Facts: A partnership dispute arose concerning the entry of Rajia Begum into the firm 'M/s RDDHI Gold'. Barnali Mukherjee, another partner, claimed that Rajia's entry was based on a forged "Admission Deed". Rajia asserted her 50.33% interest in the firm based on this deed, while Barnali denied its execution and Rajia's induction. The High Court, in separate proceedings, both declined to appoint an arbitrator due to doubts about the arbitration agreement's existence and later referred the dispute to arbitration under Article 227 of the Constitution.
Procedural Posture: Two civil appeals were filed before the Supreme Court. One appeal challenged the High Court's order dismissing Rajia's application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The other appeal challenged the High Court's order allowing Rajia's petition under Article 227 and referring the title suit to arbitration.
Issue: Whether the disputes between the parties could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, and whether the High Court was justified in declining the appointment of an arbitrator under Section 11 of the same Act, considering the serious allegations of forgery regarding the "Admission Deed"?
Holding: The Supreme Court held that the dispute was not amenable to arbitration at this stage due to the serious allegations of forgery going to the root of the arbitration agreement itself. The Court quashed the High Court's order allowing Rajia's application under Section 8 of the Act and affirmed the High Court's order rejecting Rajia's application under Section 11 of the Act.
Reasoning: The Court reasoned that arbitration is founded upon consent, and where the arbitration agreement itself is alleged to be forged or fabricated, the dispute ceases to be merely contractual and strikes at the very root of arbitral jurisdiction. The Court emphasized that a prima facie level of agreement to submit disputes to arbitration must be established. The Court also noted the concurrent findings of the Trial Court and the First Appellate Court that the allegations of fraud were serious and that Rajia had failed to produce the original Admission Deed. The Court held that the High Court's supervisory jurisdiction under Article 227 does not permit reappreciation of evidence and that the High Court was not justified in dislodging the concurrent findings. The Court relied on previous decisions regarding the impact of fraud on arbitrability, stating that serious allegations of fraud that permeate the entire contract or go to the validity of the arbitration clause itself render the subject matter non-arbitrable.