Arbitrability of Fraud Disputes: Supreme Court Reaffirms Arbitrability of Disputes Involving Allegations of Fraud:
The disputes regarding fraud are held to be arbitrable and in the case of Deccan Paper Mills Co. Lts vs Regency Mahavir Properties and Ors, the question of arbitrability of disputes and fraud in the execution of agreements and the proceedings of sec 31of the Specific Relief Act to be treated as in personam or in rem were widely discussed.
Facts of the Case
An agreement was entered into by Deccan Paper Mills Co Lts vs Ashray Premises Pvt Ltd to develop a portion of land owned by Deccan. The agreement also stated that Deccan would have no objection if Ashray delegates that right to another party.
Pursuant to this, Deccan entered into an agreement with the “Regency” to carry out the execution of the work. Later, a deed of conformation was signed by one of the authorized partners of Regency.
It was later come to the notice that the whole transaction was fraudulent and the authorized partner who signed the deed retired.
After hearing the contentions of the parties, the Supreme Court held that the deed was not entered into at all and that the arbitration clause would be non-existent and therefore, the fraud exception would not apply to the case.
Conclusion
Thus, the Supreme Court has set up a high threshold for the “fraud exception” and that the proceedings under sec 31 of the Specific Relief Act would be proceedings in personam and would be binding on the parties.