I. FRAUD’ AS A SUBJECT MATTER WILL NOT BE ARBITRABLE.

A. The dispute is arising out of a fraudulent activity

It is humbly submitted that the parties entered into a contract for a tender for the dealership of a
petrol pump. As per the report of the investigating officers, the claimants were using the chip and
have 'misrepresented' and 'forged' the data relating to operation of the pump for making the surplus
profit. Forgery and misrepresentation are in a way forms of fraud. Fraud is an umbrella term and
forgery, misrepresentation, deceit, etc come under it.

In the case of M.Narsimsinga Rao v State of A.P1, forgery is creating a false copy in an effort to
defraud someone or something. The crime of forgery is defrauding someone through the act of
altering or falsifying a written document. Forgery is very similar to the crime of fraud as both acts
are deceptive in nature. Fraud typically involves forged items to complete the criminal act. Also, in
the case of N. Radhakrishnan v. Maestro Engineers, The fraud is a knowing misrepresentation of
the truth or concealment of a material fact to induce another to act to his detriment. The Black law
Dictionary defines "fraud" as a concealment or false representation through a statement or conduct
that injures another who relies on it.2

B. Serious allegations of Fraud is not a subject-matter for arbitration

It is humbly submitted before this Hon'ble Court that fraud and other malpractices which require
investigation and supporting evidence requires a proper trial in an appropriate Court of Law. 3 The
SC in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak4, held that in the interest of
justice, matters pertaining to serious fraudulent activities should be tried in a court of law which
would be more competent and have the means to decide such a complicated issue of facts. In Booz-
Allen and Hamilton Inc. v. SBI Home Finance Ltd5 and Vimal Kishore Shah v. Jayesh Dinesh Shah6,
the Supreme Court set down certain non arbitrable disputes involving rights and liabilities arising
out of civil and criminal offences.

It is submitted that the Supreme Court has previously, in Sukanya Holdings v. Jayesh Pandya7,
stated that where both arbitrable and non-arbitrable claims were raised, bifurcation of the subject
matter would not be possible. It would, therefore, seem a matter of concern for arbitration in India if
claims relating to fraud are raised in order to vitiate arbitral proceedings, as on account of a claim of

1 M.Narsimsinga Rao v State of A.P., (2001) 1 SCC 691: 2001 SCC (Cr.)
2 N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72.
3 N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72.
4 AIR 1962 SC 406
5 (2011) 5 SCC 532
6 Civil Appeal No. 8164 of 2016
7 Appeal (civil) 1174 of 2002.
fraud being raised, all the other substantive issues may also be relegated for adjudication to the civil
court. Also, in the case of A. Ayyasamy v. A. Paramsivam & Ors. 8,it was held that mere allegation
of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the
parties but in cases where the court, while dealing with section 8 9 of the Act, finds that there are
very serious allegation of fraud which make a virtual case of criminal offence or where allegations
of fraud are so complicated that it becomes absolutely essential that such complex issues can be
decided only by civil court on the appreciation of the voluminous evidence that needs to be
considered. In the present case, the allegations of forgery and misrepresentation against the
Petitioners are not fraud simplicitor or mere suspicion of fraud. The defendants have put forth such
allegations that can harm the goodwill and reputation of the Petitioner company and lead to
unprecedented economic loss of the Petitioners.

It is humbly submitted before this Hon'ble Court that as per S.5 of the Arbitration and Conciliation
Act, 1996, the judiciary has no power to interfere in matters of arbitration 'except as provided in this
Part'. It is to be noted that the Act does not specify any particular matters to be excluded from the
scope of arbitration. However, statutes are not restrictive and the judiciary can always interpret the
statue on case to case basis. As the SC has interpreted in A. Ayyasamy v. A. Paramsivam & Ors10,
serious offences like fraud and malpractices cannot be arbitrated. It is humbly submitted that the
Act does not provide any expressed provision stating the arbitrability and non-arbitrability of
subject-matters. However, it is the role of the judiciary to interpret the laws and apply it on a case to
case basis. As the Indian Arbitration and Conciliation Act, 1996, omits to define the contours of
arbitrability, this mantle of responsibility has fallen to the decisions of various courts. 11 Hence, the
issue at hand is not a subject-matter of arbitration.

8 Civil Appeal Nos. 8245- 8246 of 2016.

9 Section 8
10 Civil Appeal Nos. 8245-8246 Of 2016.
11 A. Ayyasamy v. A. Paramsivam & Ors., Civil Appeal Nos. 8245-8246 Of 2016.