Section 8 of The Arbitration Act V

Though there are different agreements involving several parties, it is a single commercial project. All the parties can be covered by the Arbitration Clause in the main agreement. High Court, in our view, erred in not keeping in view the various clauses in all the three agreements which make them an integral part of the principal agreement. The Arbitration and Conciliation (Amendment) Act, 2015 has brought in an amendment to Section 8 to make it in line with Section 45 of The Act. The amendments are expressed to apply notwithstanding any prior judicial precedent.

In Ayyasamy, this Court held that mere allegation of fraud is not a ground to nullify the effect of Arbitration Agreement between the parties and Arbitration Clause need not be avoided and parties can be relegated to Arbitration where merely simple allegations of fraud touched upon internal affairs of parties is levelled. Justice A.K. Sikri observed that it is only when Court finds that there are serious allegations of fraud which make a virtual case of criminal offence and where there are complicated allegations of fraud then it becomes necessary that such complex issues can be decided only by Civil Court on the appreciation of evidence that needs to be produced. In this case, there were no serious allegations of fraud. Suffice to say that the allegations cannot be said to be so serious to refuse to refer the parties to Arbitration. In any event, the Arbitrator appointed can very well examine the allegations regarding fraud. High Court was not right in refusing to refer the parties to Arbitration on the ground of the allegations of fraud levelled in the plaint.”

Hon’ble Justice R. Banumathi, Ameet Lalchand Shah v. Rishabh Enterprises, [Civil Appeal No. 4690 of 2018].