Legal Review and Analysis of Rajia Begum vs Barnali Mukherjee & Ors Barnali Mukherjee vs Rajia Begum & Ors 2026 INSC 106
Synopsis
This judgment of the Supreme Court of India addresses a foundational issue in arbitration law: whether disputes can be referred to arbitration when the very existence of the arbitration agreement is seriously contested on allegations of forgery and fabrication. The Court, in a partnership dispute, clarified the legal principles governing the "non-arbitrability" of disputes where fraud vitiates the arbitration clause itself, distinguishing such serious allegations from mere contractual fraud.
1. Basic Information of the Judgment
Case Title: Rajia Begum v. Barnali Mukherjee & Ors.; Barnali Mukherjee v. Rajia Begum & Ors.
INSC Citation: 2026 INSC 106
Court: Supreme Court of India
Coram: Justice Alok Aradhe and Justice Pamidighantam Sri Narasimha (Division Bench)
Jurisdiction: Civil Appellate Jurisdiction
Civil Appeal Nos.: @ SLP(C) No. 6013 of 2021 and @ SLP(C) No. 20262 of 2021
Date of Judgment: February 2, 2026
2. Legal Framework and Precedents
Governing Statute:
The Arbitration and Conciliation Act, 1996 (the "Act").
Key Provisions:
Section 8: Power of a judicial authority to refer parties to arbitration if there is a valid arbitration agreement.
Section 9: Interim measures by the court before or during arbitral proceedings.
Section 11: Appointment of arbitrators by the court.
Key Legal Issue: The arbitrability of disputes involving serious allegations of fraud, particularly when the fraud alleged pertains to the arbitration agreement itself.
Relevant Precedents Relied Upon:
A. Ayyasamy v. A. Paramasivam & Ors.: Established that mere allegations of fraud are not enough to oust arbitration; serious allegations requiring extensive evidence or involving criminal offences may be an exception.
Rashid Raza v. Sadaf Akhtar: Laid down a two-fold test to determine "serious allegations of fraud" that render a matter non-arbitrable:
Whether the fraud permeates the entire contract, including the arbitration agreement, rendering it void.
Whether the allegations are purely between private parties or involve public interest.Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited: Held that allegations of fraud relating to the arbitration agreement itself stand on a different footing and are generally non-arbitrable, as the tribunal's jurisdiction is itself in question.
Managing Director, Bihar State Food and Civil Supply Corporation Limited v. Emkay Global Financial Services Ltd.: Reiterated the principles from Ayyasamy and Rashid Raza.
3. Relevant Facts of the Case
A partnership firm, M/s RDDHI Gold, was formed in 2005 between Barnali Mukherjee (Appellant in one appeal) and others.
Rajia Begum (Respondent) claimed she became a partner in 2007 through a 'Deed of Admission and Retirement' ("Admission Deed"), which also contained an arbitration clause. She asserted that two original partners retired via this deed.
Barnali Mukherjee stoutly denied the execution of this Admission Deed, alleging it was a forged and fabricated document. She contended Rajia Begum was never a partner.
Parallel legal proceedings were initiated:
Section 9 (Rajia): Initially granted interim relief by the trial court but overturned by the High Court (04.05.2018), which noted the Admission Deed's existence was prima facie doubtful. This order attained finality upon dismissal of the SLP by the Supreme Court.
Section 8 (Rajia): Filed in a civil suit initiated by Barnali seeking a declaration that the deed was forged. The trial and appellate courts rejected the application under Section 8, noting serious fraud and non-production of the original deed. However, the High Court, under Article 227 (24.09.2021), set aside these orders and referred the suit to arbitration.
Section 11 (Rajia): A separate petition for appointment of arbitrator was dismissed by the High Court (11.03.2021), holding it inexpedient to appoint an arbitrator till the existence of the arbitration agreement was finally determined.
4. Issues Before the Supreme Court
Whether, in the factual matrix of the case, the dispute could have been referred to arbitration under Section 8 of the Act?
Whether the High Court was justified in declining the appointment of an arbitrator under Section 11 of the Act?
The core legal issue: Whether disputes can be referred to arbitration when the very existence of the arbitration agreement is seriously disputed on allegations of forgery and fabrication?
5. Ratio Decidendi of the Court
The Supreme Court allowed Barnali Mukherjee's appeal and dismissed Rajia Begum's appeal, holding:
Fraud Going to the Root of Arbitration Agreement: When allegations of forgery/fraud are levelled against the very document containing the arbitration clause, it strikes at the root of arbitral jurisdiction. Such disputes are "generally recognised as a dispute, which is in the realm of non-arbitrability."
Application of the Rashid Raza Test: The Court found the first test was satisfied. The allegation that the Admission Deed (and thus the embedded arbitration clause) was forged meant that the party against whom it was sought to be enforced (Barnali) could not be said to have entered into the arbitration agreement at all.
Prima Facie Doubt on Existence: The Court affirmed that a party can be bound by arbitration only if it is shown, even at a prima facie level, that it agreed to arbitrate. The material on record—including inconsistencies in the respondent's own admissions, the document's sudden emergence after nine years, and contemporaneous records showing a different relationship—created a "grave cloud of doubt" requiring a full-fledged inquiry, which is unsuitable for arbitration at the threshold.
Finality of Prima Facie Findings: Findings in earlier proceedings (like the Section 9 order which attained finality) are relevant considerations in subsequent proceedings (under Sections 8 & 11) when they pertain to the same foundational issue.
Jurisdiction under Article 227: The High Court, in exercise of its supervisory power under Article 227 of the Constitution, erred in reappreciating evidence and overturning the concurrent factual findings of the lower courts on the seriousness of the fraud and non-compliance with Section 8(2) of the Act.
6. Legal Principles Established/Reaffirmed
The judgment does not create new law but powerfully reaffirms and clarifies settled principles:
Distinction in Types of Fraud: It sharply distinguishes allegations of fraud simpliciter in the performance of a contract (which are arbitrable) from allegations of fraud that go to the validity of the arbitration agreement itself (which are generally non-arbitrable).
Consent as the Bedrock: It re-emphasizes that arbitration is consensual. If the validity of the instrument manifesting consent is fundamentally challenged, the court must examine that challenge as a jurisdictional issue before referring parties to arbitration.
Threshold of Judicial Scrutiny: The court, at the referral stage (Sections 8 & 11), must undertake a prima facie examination to ascertain if a valid arbitration agreement exists. If serious questions are raised about its very existence due to forgery, the dispute is not fit for referral.
7. Court's Examination and Analysis
The Court's analysis followed a structured path:
Step 1 - Identifying the Legal Standard: It began by recapitulating the evolution of jurisprudence on fraud and arbitrability, culminating in the two-fold test from Rashid Raza.
Step 2 - Applying Law to Facts: It meticulously applied this test to the evidence. It highlighted factual incongruities: the respondent's husband (a retiring partner per the deed) continued acting as a partner; the deed surfaced only after nine years; and post-2007 banking documents consistently showed the respondent as a guarantor, not a partner.
Step 3 - Evaluating Procedural History: The Court gave due weight to the final prima facie finding from the Section 9 proceedings which cast doubt on the deed's genuineness. It held that these findings could not be ignored in the Section 8 and 11 proceedings.
Step 4 - Concluding on Jurisdiction: It concluded that the dispute fell into the category where the arbitration clause itself was impeached. Therefore, the civil court was the appropriate forum for a full trial to determine the document's validity, and appointing an arbitrator under Section 11 was premature.
8. Critical Analysis and Final Outcome
Critical Analysis:
The judgment is a robust application of the "separability doctrine" (which presumes the arbitration clause is separate from the main contract) to its logical limit. The Court rightly held that while the doctrine saves the arbitration clause from invalidity of the main contract, it cannot save a clause that was never agreed to in the first place due to forgery. The decision safeguards parties from being forced into an arbitral process based on a document they genuinely dispute, upholding the principle of party autonomy. It also checks the overreach of supervisory jurisdiction under Article 227, reinforcing that such power cannot be used for a fresh appraisal of evidence.
Final Outcome:
The appeal @ SLP(C) No. 20262 of 2021 (filed by Barnali Mukherjee) was allowed.
The High Court's order dated 24.09.2021 (referring the suit to arbitration under Section 8) was quashed and set aside.
The orders of the lower courts dismissing the Section 8 application were restored.The appeal @ SLP(C) No. 6013 of 2021 (filed by Rajia Begum) was dismissed.
The High Court's order dated 11.03.2021 (refusing to appoint an arbitrator under Section 11) was upheld.Consequently, the civil suit seeking a declaration that the Admission Deed is forged will proceed before the civil court. The disputes cannot be referred to arbitration at this stage.
(MCQs)
1. According to the Supreme Court's analysis in this judgment, which of the following scenarios would most likely render a dispute NON-arbitrable?
A) Allegations of fraudulent misrepresentation during the performance of a construction contract.
B) Allegations that the document containing the arbitration clause was forged by one party.
C) Allegations of breach of contract due to negligent supply of goods.
D) Allegations of non-payment of dues as per an agreed invoice.
2. The Supreme Court applied the two-fold test laid down in which of the following precedents to determine the seriousness of the fraud allegations?
A) A. Ayyasamy v. A. Paramasivam
B) Avitel Post Studioz Ltd. v. HSBC PI Holdings
C) Rashid Raza v. Sadaf Akhtar
D) Managing Director, Bihar State Food and Civil Supply Corp. Ltd.
3. Which section of the Arbitration and Conciliation Act, 1996 empowers a judicial authority to refer parties to arbitration if an action is brought before it in a matter which is the subject of an arbitration agreement?
A) Section 9
B) Section 11
C) Section 8
D) Section 16
4. The Supreme Court held that the findings recorded in proceedings under which section of the Act, having attained finality, were a relevant consideration in deciding applications under Sections 8 and 11?
A) Section 11
B) Section 34
C) Section 9
D) Section 17