Fraud allegation cannot nullify arbitration agreement

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In a recent judgment, the Supreme Court held that the mere allegation of simple or plain fraud may not be a ground to nullify the effect of an arbitration agreement between the parties.

In the Rashid Raza v Sadaf Akhtar case, the court was hearing an appeal filed against the judgment passed by the Jharkhand High Court, which had refused a plea seeking appointment of an arbitrator by one partner, taking note that a first information report (FIR) lodged by some other partners alleging siphoning of funds and various other business improprieties, is presently under investigation. The high court had cited judgment in A Ayyasamy v A Paramasivam and Others (2016) to rule that disputes involving serious allegations of fraud of a complicated nature are not fit to be decided in arbitration proceedings.

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The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in. Readers should not act on the basis of this information without seeking professional legal advice.

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