Arbitrability of Fraud

It is clear that ‘serious allegations of fraud’ arise only if either of the two tests laid down are satisfied, and not otherwise. The first test is satisfied only when it can be said that the Arbitration Clause or agreement itself cannot be said to exist in a clear case in which the Court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to Arbitration at all. The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a Writ Court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.”

Hon’ble Justice R.F. Nariman, Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited, [Civil Appeal No. 5145 of 2016].

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We have, in Avitel Post Studioz Limited v. HSBC PI Holding (Mauritius) Ltd., Civil Appeal No. 5145 of 2016, laid down the law on invocation of the ‘fraud exception’ in some detail, which reasoning we adopt and follow.”

Hon’ble Justice R.F. Nariman, Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties, [Civil Appeal No. 5147 of 2016].