Arbitrability of fraud has been one of the contentious issues in
arbitration. It involves the question of what type of issues can
and cannot be submitted to arbitration. The recent judgment of the
Supreme Court, in A Ayyasamy vs A Paramasivam & Ors, has
settled the law and provides much-needed guidance on this
subject.
Earlier, the Supreme Court, in N Radhakrishnan vs Maestro
Engineers, held that where fraud and serious malpractices are
alleged, the matter can only be settled by the court and such a
situation cannot be referred to an arbitrator. It was observed that
fraud, financial malpractice and collusion are allegations with
criminal repercussions, and the arbitrator, being a creature of
contract, has limited jurisdiction. It was held that courts are
more equipped to adjudicate serious and complex allegations, and
are competent in offering a wider range of relief to the parties in
dispute.
