more complex as the materials on
records disclose.  This Court however does not intend to make
any comments on the merits of the allegations lest it may prejudice
the case of the parties in an appropriate proceeding before
competent court.  However, considered in totality this Court is of
the firm view that the nature of the dispute involving serious
allegations of fraud of complicated nature are not fit to be decided
in an arbitration proceedings.  The dispute may require voluminous
evidence on the part of both the parties to come to a finding which
can be only properly undertaken by a civil court of competent
jurisdiction.”
RASHID RAZA v. SADAF AKHTAR
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SUPREME COURT REPORTS
[2019] 12 S.C.R.
3. Consequently, while purportedly following this judgment, the
Section 11 application was dismissed.
4. Having heard learned counsel for both the sides, it is clear that
the law laid down in A. Ayyasamy’s case is in paragraph 25 and not in
paragraph 26.  Paragraph 25 of the said judgment states as follows:
25. In view of our aforesaid discussions, we are of the opinion
that mere allegation of fraud simplicitor may not be a ground to
nullify the

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