Arbitrability of Fraud and Forgery in India

Several months ago, I appeared as counsel in an arbitration that, to be candid, felt more like a civil trial. The dispute centred on allegedly forged signatures in a set of commercial contracts. Multiple handwriting experts were summoned, each presenting a report that contradicted the others. The cross-examinations were exhaustive. The evidence was sprawling. The tribunal, though diligent, was visibly fatigued. Midway through, a question emerged, not new but deeply unsettling: can arbitration truly hold the line when the dispute is laden with allegations of fraud and forgery? That question isn’t just personal; it echoes through decades of Indian jurisprudence.

Historically, Indian courts viewed fraud and forgery as antithetical to arbitration. As early as Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, the Supreme Court insisted fraud required full-scale judicial scrutiny—documents, discovery, testimony—beyond a tribunal’s reach. This caution persisted, though flickers of openness emerged. In P Anand Gajapathi Raju v. PVG Raju, the Court referred a dispute to arbitration despite procedural objections, hinting at a more permissive approach. Such cases were rare.

Two concerns dominated: arbitrators lacked the procedural heft to untangle complex evidence, and such disputes often implicated public interest—ill-suited to a private forum. This caution crystallised in N Radhakrishnan v. Maestro Engineers, where the Supreme Court held that serious fraud belonged in court, not before a tribunal. The ruling became a strategic tool: allege fraud, derail arbitration. The judicial tide began to turn with the 2015 Arbitration and Conciliation (Amendment) Act, which curbed judicial overreach. Sundaram Finance Ltd. v. T. Thankam signaled this shift, prioritizing arbitration unless fraud clearly voided the agreement. Ayyasamy v. A Paramasivam, introduced a doctrinal filter—distinguishing mere allegations from fraud so serious that it infects the entire contract and arbitration clause.

Rashid Raza v. Sadaf Akhtar, refined the approach, introducing a twin test: (1) does the fraud undermine the arbitration agreement itself? and (2) does it involve matters in the public domain? If not, arbitration should proceed. Then came Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd., which overruled Radhakrishnan and firmly established a presumption in favour of arbitrability. Unless the clause itself is impeached, or the fraud implicates public interest, tribunals retain jurisdiction. Vidya Drolia v. Durga Trading Corporation, confirmed that disputes are arbitrable unless excluded by statute, third-party rights, or state functions. But clarity remained short-lived. In NN Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., a 3:2 majority of the Supreme Court held that an unstamped contract is void—invalidating its arbitration clause. This marked a rollback of the separability doctrine and the kompetenz-kompetenz principle. If stamping defects could undo a clause, what about forged documents?

High Courts have refined this framework, stress-testing its resilience in fraud disputes. In M Vijaya v. Dinesh Kumar [(2021) SCC OnLine Mad 881], the Madras High Court upheld arbitration in a property dispute despite forgery claims, finding the clause intact under Vidya Drolia’s presumption. In BSI-JDN Joint Venture v. JNPT, the Bombay High Court greenlit arbitration despite a CBI probe, deeming the payment dispute civil and outside Avitel’s public domain threshold, showcasing deference to tribunals.

Simran Sodhi v. Sandeep Singh struck a balance: the Delhi High Court sent contractual claims to arbitration but retained a forged rental deed for criminal scrutiny, reflecting Ayyasamy’s civil-criminal divide. Similarly, Seema Gupta v. Sunny Talwani referred most property fraud claims to arbitration, reserving public-record forgery, affirming Vidya Drolia’s view that complexity alone doesn’t bar arbitrability.

The Gujarat High Court reinforced this trend. Sai Polyplast Pvt. Ltd. v. Vikas Raj Chhajer rejected a misrepresentation defense under Section 8, holding that internal fraud doesn’t void the clause per Avitel. Shailesh Anilkumar Amin v. Gujarat Metro Rail Corporation ruled that a state entity’s presence doesn’t trigger Rashid Raza’s public interest test unless state functions are directly affected.

Bentwood Seating System Pvt. Ltd. v. Airport Authority of India broke this pattern. Blacklisted for forging certificates, Bentwood’s arbitration bid failed when the Delhi High Court, under Section 34, vacated an award ignoring the fraud. A second tribunal declined jurisdiction, upheld under Section 37, as forgery permeated the contract, AAI’s public role engaged public interest, and cross-border evidence (UK, Vietnam, China) proved unreachable. While rooted in Avitel and Vidya Drolia, Bentwood echoes Radhakrishnan’s practical caution, exposing arbitration’s fragility when fraud is foundational and global.

These rulings, mirroring my own arbitration’s strain, show courts being increasingly resilient to tactical fraud claims—yet Bentwood questions whether arbitration can bear the weight of complex, public fraud.

From years of practice, where forged signatures tested my own resolve, ten principles emerge - simple rules to guide anyone navigating fraud disputes in arbitration. Forged from hard-won experience, they clarify when private tribunals can tackle fraud’s weight.

1. Presumption of Arbitrability: Private disputes between parties are suitable for arbitration unless a law or public concern forbids it. The burden falls on those opposing arbitration to prove otherwise.

2. Substance Over Allegation: Fraud claims must be backed by evidence, like fake documents or forced agreements. Empty accusations don’t stop arbitration.

3. Twin Tests: Arbitration fails if fraud undermines the agreement to arbitrate or involves public issues, such as state entities or widespread impact.

4. Separability: Fraud in the main contract doesn’t affect the arbitration clause unless the clause itself is fraudulent. The clause stands alone.

5. Kompetenz-Kompetenz: Arbitrators decide their own authority to hear a case. Courts only check for clear flaws at the outset.

6. Serious Fraud: Only fraud that destroys the agreement’s foundation—not just complexity—prevents arbitration. Minor deceit doesn’t block it.

7. Evidentiary Reach: Arbitrators can handle complex evidence unless it’s out of reach, like documents held abroad or in public records.

8. Parallel Proceedings: Arbitration for contract disputes can run alongside criminal fraud cases. The two don’t conflict.

9. Timing: Fraud claims raised early face light review. Claims raised late need strong proof to challenge arbitration.

10. Section 34 Review: Courts fix arbitration errors if the tribunal oversteps its role. They don’t retry the evidence.

These principles empower arbitration to resolve fraud disputes, yet their strength depends on a system equipped to deliver justice.

The law trusts arbitration with fraud, but can the system deliver? Arbitration’s strengths - confidentiality, speed, flexibility shine in disputes where tribunals dissect fund trails or resolve private misrepresentation. I’ve seen tribunals handle forged invoices and coerced deals with precision that courts often lack amid backlog.

Yet, arbitration has blind spots. No subpoenas, no police coordination, no treaty-based evidence access. Court aid for evidence is slow and local. In my own case, foreign evidence slipped away; we managed, but it was grueling. Global systems, backed by robust rules, outpace India’s infrastructure.

To equip arbitration for fraud, India must reinforce its procedural backbone, as my own case taught me:

1. Expand Evidence Access: Allow tribunals to request overseas evidence through international agreements, with swift court support.

2. Adopt Global Rules: Incorporate emergency arbitrator (expected soon!) and multi-party dispute rules into Indian arbitration bodies.

3. Specialist Courts: Create dedicated judges to assist arbitration without interference, as recommended in 2014.

4. Clear Laws: Define private fraud as arbitrable, public fraud for courts.

5. Train Arbitrators: Teach skills in digital forensics, bank audits, and global evidence handling.

India’s legal position on arbitrability of fraud has come a long way. The shift from rigid exclusion to presumptive inclusion is doctrinally sound. Courts are more confident in sending fraud disputes to arbitration—if the agreement survives and public interest isn’t triggered. But law is only part of the answer. The process must keep pace. Arbitrators still lack access to tools like subpoenas or treaty-based cooperation. Foreign evidence slips through. Procedural support remains thin. Some of this may change. Proposed amendments to arbitration law promise clearer guidance and stronger enforcement mechanisms. That’s encouraging. But it won’t be enough without infrastructure, training, and judicial coordination. For arbitration to truly hold the line on fraud, India must match legal clarity with institutional readiness. Only then can tribunals bear the full weight of truth-finding—even when fraud and forgery stand at the centre of the dispute.

About the author: Rishabh Gandhi is an Arbitration lawyer and former trial court Judge. Gandhi is also the founder of Rishabh Gandhi and Advocates.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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