The Supreme Court heard the appeal which arose from a partnership dispute concerning the firm "M/s RDDHI Gold," originally constituted in 2005, and clarified that there lies an exception in arbitration in the even of a "serious fraud". The respondent no.1, Rajia Begum, claimed that she was inducted into the firm via a "Deed of Admission and Retirement" in the year 2007, and retires other partners. The appellant, Barnali Mukherjee, who is also a partner, vehemently denied the execution of this deed, and cliam it to be forged and fabricated document.

The legal process initiated by both the parties resulted in conflicting outcomes in the High Court; as one order referred the parties to arbitration under Section 8, while another refused to appoint an arbitrator under Section 11, citing the doubtful existence of the agreement.

The Supreme Court was tasked with determining whether a dispute can be referred to arbitration when the very existence of the arbitration clause is hit by serious allegations of forgery.

The Supreme Court set aside the High Court's order referring the matter to arbitration, affirming that the judiciary must act as a gatekeeper when the foundation of arbitral jurisdiction—consent—is under attack.

Holding the Non-Arbitrability in Serious Frauds, the Apex Court restated the established legal position that while mere allegations of fraud do not nullify an arbitration agreement, "serious allegations of fraud" that permeate the entire contract or specifically target the arbitration clause render the matter non-arbitrable.

The Apex Court examined whether the plea renders the agreement 'void ab initio', and whether the allegations are so complicated they require voluminous evidence best suited for a civil court?

Identifying several "cogent materials" that cast serious doubt on the genuineness of the Admission Deed, the Supreme Court observed as follows: Inconsistent Conduct: Although the deed claimed Rajia Begum's husband retired in 2007, she admitted he continued acting as a partner until 2010.

Delayed Surfacing: The document did not appear in any contemporaneous record for nine years, surfacing only in 2016.

Lack of Status: Records from 2009–2010 portrayed Rajia Begum not as a partner, but merely as a guarantor for the firm’s bank facilities.

The Supreme Court limits of Judicial Intervention and criticized the High Court's use of Article 227, noting that supervisory jurisdiction is not "appellate jurisdiction in disguise" and does not permit the reappreciation of evidence to dislodge concurrent findings of fact by lower courts.

The Bench concluded that since the arbitration clause was embedded in a document whose existence was in "grave cloud of doubt," appointing an arbitrator would be premature and legally impermissible.

Coram: JUSTICE PAMIDIGHANTAM SRI NARASIMHA AND JUSTICE ALOK ARADHE.